2023 Consultation on proposed changes related to financial penalties and financial key event reporting

In December 2023 the Gambling Commission consulted on two separate issues: 

(i) proposed changes to its Statement of Principles for Determining Financial Penalties (SoPfDFP) (the consultation); and  

(ii) proposed changes to financial key event reporting.  

The consultation ran from 15 December 2023 until 15 March 2024.  

Financial Penalties  

The SoPfDFP details the Commission’s approach to determining financial penalties imposed on license holders.  

In the consultation we proposed to make changes to the criteria for imposing a financial penalty and the methodology for determining the amount of a penalty. The proposed changes aimed to enable the Commission to better achieve the objectives and duties imposed under the Gambling Act 2005 (the Act) by making the Commission’s approach to financial penalties more transparent and addressing stakeholder concerns about the lack of transparency and consistency with regards to the existing approach. Further, the proposed changes were intended to make the decision-making processes clearer therefore reducing the time and resources involved in determining financial penalties. Respondents were invited to share their views and comments on the proposals.  

Key Event Reporting  

In the second part of the consultation we proposed changes to the Licence Conditions and Codes of Practice (LCCP) Licence Condition 15.2.1 and the addition of some new key reporting requirements to ensure that we are notified of changes to finances, ownership and interests within gambling licensees at the appropriate levels. The proposed changes to the LCCP would also be reflected in our Licensing, Compliance and Enforcement Policy Statement. 

Licence Condition 15.2.1. (Reporting Key Events) sets out specific key events relating to operator status, relevant persons and positions, as well as financial events which licensees are required to report to us. 

A key event is an event that could have a significant impact on the nature or structure of a licensee’s business and licensees are required to report the occurrence of key events to the Gambling Commission as soon as reasonably practicable and in any event within 5 working days of the licensee becoming aware of the event’s occurrence. 

Currently, gambling licensees are required to report to the Commission when persons become 3 percent or more shareholders in the licensee (or its holding company) and also if the licensee enters into a loan with an entity that is not regulated by the Financial Conduct Authority (FCA).    

The proposed changes are driven by gambling licensees being linked to complex, modern day, global business structures meaning that their ownership and interests are not always clear. Similarly, their financing arrangements are not always straightforward.  

The current requirements risk potential gaps in our understanding of licensees’ financial positions and associations with others. Furthermore, many gambling licensees are now linked to jurisdictions where the governance arrangements mean that some licensees cannot meet the 3 percent shareholder reporting requirement because they cannot access information about shareholdings below 5 percent. This has led to some licensees having additional conditions added to their licence to allow a 5 percent threshold reporting requirement to apply to them. The current reporting requirements are therefore difficult to apply consistently across all licensees. 

We consulted on 5 proposals: 

1. Amendment to paragraph 1 of Licence Condition 15.2.1 to raise the reporting threshold for ‘operator status’ and ‘relevant persons and positions’ from 3 percent to 5 percent 

2. Amendment to paragraph 2 of Licence Condition 15.2.1 to expand the application of ‘relevant persons’ to include shareholders, but also other entities with both direct and indirect interests in the licensee of 5 percent or more so that these are reported to the Commission 

3. Amendment to paragraph 3 of Licence Condition 15.2.1 to include the reporting of entering into financial agreements or arrangements with third parties and/or the receipt of financial assistance from a group company so that these are reported to the Commission (and moving the requirement to become Licence Condition 15.2.1 paragraph 6, changing the current paragraphs 6 and 7 to paragraphs 7a and 7b, accordingly) 

4. Introduction of a new requirement for licensees to report to the Commission the details of individuals who acquire the equivalent of £50,000 or more worth of new shares in a rolling 12 month period or entities that acquire the equivalent of £1 million or more worth of new shares in a rolling 12 month period, along with the value of the acquisition and evidence of source of funds for that investment (to become paragraph 3 at Licence Condition 15.2.1) 

5. Amendment to the Licensing, compliance and enforcement under the Gambling Act 2005 - 3 - Licensing (opens in new tab) to raise the threshold of shareholders to be listed from 3 percent to 5 percent. 

These Licence Conditions would apply to all operating licences. 

The proposed changes aimed to: 

• clarify and extend the key event reporting requirements and allow the Commission to apply the requirements consistently across all licensees 

• address the risk of gaps in the Commission’s understanding of licensees’ financial positions and associations with others 

• align the Commission’s reporting requirements with international reporting requirements (including the Securities and Exchange Commission). 

The effect of these proposals would be to narrow the scope of information we require from licensees in some areas (proposals 1 and 5) and to significantly, but proportionately, expand the scope of information we require from licensees in other areas (proposals 2, 3 and 4). 

