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  3. Fourth National Lottery Licence: Regulatory Handbook

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Fourth National Lottery Licence: Regulatory Handbook

The Commission’s regulatory handbook sets out our regulatory approach to the National Lottery.

Published
1 February 2024

Last updated
1 February 2024 - Changes

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  1. Contents
  2. Volume two: Monitoring Performance Framework
  3. 9. Condition 5: Fitness and Propriety of the Licensee

9. Condition 5: Fitness and Propriety of the Licensee

9.1 This section provides guidance on factors and types of evidence we may have regard to in the context of compliance with Condition 5, specifically in relation to the treatment of Designated Lottery Subcontracts under Conditions 5.6 to 5.8.

9.2 Direction 8 of the Secretary of State Directions imposes requirements related to contracts:

8. The Commission shall exercise its functions under section 7 to include in the licence granted under section 5 of the Act or, as appropriate, in licences granted under section 6 of the Act, conditions which have the following effects:

a) that the Commission and persons authorised by the Commission will have the powers to inspect all forms of records relevant to Lottery contracts or operations held by–

i. any licensee; or

ii. any contractor of any such licensee who in the opinion of the Commission is a significant contractor.

b) that the Commission has the power to approve any party to a contract with any licensee where in the opinion of the Commission the contract is significant.

9.3 To comply with this Direction, Condition 5 defines the concept of a Designated Lottery Subcontract. This concept allows us to identify a subset of Lottery Subcontracts – either by designating individual Lottery Subcontracts or designating all Lottery Subcontracts within a category that we may specify – whereby the Licensee must provide us with 20 Business Days’ notice before entering into or amending such a Lottery Subcontract. Conditions 5.6 to 5.8 set out the relevant detail.

9.4 Our assessment of which Lottery Subcontracts are Designated Lottery Subcontracts will take into account the Licensee’s Business Plan and operations during the Fourth Licence. In particular, we will assess where Lottery Subcontracts could raise material risks to the operation of the National Lottery and the outcomes set out in Condition 1.2. When undertaking this assessment, and amongst other factors, we may have regard to the scale, nature and complexity of the Lottery Subcontract and whether the Required Standard Terms, as set out in Condition 21, are appropriate given these factors.

9.5 To provide an example, factors which we may consider in determining whether a Lottery Subcontract will be a Designated Lottery Subcontract could include:

  • whether the Lottery Subcontract may prove difficult to replace, for example in the event of contract failure, and whether this could have a material impact on the operation of the National Lottery, for example where there may be a limited pool of qualified suppliers, such as scratchcard or infrastructure providers

  • whether the Lottery Subcontract involves the delivery of a Critical Function by a Lottery Subcontractor, for example the 4NL Trust, providers of annuity payments or other potentially life-changing Prizes, or the Independent Verification System; or

  • whether the Lottery Subcontract may entail a high-profile reputational risk, for example media or advertising contracts.

9.6 We may specify that a Lottery Subcontract is a Designated Lottery Subcontract either before or after that Lottery Subcontract has been entered into. Once the Lottery Subcontract is specified as Designated, any subsequent amendments will be subject to Conditions 5.7 and 5.8 (noting that the requirements related to Contractors set out separately in Condition 21 will, among others, continue to apply).  

9.7 Per Condition 5.6(b), we may specify a category of Lottery Subcontracts that will always be specified as Designated Lottery Subcontracts. The Licensee should consider these categories, and the nature of other Designated Lottery Subcontracts, when entering into a new Lottery Subcontract.

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8. Condition 1: Purpose and outcomes Next section
10. Conditions 6 and 7: Fitness and Propriety of Critical Function Employees, Lottery Beneficiaries and Lottery Supervisors
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