The Acquisitions Directive

HM Treasury and the FSA have published a joint CP entitled "Implementation of the Acquisitions Directive: a consultation document ". The Acquisitions Directive (the Directive) was adopted by the European Parliament and the European Council in September 2007. The aim of the Directive is to improve the process of supervisory approvals for the acquisition of financial services firms in the European Union by increasing legal certainty, clarity and transparency and ensuring absolute consistency between credit institutions, insurance and securities sectors. It is hoped that improving the supervisory process will lead to an increase in the numbers of cross-border acquisitions.

The CP sets out how HM Treasury and the FSA propose to implement the Directive by amending the Financial Services and Markets Act 2000 (FSMA) and the FSA Handbook. The CP can be accessed here.

Current FSA 'Change of Control' Regime

Broadly speaking, the current regime requires persons to obtain prior consent if they propose to acquire control of or cease to control a UK authorised person. The definition of control is complex. For example, the FSMA sets out eight cases in which control is considered to have been acquired for (re)insurers, including the holding of shares or voting rights of 10%, 20%, 33% or 50% of an authorised person, although only the 20% and 50% thresholds are used for insurance intermediaries.

Proposed Changes

Definition of Acquirer

The Directive contains a single definition of acquirer and it is proposed therefore to simplify the FSMA definitions of control. In addition the concept of acquiring control together with "an associate" will be replaced with the term "acting in concert".


The only changes proposed to the existing thresholds are a threshold of 30% rather than 33%. The Directive also allows Member States to require notification by a proposed acquirer below the 10 per cent threshold. It should be noted, however, that the UK is not proposing to implement this.

Time period for assessment

Following implementation of the Directive, the FSA will have 60 working days (instead of 90 calendar days) in which to decide whether to approve an acquirer. It will only be able to "stop the clock" once during the first 50 working days for a maximum period of 20 days (except if the acquirer is regulated outside the European Union single market directives, when it can be extended to 30 working days).

Criteria for assessment of proposed acquirers

The Directive sets out the following exhaustive set of criteria, which supervisory authorities across Europe should use to judge the suitability and financial soundness of a proposed acquirer:

  • reputation of the proposed acquirer;
  • reputation and experience of any person who will direct the business of the financial institution as a result of the acquisition;
  • financial soundness of the proposed acquirer;
  • ability of the financial institution to comply on an ongoing basis with the applicable prudential requirements; and
  • whether there are reasonable grounds to suspect that, in connection with the proposed acquisition, money laundering or terrorist financing is being or has been committed or attempted, or that the proposed acquisition could increase the risk of this occurring.

The criteria cannot be added to by Member States. They are specifically restricted to prudential matters and are intended to prevent suitability being assessed by the economic needs of a domestic market.


Responses to the CP must reach HM Treasury by Friday 12 December 2008.

The Directive is to be implemented into national law by 21 March 2009.