• GENE Part 8.2 GENE Part 8.2 Seeking approval to change control — QFC entities

    • GENE 8.2.1 Application of Part 8.2

      This Part applies to an authorised firm that is a QFC entity.

      Editorial changes (as from 1st January 2016).

    • GENE 8.2.2 Approval to change control — QFC entities (FSR, articles 35 and 38)

      A person must not first become a controller or increase or decrease control over an authorised firm without the Regulatory Authority's approval.

      Editorial changes (as from 1st January 2016).

    • GENE 8.2.3 Controller notice seeking approval to change control — QFC entities

      (1) An authorised firm must give a controller notice in the approved form to the Regulatory Authority before a person becomes a controller of the firm or increases or decreases control over the firm. The controller notice serves as an application for the approval required under rule 8.2.2.
      (2) If the firm does not know of the matter or does not have sufficient information to give the controller notice, the notice must be given by the person proposing to first become a controller or increase or decrease control.
      (3) If the firm has reasonable grounds to suspect that any of the matters mentioned in subrule (1) exists, the firm must make appropriate inquiries to satisfy itself about the matter and decide whether it should give a controller notice.

      Note Under FSR, article 36 (3), an authorised firm that does not have sufficient information to enable it to give the controller notice must notify the person proposing to acquire or change control about the person's obligation to give the controller notice to the authority.
      (4) A controller notice must be given:
      (a) at least 30 days before the person first becomes a controller or increases or decreases control; or
      (b) if it is not practicable to give the notice in accordance with paragraph (a) — immediately after the firm or person required to give the notice becomes aware of the matter.
      (5) A controller notice may be withdrawn at any time before the authority decides on the application for approval.
      (6) If, at any time before the authority makes its decision, the firm or person making the proposal becomes aware of a change that is reasonably likely to be material to the Regulatory Authority's decision, the firm or person must notify the authority about the change without delay.
      Editorial changes (as from 1st January 2016).

    • GENE 8.2.4 Additional requirement — letter of comfort

      (1) A controller notice must be accompanied by a letter of comfort if the notice is seeking approval to increase existing control:
      (a) from a level of 10% to 48.99% to a level of 49% or more; or
      (b) from a level of 10% to 73.99% to a level of 74% or more.

      Note By giving a letter of comfort when a controller crosses the thresholds at 49% and 74%, the controller signifies its continuing willingness and commitment to support the firm in case of unforeseen contingencies that may affect the firm's ability to maintain adequate capital and liquidity levels in order to meet its obligations and regulatory requirements.
      (2) The Regulatory Authority may require a letter of comfort to accompany a controller notice seeking approval to increase control from a level of 10% to 23.99% to a level up to 48.99%.
      (3) A letter of comfort must be in a form acceptable to the authority and must state that the person:
      (a) has adequate financial resources to fulfil its commitments under the letter;
      (b) will support the firm:
      (i) to conduct its business under the applicable laws, regulations and rules; and
      (ii) to enable it at all times to meet its obligations in accordance with standards of prudence generally accepted for the firm's business; and
      (c) will notify the authority immediately of any significant change in its relationship with the firm.
      Guidance

      The Regulatory Authority expects the following to be part of the letter in addition to the matters in rule 8.2.4 (3):
      •  acknowledgment of its purpose
      •  clear statement of the relationship between the firm and the controller, and the type and level of control to which the letter relates
      •  the nature and extent of the commitments to support the firm.
      (4) A letter of comfort given by a person ceases to have effect if:
      (a) the person's level of control subsequently decreases to 49% or less; and
      (b) on application by the person, the Regulatory Authority is satisfied (after considering the person's financial capability, capital adequacy and risk profile and any evidence offered by the person) that the letter should cease to have effect.
      (5) The Regulatory Authority will notify the person in writing of its decision. If the authority is satisfied that the letter of comfort should cease to have effect, the notice must state the date when the letter so ceases.
      (6) A letter of comfort from a person that is not an individual must also state that it is made under a resolution of the governing body of the person. The person must give a copy of the resolution to the Regulatory Authority if the authority requires it.
      (7) A firm that is the beneficiary of a letter of comfort must immediately notify the authority of any cancellation or variation of the letter.
      Amended by QFCRA RM/2015-1 (as from 1st July 2015).

    • GENE 8.2.5 Approval process (FSR, article 38)

      (1) If the Regulatory Authority receives a controller notice in relation to a proposal for a person to first become a controller of a firm or to increase or decrease control over a firm, the authority may:
      (a) approve the proposal without conditions;
      (b) approve the proposal subject to such conditions as the authority considers appropriate;
      (c) refuse to approve the proposal; or
      (d) object to the proposal and then decide whether to approve or refuse to approve it.
      Note 1 Under FSR, article 38 (2), the Regulatory Authority shall seek to make its determination within 30 days of receipt of all the required information and shall notify the authorised firm (or if the controller notice has been submitted by another person, both the firm and that other person) of its determination promptly.

      Note 2 Under FSR, article 38 (4), the Regulatory Authority may grant unconditional approval only if it is satisfied that:
      •  the person acquiring or increasing the control is a fit and proper person to have the control in question;
      •  the conditions in article 29 (5) (A) and (B) (Close Links) have been met; and
      •  granting such approval would be consistent with the regulatory objectives.
      (2) Nothing in this rule prevents the authority from taking any other action against a person who has failed to comply with these rules or any other rules or law applying in the QFC.

      Note Under FSR, article 38 (6), the Regulatory Authority's power to approve or refuse to approve a proposal remains even if no controller notice seeking approval is given to the authority.
      Editorial changes (as from 1st January 2016).

    • GENE 8.2.6 Objection process

      (1) If the Regulatory Authority objects to a proposal for a person to first become a controller or to increase or decrease control, the authority must, as soon as practicable after it receives the controller notice, letter of comfort and any additional information it requires, give the authorised firm and the person written notice:
      (a) stating the reasons for its objection; and
      (b) giving the firm and person an opportunity to make representations within 14 days after receipt of the notice or a longer period fixed by the authority.
      Example
      The Regulatory Authority may object to a proposal if it considers that the letter of comfort accompanying the application is not acceptable taking into consideration the financial capability, capital adequacy and risk profile of the proposed controller or controller and the authorised firm.
      (2) The authority must, as soon as practicable after the expiry of the period for making representations, consider any representations and:
      (a) withdraw its objection and approve (with or without conditions) the proposal; or
      (b) refuse to approve the proposal.
      Note Under rule 5.2.2 (2), the Regulatory Authority may require a person to give additional information in relation to any document given to the authority.
      Editorial changes (as from 1st January 2016).

    • GENE 8.2.7 When approved proposal lapses

      (1) A proposal for a person to first become a controller or to increase or decrease control that has been approved (with or without condition) must be acted on by the person:
      (a) by the date specified by the Regulatory Authority in its approval; or
      (b) if there is no date specified — within 6 months after the date of the approval.
      (2) The approval lapses if the person does not become a controller or does not increase or decrease control by that date or period, unless the Regulatory Authority gives an extension in writing.
      Inserted by QFCRA RM/2014-1 (as from 1st February 2014).