The regulators and parent undertakings
The regulators and parent undertakings

The following Financial Services practice note provides comprehensive and up to date legal information covering:

  • The regulators and parent undertakings
  • Regulator powers in relation to parent undertakings
  • Understanding the entities subject to regulatory powers
  • The power to give a direction to a qualifying parent undertaking
  • Requirements that may be imposed against parent undertakings
  • The procedure the regulator must use to issue a direction to a parent undertaking
  • Rules requiring provision of information by parent undertakings
  • Failure to comply with a direction to a parent undertaking
  • Procedure in relation to censure for contravention of a direction to a parent and the right to refer to Tribunal

Regulator powers in relation to parent undertakings

As part of the government's intention to ensure more rigorous regulatory oversight of the financial system, in light of issues presented following the failure of a number of high-profile firms, the Financial Services Act 2012 introduced new tools to the regulators' armoury. Among the most important of these are the provisions in Part 12A of the Financial Services and Markets Act 2000 (FSMA 2000) dealing with unregulated ’qualified parent undertakings’. The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have similar powers. (See the Financial Services Act 2012 (Commencement No. 31) Order 2013, SI 2013/113 and the Financial Services Act 2012 (Commencement No. 2) Order 2013, SI 2013/423 for implementation dates). The powers in FSMA 2000, ss 192A-192N are linked to those in FSMA 2000, Pt XII (relating to control over authorised persons).

As with any business type, parent undertakings can exert a significant influence over the decision making of regulated firms. This can negatively affect the firm's ability to meet its regulatory requirements and compliance with the FCA Handbook Principles for Business eg Principle 11 (fair and open dealings with the regulator), Principle 4 (a firm's capital position-the parent will generally lead the group's capital raising ability and its actions can alter the group structure around a regulated entity) and PRA Rulebook Fundamental Rule 7 and

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