The Financial Conduct Authority (FCA) halted five firms from buying out other companies last year, a freedom of onformation (FOI) request revealed.
Under the Financial Services and Markets Act 2000 (FSMA), the regulator has the power to object to an acquisition if there are reasonable grounds to do so.
This can be based on two conditions:
- if the information provided by the acquirer is incomplete; or,
- as per section 186 of FSMA, which highlights reputation, financial soundness of the firm, compliance with prudential regulations and whether there are money laundering or ineffective management concerns.
“We issued warning notices in respect of five transactions,” the FCA said.
It did not specify which firms received the notices, nor did it give any indication about the sectors in which they operate.
“In four of those cases, the notice-givers subsequently withdrew their notification, and so the FCA did not make any determination in respect of the acquisition. We did not issue a decision notice in these cases.
“In the remaining case, after further consideration the acquisition was approved.”
Array of regulatory tools
But these are not the only powers in the watchdog’s arsenal.
The FCA can get in touch with firms and ask them to either improve their acquisition plans or pull out altogether.
“A notice-giver may withdraw their notification without a warning notice being issued,” the regulator explained.
“Such withdrawals may take place at a number of stages during the case’s assessment, but are frequently seen in response to concerns raised by the FCA.
“Generally, before issuing a formal warning notice, the FCA will issue a letter to the notice-giver advising that it is minded to object to the transaction if the notification is not withdrawn.
“Having early discussions with notice-givers ahead of formal objection action allows the FCA to influence proposed controllers to take steps to address issues,” it added.
But if the regulator’s concerns cannot be allayed, a notification withdrawal is probably the quickest and most cost-effective way to deal with the situation.
“As such, there are a larger number of acquisitions that did not proceed in 2019 following the FCA’s intervention, though without the use of the formal powers discussed here,” the watchdog revealed.