FCA Change in Control Notifications for Payment Institutions and EMIs

When ownership of an FCA-authorised payment institution or electronic money institution changes hands — through acquisition, investment, merger or corporate restructuring — the transaction is subject to the FCA's change in control regime. The regulatory framework requires that any person proposing to acquire or increase a qualifying holding in a regulated firm must notify the FCA and obtain approval before completing the transaction. This guide explains the change in control requirements for payment institutions and EMIs, the notification process, FCA assessment criteria and practical considerations for firms and investors.

What Triggers a Change in Control Notification?

A change in control notification is required when a person (including a corporate entity) proposes to: acquire a qualifying holding in a payment institution or EMI for the first time (crossing the 10% threshold); increase an existing qualifying holding so that it reaches or exceeds 20%, 30% or 50% of the shares or voting rights; or acquire a holding that, regardless of the percentage, gives the person effective control over the management of the institution.

A qualifying holding is defined under Regulation 2 of the PSRs 2017 as a direct or indirect holding of 10% or more of the shares or voting rights in the firm, or any holding which makes it possible to exercise significant influence over the management of the institution. The thresholds are cumulative — they include holdings by connected persons, persons acting in concert, and indirect holdings through intermediate entities.

The Notification Process

The person proposing to acquire or increase the qualifying holding (the 'proposed acquirer') must submit a written notification to the FCA before the acquisition is completed. The notification must include: identification of the proposed acquirer, including corporate structure and beneficial ownership; details of the proposed holding (percentage of shares/voting rights to be acquired); the proposed acquirer's strategic plans for the firm; financial information demonstrating the acquirer's financial soundness; evidence of the acquirer's reputation and integrity; and any other information the FCA requests to assess the notification.

Upon receiving a complete notification, the FCA has 60 working days (the assessment period) to either approve the acquisition or issue a notice of objection. The FCA may extend this period by up to 30 working days if it requests additional information. During the assessment period, the acquirer must not complete the transaction. If the FCA does not object within the assessment period, the acquisition is deemed approved.

FCA Assessment Criteria

The FCA assesses change in control notifications against the criteria set out in Regulation 82D of the PSRs 2017 (for PIs) and Regulation 39 of the EMRs 2011 (for EMIs). The assessment focuses on:

Reputation of the proposed acquirer. The FCA considers the integrity, competence and financial soundness of the acquirer. This includes checks on criminal records, regulatory history, civil proceedings, bankruptcy and any other matters that may call into question the acquirer's fitness to hold a qualifying holding in a regulated firm. For corporate acquirers, the assessment extends to directors, senior managers and beneficial owners.

Reputation and experience of proposed new directors or senior managers. If the acquisition will result in changes to the firm's board or senior management, the FCA assesses whether the proposed individuals are fit and proper.

Financial soundness of the proposed acquirer. The FCA must be satisfied that the acquirer has the financial resources to support the firm, will not put the firm under financial strain, and will be able to meet any capital injections required.

Impact on the firm's regulatory compliance. The FCA considers whether the acquisition will affect the firm's ability to continue meeting its regulatory requirements — including capital adequacy, safeguarding, governance and AML compliance.

Money laundering and terrorist financing risk. The FCA must assess whether there are reasonable grounds to suspect that the acquisition is connected to, or will facilitate, money laundering or terrorist financing.

Consequences of Non-Compliance

Failure to notify the FCA before completing an acquisition of a qualifying holding is a criminal offence under the PSRs 2017. The acquirer may face prosecution, and the FCA has the power to direct the unwinding of an unauthorised acquisition — requiring the shares or voting rights to be sold or transferred. The FCA can also suspend voting rights associated with an unauthorised holding, preventing the acquirer from exercising control until the notification process is completed.

Beyond criminal sanctions, an unauthorised change in control can have severe consequences for the regulated firm itself. The FCA may impose requirements on the firm, increase supervisory intensity, or — in extreme cases — consider whether the firm continues to meet the threshold conditions for authorisation.

Practical Considerations for Firms and Investors

Change in control transactions involving regulated payment firms require careful planning and sequencing. Key practical considerations include: beginning the FCA notification process early — the 60-working-day assessment period (potentially extended to 90 days) must be factored into transaction timelines; ensuring the proposed acquirer has gathered all necessary documentation before submission to avoid delays from information requests; considering the FCA's likely assessment of the acquirer's reputation and financial soundness before making public announcements; coordinating with legal advisers on the interaction between FCA notification requirements and other regulatory approvals (e.g., competition clearance); and preparing the regulated firm's existing management for the assessment process, as the FCA may request information from the firm as well as the acquirer.

Firms should also be aware that the disposal of qualifying holdings — reducing a holding below 50%, 30%, 20% or 10% — requires notification to the FCA, though disposals do not require prior approval. The FCA uses disposal notifications to maintain an accurate picture of ownership structures.

Regulatory Counsel advises on FCA change in control notifications, acquisition structuring and regulatory due diligence for payment institutions and EMIs. Contact us for a free initial consultation. See our licensing and authorisation services page for more.