Confidentiality - Keeping secrets from the regulator

Be very careful here and seek guidance from your compliance consultant or your legal advisers. You could not be further from the truth in your assumption that the Financial Services Authority will not be interested until the deal is done. As an old friend of mine is often wont to say, 'assume makes an 'ass' out of 'u' and 'me"!

There are a number of issues here. Acquisition of an FSA-regulated business means a change in controller of the target business and the FSA needs to be advised of that.

So far as your firm is concerned, you must obtain permission from the FSA to make the acquisition before doing so. You should notify the regulator as early as possible in the process (see its website for more details in how to do that). Bear in mind that the FSA has three months from the date that it has all the information, which is not necessarily the date of initial notification, to sanction the deal or rebuff it.

The regulator will wish to be assured that: your management structure is sufficiently robust to cope with the enlarged business; solvency margins are ok; and, in general, that clients are not put at risk in any way by the changes proposed to your business.

If that sounds a bit heavy-handed, then bear in mind that scarcely a week goes by without the industry press reporting on an acquisition. So, if you do your due diligence correctly, put together a proper business plan and strategy for the enlarged business and demonstrate to the regulator that you have a viable plan then you should have no concerns. As regards confidentiality, you may rest assured that nothing will leak from the FSA. What is more important in avoiding leaks is that you keep copies of communications secure within your own organisation.

Do not risk waiting until the last minute to attempt to pressure the FSA into nodding your deal through. This is thoroughly unprofessional and could also send a signal to the FSA that your firm is one that pays scant regard to its regulations and authority. This may, in turn, encourage the body to take a closer look at other aspects of your business to see how your compliance measures up in other areas; it could also make you look foolish in the eyes of the other parties to the deal if, at the last minute, you tell them that you have just found out that the FSA needs to give approval.

As with all other aspects of your relationship with the FSA, always remember the FSA Principle for Businesses number 11: a firm must deal with its regulators in an open and co-operative way and must disclose to the FSA appropriately anything relating to the firm of which the FSA would reasonably expect notice.