• GENE Part 8.1 GENE Part 8.1 General provisions

    • GENE 8.1.1 Introduction

      This Chapter is about:

      (a) the controllers of applicants for authorisation and authorised firms, and the entities with which such applicants and firms have close links;
      (b) the obligations and procedures relating to first becoming such a controller, and to increasing, decreasing and ceasing control; and
      (c) the systems and controls that a firm must have, and the reports it must make, relating to its controllers and the entities with which it has close links.
      Note Under rule 2.3.1, the connection of an applicant or authorised firm with its controllers, and the persons with which an applicant or firm has close links, are matters to be considered in determining an applicant's or firm's fitness and propriety.
      Amended by RM/2018-4 (as from 1st August 2018).

    • GENE 8.1.2 Application of Part 8.1

      This Part applies to an authorised firms.

      Amended by RM/2018-4 (as from 1st August 2018).

    • GENE 8.1.3 Meaning of controller, types of control and first becomes a controller

      (1) Controller, of an authorised firm, is a person who (whether alone or together with 1 or more associates) has acquired control over the firm through any of the following types of control described in FSR, article 37 (1):
      (a) holding 10% or more of the shares in the firm;
      (b) being entitled to exercise, or control the exercise of, 10% or more of the voting power in the firm;
      (c) holding 10% or more of the shares in a parent entity of the firm;
      (d) being entitled to exercise, or control the exercise of, 10% or more of the voting power in a parent entity of the firm;
      (e) being able to exercise significant influence over the management of the firm or a parent entity of the firm because of the person's shareholding or voting power, or by contractual or other arrangements;
      Guidance
      Other arrangements include trusts, agreements, understandings and practices, whether or not having legal or equitable force and whether or not based on legal or equitable rights. These arrangements could comprise a number of arrangements that would not individually enable the person to exercise a type of control over the authorised firm but would do so if they were taken together.
      (f) being able to exercise, or control the exercise of, 10% or more of the voting power in the firm because of the person's shareholding or voting power in a third party that holds 10% or more of the shares of the firm;
      (g) being able to exercise significant influence over the management of the firm because of the person's shareholding or voting power in a third party that holds 10% or more of the shares of the firm.
      (2) In determining whether a person is a controller of an authorised firm, any shares, voting power or rights to acquire shares or voting power that the person holds in the firm (whether alone or together with 1 or more associates) must be disregarded if:
      (a) the shares are held for the sole purpose of clearing and settling within a short settlement cycle;
      (b) the shares are held as custodian or nominee and the voting power attached to the shares is exercised only in accordance with written instructions given to the person; or
      (c) the person is an authorised firm and it:
      (i) acquires shares as a result of an underwriting of a share issue or a placement of shares on a firm commitment basis;
      (ii) does not exercise the voting power attached to the shares or otherwise intervene in the management of the issuer; and
      (iii) retains the shares for less than 1 year.
      (3) A person first becomes a controller:
      (a) when the person becomes a controller of the firm for the first time; or
      (b) if the person is not a controller of the firm but had previously been such a controller — when the person again becomes a controller of the firm.
      Inserted by QFCRA RM/2014-1 (as from 1st February 2014).

    • GENE 8.1.4 Meaning of increases control

      (1) A controller increases control over an authorised firm if:
      (a) the controller (whether alone or together with 1 or more associates) acquires a different type of control over the firm;
      (b) the controller becomes a parent entity of the firm;
      (c) the percentage of shares held by the controller (whether alone or together with 1 or more associates) in the firm or in a parent entity of the firm increases from, or below, a level mentioned in subrule (2) to above that level; or
      (d) the percentage of voting power that the controller (whether alone or together with 1 or more associates) is entitled to exercise, or control the exercise of, in the firm or in a parent entity of the firm increases from, or below, a level mentioned in subrule (2) to above that level.
      (2) The levels for increased control are 24%, 49% and 74%.
      Inserted by QFCRA RM/2014-1 (as from 1st February 2014).

    • GENE 8.1.5 Meaning of decreases control

      (1) A controller decreases control over an authorised firm if:
      (a) the controller (whether alone or together with 1 or more associates) loses a type of control over the firm;
      (b) the controller ceases to be a parent entity of the firm;
      (c) the percentage of shares held by the controller (whether alone or together with 1 or more associates) in the firm or in a parent entity of the firm decreases from above a level mentioned in subrule (2) to, or below, that level; or
      (d) the percentage of voting power that the controller (whether alone or together with 1 or more associates) is entitled to exercise, or control the exercise of, in the firm or in a parent entity of the firm decreases from above a level mentioned in subrule (2) to, or below, that level.
      (2) The levels for decreased control are 74%, 49% and 24%.
      Inserted by QFCRA RM/2014-1 (as from 1st February 2014).

    • GENE 8.1.6 Meaning of voting power and control

      (1) Voting power of a person in an authorised firm or a parent entity of the firm means the total rights of the person to vote, or take part in any decision-making, about any of the following:
      (a) the distribution of capital or profits of the firm to its shareholders;
      (b) the articles of association, partnership agreement or similar document constituting the firm or governing its activities;
      (c) any variation of the share capital of the firm;
      (d) any appointment of a director (however called) of the firm;
      (e) the overall policy of the firm.
      (2) A person's voting power includes:
      (a) voting power held by a third party with whom the person has concluded an agreement that obliges the person and the third party to adopt, by concerted exercise of the voting power they hold, a lasting common policy towards the management of the firm or parent entity;
      (b) voting power held by a third party under an agreement concluded with the person providing for the temporary transfer, for consideration, of the voting power;
      (c) voting power attaching to shares that are lodged as collateral with the person, if the person controls the voting power and declares an intention to exercise it;
      (d) voting power attaching to shares in which the person has a life interest;
      (e) voting power that is held, or may be exercised in any of the ways described in paragraphs (a) to (d), by a subsidiary of the person;
      (f) voting power attaching to shares deposited with the person that the person has discretion to exercise in the absence of specific instructions from the shareholders;
      (g) voting power held in the name of a third party on behalf of the person; and
      (h) voting power that the person may exercise as a proxy where the person has discretion about the exercise of the voting power in the absence of specific instructions from the shareholders.
      (3) Control (of the exercise of voting power) includes direct and indirect control, and control that is exercisable as a result, or by means, of arrangements or practices:
      (a) whether or not having legal or equitable force; and
      (b) whether or not based on legal or equitable rights.
      (4) If the percentage of total rights to vote or participate in decision-making differs as between different types of voting or decision-making, the highest of those percentages applies for the purposes of this rule.
      (5) If a firm or parent entity:
      (a) is limited both by shares and by guarantee; or
      (b) does not have a share capital;
      this rule has effect as if the members or policy holders of the firm or parent entity were shareholders.

      Note FSR, article 37 (3) (B) states that voting power, in relation to an authorised firm or relevant parent entity which does not have general meetings at which matters are decided by the exercise of voting rights, means the right under the constitution of the authorised firm or relevant parent entity to direct the overall policy of the authorised firm or relevant parent entity or alter the terms of its constitution.

      Editorial changes (as from 1st January 2016).