Source of funds evidence
Criteria
This is a general overview of when and what source of funds evidence is required, but we assess each application on a case-by-case basis according to risk so the type and level of evidence may differ between applications.
We consider there are three main categories of funding:
- from unregulated entities or individuals
- from regulated banks or investment companies
- from regulated banks or investment companies acting as an intermediary for an investor or pool of investors.
Regulated means by the Financial Conduct Authority (FCA) in the United Kingdom (UK) and FCA equivalent in other jurisdictions, for example the United States equivalent would be the Securities and Exchange Commission (SEC).
We would not normally require source of funds evidence in relation to the origin of monies when an operator takes out a loan from a UK regulated bank, but if an investor borrows from a UK regulated bank to invest in an operator, we will normally undertake source of funds checks on the period when the monies were in the investor’s control. If any bank is buying shares in the operator, we will undertake source of funds checks on the bank, as explained on this page.
Funding from unregulated individuals
These are typically private investors who are investing their own money. We require source of funds evidence if the individual has provided £50,000 (or equivalent in foreign currency) or more of the funding for the acquisition or ongoing investment. Evidence of the individual’s source of funds will depend on what the source of funds is but examples include bank statements, investment portfolio statements and P60s.
Funding from unregulated entities
These investors are typically entities that are using their own money to fund the investment. For these investors we need to know when they were created or incorporated, what jurisdiction they are registered in and we require source of funds evidence if they have been:
- created or incorporated for more than 12 months at the date of investment and invest £1,000,000 (or equivalent in foreign currency) or more; or
- created or incorporated for less than 12 months at the date of investment and invested any amount.
Typically for established entities the latest set of filed financial statements can be sufficient evidence. For recently established entities, evidence of how the entity has been funded is required.
Funding from regulated banks or investment companies
These investors are regulated banks or entities investing their own money. When we consider what type of source of funds evidence is required, we group these investors into two categories – FCA regulated and overseas equivalent regulated.
For FCA regulated entities, we require its FCA reference number along with source of funds evidence if it is investing 10 percent or more of the total investment amount (that is, 10 percent of the total borrowed or 10 percent of the monies raised via the issue of new shares). Typically, these investors are established entities and the latest set of filed financial statements can be sufficient evidence.
For overseas equivalent regulated entities, we require its reference number with the regulator, along with source of funds evidence if it is investing 5 percent or more of the total investment amount. Typically, these investors are established entities and the latest set of filed financial statements can be sufficient evidence.
Funding from regulated banks or investment companies acting as an intermediary
These investors are regulated banks or entities acting as an intermediary for an investor or pool of investors (that is, the entity is not investing its own money). When we consider source of funds evidence, we group these investors into two categories – FCA regulated and overseas equivalent regulated.
For FCA regulated entities, we require its FCA reference number and, if it is investing 10 percent or more of the total investment amount, we require a schedule of the underlying investors.
For the underlying investors, we require source of funds evidence for:
- individual private investors investing £50,000 (or equivalent in foreign currency) or more
- non-regulated entities created or incorporated for more than 12 months at the date of investment and investing £1,000,000 (or equivalent in foreign currency) or more
- non-regulated entities created or incorporated for less than 12 months at the date of investment and investing any amount
- regulated entities investing 5 percent or more of the overall total investment amount.
For overseas equivalent regulated entities, we require its reference number with the regulator and, if it is investing 5 percent or more of the total investment amount, we require a schedule of the underlying investors.
For the underlying investors, we require source of funds evidence for:
- individual private investors investing £50,000 (or equivalent in foreign currency) or more
- non-regulated entities created or incorporated for more than 12 months at the date of investment and investing £1,000,000 (or equivalent in foreign currency) or more
- non-regulated entities created or incorporated for less than 12 months at the date of investment and investing any amount
- regulated entities investing 5 percent or more of the overall total investment amount.
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Last updated: 28 November 2023
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