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Gambling Commission launches Consultations for Effective Regulation

Proposed changes to Financial Penalty Calculations and Financial Key Event Reporting

Man writing on paper. Illustration in correlation to Martyn's law

The Gambling Commission has commenced two consultations, which will run for 13 weeks closing on the 15th March 2024.

Financial Penalties

The Commission has stated that in ‘in order to ensure transparency, clarity and consistency’ as to how financial penalties are calculated following the result of an investigation , it has proposed a number of changes to its criteria for imposing penalties and its methodology for determining the level of penalty applied.

Proposals include:

  1. ‘A clear and distinct six step process the Commission would follow when determining a financial penalty.
  2. Providing clarity as to how and when the Commission will calculate a ‘disgorgement’ element of the penalty where clear consumer detriment and/or financial gain by the Licensee has resulted directly from the breach.
  3. Identifying which factors would determine the seriousness of the breach and form part of the assessment of the starting point of the penal element, as distinct from constituting aggravating or mitigating factors.
  4. Providing transparency on how the Commission would determine the level of seriousness of the breach and the introduction of five levels of seriousness.
  5. A proposal for determining the starting point for the penal element of the penalty by reference to the seriousness of the breach and a percentage of gross gambling yield (GGY) or equivalent income generated during the period of the breach.
  6. A proposal for addressing situations involving multiple breaches during the period.
  7. A proposal for making adjustments to the penalty for aggravating and mitigating factors, deterrence and early resolution, as distinct and separate from the process for determining the seriousness and starting point of the penal element of the penalty’.

Financial Key Event Reporting   

Operating Licence holders are currently required to report when an individual or entity becomes a 3% or more shareholder in a gambling licensee (or its holding company) and also provide details where the licensee enters into a loan with an entity that is not regulated by the Financial Conduct Authority.

The Gambling Commission has acknowledged that many operators are now linked to complex, modern day, global business structures and that ownership and interest reporting is not always straight forward and that international reporting requirements can vary significantly between jurisdictions.   To address the difficulties in applying a consistent approach to all licensees, the Gambling Commission’s consultation proposes a number of changes to Licence Condition 15.2.1 regarding  key event reporting.

Proposals include:

  1. Raising the reporting threshold for ‘operator status’ and ‘relevant persons and positions’ from 3% to 5%.
  2. ‘Expanding the application of ‘relevant persons’ to include not only shareholders, but other entities with an interest in the gambling licensee (including, but not limited to, partnerships, trusts, charities and investment funds) and to include both direct and indirect interests in the gambling licensee of 5% or more’.
  3. ‘Amendment of the wording of existing paragraph 3 of the condition to include the reporting of entering into financial agreements or arrangements with third parties and/or the receipt of financial assistance from a group’.
  4. ‘Introducing a new requirement for gambling licensees to report details of individuals who acquire the equivalent of £50,000 or more worth of new shares in a rolling twelve-month period or entities that acquire the equivalent of £1 million worth or more of new shares in a rolling twelve-month period, and also disclose the value of the acquisition and provide evidence of source of funds for that investment’.

Whilst the changes would limit the scope of information required in some areas, such as point 1 above, operators will need to consider the potential impact of matters 2 to 4.

Full details of the consultation and the questionnaire can be found here.

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