FSA promises tougher line on change of control breaches

A billion-pound property fund was fined £1,000 this week forbreaching takeover rules. But a change in the law means similaroffences in future could attract unlimited penalties.

In only the second prosecution of its kind, Semperian PPPInvestment Partners Limited Partnership pleaded guilty to anoffence under change of control rules in the Financial Services andMarkets Act 2000 after it took over an authorised firm beforereceiving the approval of the Financial Services Authority(FSA).

Semperian notified the regulator about the proposed acquisitionin mid-December 2008 but failed to wait for the FSA to approve thechange of control before completing the deal three weeks later. TheDeputy District Judge said Semperian had taken a calculated riskthat the FSA would not prosecute.

Given the date of Semperian's offence, the maximum penalty thecourt could impose was £5,000. In deciding on a £1,000 fine, thejudge took into account the prompt guilty plea and the fact thatthe offence had no adverse impact on consumers.

But the court now has power to impose an unlimited fine forchange in control offences committed after 21st March 2009. Anindividual who takes a controlling interest in a firm despitereceiving an objection from the FSA risks going to prison for up totwo years.

Margaret Cole, director of the FSA's enforcement and financialcrime division, said other firms could expect tougherpenalties.

"This is an example of a controller putting its commercialinterests before its regulatory responsibilities and the FSA istaking a much tougher line with those that seek to avoid or rideroughshod over the change in control regime," said Cole.

"This is a serious offence and the change in law means thatfuture violations could result in an unlimited fine. Today’s resultis a clear warning to other potential controllers that the FSA willprosecute change in control offences in appropriate cases," shesaid.

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