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.

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).