In December 2007, the FSA published Consultation Paper CP07/21 entitled 'Close Links', in which it reviews existing close links requirements, which you can review by clicking here. The review is ahead of a full review of the Supervision (SUP) Manual in Q4 2008, but is being addressed now in order to bring forward identified savings for firms. The consultation also addresses the issues Lord Davidson raised in his Review of the Implementation of EU Legislation of November 2006.

The close links provisions contained in Schedule 6(3) of the Financial Services and Markets Act (FSMA) stem from the BCCI Directive. The BCCI Directive was implemented in July 1996 in the wake of the collapse of Bank of Credit & Commerce International (BCCI) in 1991, and aims to ensure that firms are not used for financial crimes such as money laundering. Close links are defined in the BCCI Directive, and in the relevant single market directives, as two or more natural or legal persons linked by:

  • participation, meaning the ownership, direct or by way of control, of 20% or more of the voting rights or capital of an undertaking; or
  • control, meaning the relationship between a parent undertaking and a subsidiary.

The close links provisions in Schedule 6 of FSMA are reflected in the FSA Handbook in Threshold Conditions (COND) 2.3; SUP 11.9 and SUP 16.5.

The CP seeks views on proposals to:

  • remove the annual close links reporting requirement;
  • specify the format of event driven/monthly close links notifications; and
  • require firms to submit a post-change organisation chart with all close links notifications.

The period for consultation responses closes on 14 March 2008.