Respondents were invited to share their views and comments on the changes we proposed. 

Financial Penalties  

In respect of the first part of the consultation there were 29 respondents in total, and the number of responses submitted by the pool of respondents to each of the 61 questions asked in the consultation document varied slightly between the questions.  

Those respondents who consented to the publication of their name are listed at Annex 1.  

We have reviewed and carefully considered the responses to the questions for each of the proposed changes as set out in the consultation document before making a decision. You can see the full response by clicking on the following link:  Consultation response document    

Key Event Reporting  

In respect of the second part of the consultation there were 29 respondents in total, and the number of responses submitted by the pool of respondents to each of the 25 questions asked in the consultation document varied slightly between the questions. 

Those respondents who consented to the publication of their name are listed at Annex 2.

You can see the full response by clicking on the following link: Financial key event reporting: Reporting changes in ownership and interests: Consultation response

Financial Penalties  

Following consultation, and in response to the feedback received on the first part of the consultation, we have made some significant changes to the existing SoPfDFP. It is not possible to outline all of the changes to the SoPfDFP in detail in this summary, therefore we have outlined them broadly as follows.  

The changes to the existing SoPfDFP:  

• provide a clear and distinct 7 step process the Commission will follow when assessing and imposing a financial penalty  

• provide added clarity as to how and when the Commission will calculate the ‘disgorgement’ element of the penalty where clear consumer detriment and/or financial gain by the licensee has resulted directly from the breach  

• identify 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  

• provide transparency on how the Commission will determine the level of seriousness of the breach, and the introduction of 5levels of seriousness  

• include a defined methodology 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  

• detail the inclusion of society lotteries and external lottery managers in instances where it is not appropriate for the starting point of the financial penalty to be based on a percentage of GGY  

• include a defined methodology for addressing situations involving multiple breaches during a period  

• include a defined methodology 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.  

The revised SoPfDFP will come into effect on 10 October 2025.  On or after this date, where the Commission notifies the holder of an operating licence that the Commission proposes to require it to pay a penalty in accordance with s121(2)(a) the revised SoPfDFP will apply.  

Key Event Reporting  

We have reviewed and carefully considered the responses to the questions set out in the second part of the consultation for each of the proposed changes before making the following decisions: 

Changes to Licence Condition 15.2.1 

For the avoidance of doubt, we do not propose to change the wording of the introductory paragraph and the numbering of the paragraphs will not change. 

Proposal 1: Changes to Licence Condition 15.2.1, paragraph 1 

We are amending paragraph 1 of Licence Condition 15.2.1 to raise the reporting threshold for ‘operator status’ and ‘relevant persons and positions’ from 3 percent to 5 percent. 

Proposal 2: Changes to Licence Condition 15.2.1, paragraph 2 

We are amending paragraph 2 of Licence Condition 15.2.1 to expand the application of ‘relevant persons’ to include entities that are not companies with share capital, but which nevertheless have direct interests in the licensee or its holding company of 5 percent or more by virtue of voting rights or entitlement to dividends or profits. 

We are not proceeding with the proposal to include indirect interests in the licensee or its holding company. We have excluded society lottery licensees from these changes. 

Proposal 3: Changes to Licence Condition 15.2.1, paragraph 3 

We will not be proceeding with the changes as proposed, but we intend to slightly amend the wording of paragraph 3 to ensure that all loans are included, whether or not agreements are in writing. 

Proposal 4: Introduction of a new requirement to report individuals acquiring £50,000 or more worth of new shares 

We will not be proceeding with this proposal at this time, but we intend to request information from a representative sample of licensees to allow us to further assess the impact of the proposal and may revisit this issue in the future. 

Proposal 5: Changes to paragraph 3.25 of the Licensing, Compliance and Enforcement Policy Statement under Gambling Act 2005 

We are amending paragraph 3.25 of the Licensing, Compliance and Enforcement Policy Statement under the Gambling Act 2005 to raise the threshold of shareholders to be listed from 3 percent to 5 percent Licensing, compliance and enforcement under the Gambling Act 2005 - 3 - Licensing. 

The proposed amendments affect all licensees and the proposed amendments to Licence Conditions and Codes of Practice and the Licensing, Compliance and Enforcement Policy Statement under the Gambling Act 2005 (the Act) will come into force on 19 March 2026. 

Applicable changes to our eServices system will be made to coincide with the changes to LCCP. 

There have been a number of requests for guidance on specific elements of our existing LCCP information requirements and as a result we intend to improve our guidance and provide worked examples where relevant.