In its fortnightly e-bulletin at the end of last month, the Gambling Commission issued a warning to operators that it planned to get tougher on operators not notifying it of key events within the required timeframe.
Licensed operators must tell the Commission about any change of corporate control within five days of the event happening, and follow this up with an application for change of control within five weeks.
However, it seems operators are frequently missing the deadlines without sufficient reason, and the Commission said that from July it will be taking a stricter approach.
While it’s likely the regulator is particularly concerned about changes to an operator’s financial structure or share composition, key events also include changes to those holding ‘key positions’ within the company.
Key positions include personnel required to hold a Personal Management Licence (PML) and any departure of such a licence holder from a company is an event that must be notified within five working days.
Richard Bradley, Partner at Poppleston Allen and gambling industry and regulatory expert, gives some guidance on why the Gambling Commission needs to know about changes in PML holders and outlines who needs to have one.
Why might companies not be notifying the Commission of changes in key personnel?
An operating licence holder has to notify the Commission of anything that is going to have a material impact on their business, but this is a bit of a catch-all provision and there are about 20 different types of reporting ‘key events’, one of which is changes to key personnel.
Operators do sometimes forget to do this, but any delays will result in a technical breach of the operating licence. If someone in a crucial position resigns, a company may be focused on recruiting a replacement and forget about the reporting element. We have also seen a case where somebody sadly died and, in such circumstances, it is understandable that reporting obligations may not be a primary focus.
However, compliance continuity under an operating licence is vital. This is one of the many reasons why responsibility for regulatory compliance, which is one of the management offices that must hold a PML, is so key.
So regulatory compliance is an area where someone must have a PML. What are the other roles that must have a licence?
It is not necessarily job title specific as to who requires one, but rather the Act itself and the Licence Conditions and Codes of Practice which define the five ‘management offices’ under the operating licence, where at least one person will be appointed and hold a PML. These are the people ultimately responsible for:
- the overall management and direction of the licensee’s business or affairs;
- the licensee’s finance function;
- the licensee’s gambling regulatory compliance function;
- the licensee’s marketing function; and
- the licensee’s information technology function (as it relates to gambling-related IT and software).
If a business has three or fewer staff members undertaking the relevant management positions, with individuals covering several functions, this situation is defined as a small-scale operator. Many smaller businesses and new startups may be in this position and those individuals may not require a PML, but they would have to complete the Annex A declaration process instead.
For the non-remote sector, there are some people lower down the management chain who must also hold PMLs. These include the managers of individual bingo and casino premises, as well as area managers in charge of five or more sites.
How much responsibility does a PML holder have? For example, could they personally face enforcement action for the actions of an operator?
PML holders can be held liable for breaches of either their personal licence or the related operating licence when carrying out their respective roles. The Gambling Commission could also impose a financial penalty and, in extreme circumstances, individuals could be charged with an offence.
In practice, fines and significant enforcement action against PML holders have been relatively rare to date and have usually only been applied in circumstances involving significant failings or continued breaches of licence conditions.
That said, this may change going forward as the Gambling Commission has stated that it is focused on holding the leadership of gambling businesses to account and that board-level management should be focused on accountability for the licensing objectives, including those governing responsible gambling.
And while fines may be uncommon, we do see PMLs being suspended or revoked. If someone’s PML is revoked as a sanction, they will not be able to obtain a new licence, which could seriously impact their existing employment status and their future employability as they may be unable to undertake specific management responsibilities in future.
In practice, fines and significant enforcement action against PML holders have been relatively rare to date and have usually only been applied in circumstances involving significant failings or continued breaches of licence conditionsRichard Bradley
What happens when someone who is a PML holder leaves a company?
As well as notifying the Commission of the departure, an operator also needs to immediately appoint a new person to undertake the responsibilities of the outgoing PML holder. A person with an existing key position could temporarily or permanently take responsibility for the vacant function, although the Commission likes to see sufficient staff members in key positions and it may not always view this as appropriate.
There may also be another PML holder in the relevant department as large operators often have several team members holding PMLs. Operators should ensure their contingency planning prevents any situation where there is nobody suitable to slot into a vacant position.
If an external recruit is coming into the company, they may already hold a PML as these are specific to individuals and not tied to an operating licence.
If the new holder of a post doesn’t have a PML, they would need to apply for one or potentially complete an Annex A (small-scale operator). The process typically takes eight weeks, though the need for a criminal record check can delay determination, particularly where candidates are not from the UK or are UK citizens who have lived abroad in the past five years.
Does a criminal record preclude one from holding a PML?
This will depend on the specific circumstances. The Gambling Act refers to ‘relevant offences,’ which include those specifically relating to gambling but also specific offences relating to dishonesty, theft, fraud or serious injury. If someone has been convicted of a relevant offence, it is unlikely they will be able to obtain a licence. If someone was involved in a relatively minor offence many years ago, that might be less of an issue.
The key point here is to be open and honest as the Commission requires information about all offences to determine the suitability of an applicant. The regulator will look more favourably on an application where full transparency is provided as opposed to an applicant claiming that there are no offences until details come to light in a criminal record check.
If an existing PML holder is investigated or convicted of a relevant offence, they must notify the Commission within five working days. While it’s up to the operator to let the Commission know if a PML holder leaves the business, the individual PML holder is directly responsible for notifying the Commission of certain events, including criminal offences. Other examples include being under investigation by a professional body, dismissal for gross misconduct, bankruptcy, disqualification from acting as a company director and any change in their name or address.
Individual PML holders are also responsible for renewing their licence every five years. If they do not, they risk it being revoked.