June 5, 2019

The Gambling Commission has recently published a decision confirming its revocation of the licence held by an operator called Maxent Limited.

In particular, the Commission was “not satisfied as to the source of funds used to acquire and support the Licensee at the time of, and following, the change of corporate control. The Commission also identified concerns relating to the new controller’s suitability, in that it appeared that he had provided conflicting information and had failed to be full and frank in his dealings with the Commission.”

Section 102 of the Gambling Act 2005 (the “Act“) requires the Commission to make a binary decision when in receipt of a change of control application. Such an application can only technically be made after the transaction has completed. At that point, the Commission is bound by the law to either sanction the change of control or to revoke the relevant licence(s).

Section 103 of Act provides a mechanism for a licence holder, in effect, to seek a “minded-to-approve” confirmation before entering into the transaction. Whilst this doesn’t technically amount to an actual approval (which still needs to be officially obtained once the transaction has completed), it is a very useful mechanism to assist in identifying any risks associated with an incoming “controller” (a term defined in the Financial Services and Markets Act 2000 and one which is a lot broader than many, in our experience, seem to think).

At a time when the Commission’s approach to the diligence required to meets its expectations on source of funds is as stringent as ever, this is a timely reminder to any stakeholder that the change of control process needs careful management and planning. The legislation affords a mechanism to remove the risk to the operator in question’s licence. It is a mechanism that operators should remember to use where there may be any uncertainty as to how a would-be controller will fare when confronted with the regulator’s probing eye.

The decision can be read on the Sanctions Register.