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What is a FSMA Section 166 Skilled Persons Report?
A key part of the process is a Section 165 which is a written notice for specified documentation to be provided to the regulator for their assessment and review. This will sometimes provide you with an idea of what they are looking for:
Tip 1: You should get your files, procedures, complaints, policies and other governance reviewed, preferably independently by a “Compliance Consultant” at the same time, so as to prepare your firm for whatever may follow; which on occasions is nothing.
Reality Check – There is no smoke without fire
The Section 166 also has to be in writing and may, or may not carry with it a Draft Requirement Notice. This notice sets out the skilled person requirements; scope of the report, considerations regarding calculating recompense and redress if required and provide an inkling as to the purpose, if you read between the lines.
Tip 2: Compliance Consultant should be engaged to help you read between the lines. FCA/PRA “code” needs to be interpreted by a consultant experienced in the workings of the regulators.
Reality Check – You will probably not know what the regulators are driving at, it may not be what you think.
Tip 3: Too often, firms see this demand by the regulator as a personal slight against them or their firm, the advice or the way their customer’s have been treated. An independent consultant’s view can provide an objective and interpretive view of the S166 Requirements Notice and the background to provide advice in how best to respond.
Reality Check – This is a highly stressful period for senior management; it is a threat to the firm and senior management careers!
If the discussions with the regulators have been focused on the removal of your permissions, then there will likely be advice issues. If threats have been forthcoming regarding your continued trading as a whole, then there are likely to be advice or conduct issues. However, if they have reviewed some files and have asked for a sample to be reviewed by the “Skilled Person” as the subject of the report, it is more than likely that there are systems and controls worries; processes and procedures are not being followed either at all or consistently by one or more of your advisers. You would also have been expected to have picked this up for yourself with your ongoing monitoring plan. Areas that need reinforcement are not always obvious to firm’s management and often needs independent views on systems and controls.
Reality Check – During a S166, the regulator can summon your S166 consultant and/or your auditor to attend their offices at your cost, whenever they wish.