Regulatory Policy - Criteria for Approving Changes in Ownership and Control

Summary

This is a CIMA regulatory policy, dated December 2020, setting out the criteria the Authority applies when deciding whether to approve changes in ownership or control of a Financial Service Provider (FSP). It confirms that, under the Regulatory Laws (excluding the Private Funds Law), shares of an FSP cannot be transferred, issued, or disposed of without CIMA's prior approval, and explains the general and specific criteria CIMA uses to assess such changes -- including for individual and corporate shareholders, changes of control, acquisitions, mergers, and ownership held through trusts or partnerships, sole shareholders, or familial shareholders acting as directors.

• Scope: The policy applies broadly to all FSPs under the Regulatory Laws, i.e. any person, licensee, registrant or entity subject to CIMA's regulatory functions or monitored under the Anti-Money Laundering Regulations.
• Definition of control: 'Control' is defined as an aggregate ownership, voting or directive right of 10% or more.
• Approval threshold: Anyone acquiring 10% or more of an FSP's shares (or gaining control regardless of the percentage acquired) must submit a Personal Questionnaire and supporting documentation before a transfer can be approved.
• Listed FSP exemption: FSPs whose shares are listed on an approved stock exchange may be exempt from prior approval, but must notify CIMA when relying on that exemption, and approval is still required if the exemption does not cover a resulting change of control.

• Ongoing fitness: After a change of control is approved, shareholders and beneficial owners must continue to act with integrity and remain fit and proper.
• Notification duty: The FSP must notify CIMA immediately if it becomes aware of material information affecting the suitability of a shareholder or controlling party.
• CIMA enforcement powers: CIMA may reject, rescind, or take enforcement action if approval was based on false or misleading information or if a change occurred without required approval.

No specific commencement or transition date is stated beyond the December 2020 publication date, and the document's ongoing legal status is not otherwise specified in the text.

Key obligations

• FSPs must obtain CIMA's prior approval before any dealing, issuance, transfer, or disposal of shares (except where a stock exchange listing exemption applies).
• Any transferee of FSP shares (e.g. via testamentary disposition or intestate succession) must contact the Authority so it can consider the change of shareholder.
• Where an FSP pledges its shares as security, prior conditional approval of the transfer to the secured party must be obtained before the shares are pledged; only notification is required if the secured party later realizes on the collateral.
• Persons acquiring 10% or more of an FSP's shares (or acquiring any amount of shares that results in 10% or more ownership or control) must submit a Personal Questionnaire and supporting documentation before the transfer can be approved.
• FSPs relying on the stock-exchange listing exemption from prior approval must notify the Authority in a timely manner that they are relying on the exemption.
• Applicants should submit share-transfer/change-of-control applications well in advance of the scheduled closing date, since the approval process can take several weeks.
• When seeking approval for a change of shareholding, the FSP must submit information on all direct and indirect ownership holdings (pre- and post-transaction), including ownership structure charts covering subsidiaries, trust companies, holding companies and nominee companies, with percentage holdings specified for each owner.
• Shareholders, ultimate beneficial owners, and any of them acting as directors, senior officers, trustees or managers must act with integrity and be competent with relevant knowledge, skill and expertise.
• FSPs must notify the Authority immediately if they become aware of material information that may negatively affect the suitability of a shareholder or a party with a controlling interest.

Applies to

Financial Service Providers (FSPs), licensees, registrants, entities monitored under the Anti-Money Laundering Regulations, shareholders and beneficial owners of FSPs, trustees, protectors, settlors and beneficiaries of trusts holding FSP shares, general partners and partnerships holding FSP ownership