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SKILLED PERSONS REVIEW & REPORT (FSMA S.166)
A Skilled Persons Review (SPR) is one of the supervisory tools the regulators have at their disposal under Section 166 (S.166) of the Financial Services and Markets Act (2000).
There are several stages to the S166, as explained further down the page.
A SPR is an independent review of a regulated firm, you could say a specialist audit and it usually focusing on specific issues where the regulator wishes to delve deeper into a firm’s activities. These specific areas are called “Lots” and we will explain them on another page. (Lots 8,9,10 are referenced by the PRA)
The SPR may be used for diagnostic or monitoring purposes, to limit or reduce identified risks and for remedial action. In practice, a SPR tends to be commissioned when the regulator has concerns about a business or where a business has alerted the regulator about concerns itself. The report will generally establish the extent of any problems and / or the degree of any customer detriment or remediation required.
Changes were made in the amendments to the FSMA in 2012 including the Financial Services Authority (FSA) being replaced by the Prudential Regulatory Authority (PRA) and the Financial Conduct Authority (FCA). Although both regulators have S166 powers, the firms that the PRA regulate are the banks and select larger firms that are full conversant with S166, so we will refer only to the FCA.
While it is the FCA that commissions the report, they will nominate, or ask a firm to nominate (with the agreement of the FCA), a Skilled Person, to undertake the work.
The FCA’s powers to commission a Skilled Person’s Report have been strengthened in a number of ways:
- The FCA can now contract directly with a panel of Skilled Persons. This panel will run until the end of the Q12017.
- The fees of a SPR will be payable by the firm concerned by way of a levy imposed by the FCA where the new regulators contract directly with the Skilled Person; and
- The provisions of the new s.166A FSMA enable the FCA to instruct a Skilled Person (or to require the firm in question to instruct a Skilled Person) to collate and keep up to date information in respect of a firm where the firm has failed to comply with its regulatory requirements to do so.
SELECTING THE RIGHT FIRM
Firms issued with an S.166 Requirement Notice need to select one of the firms from the FCA’s Skilled Persons Panel. It is crucial that firms respond in a timely manner and that they liaise appropriately with the FCA during the course of the process.
It’s important to select the right firm to undertake the review because the report and recommendations provided by the Skilled Person will also help the FCA to determine:
- The extent of any remedial action that needs to be undertaken
- The ongoing supervisory relationship the firm has with the FCA
- Whether enforcement action should be taken against the firm
PREPARING FOR YOUR S166 – MAKING COMPLIANCE WORK
Firms must assess whether their chosen review partner has the expertise, experience and the correct level of resource to carry out an effective review and most importantly provide remedial recommendations that are both proactively compliant and commercially viable.
The key points here are that you must “choose the right review partner” and that they will provide the “remedial recommendations”. Although the firms will not tell you there are several stages to the review, and they do not have to control all of it, only the review and their findings (and obviously recommendations).
Compliance Consultant have been involved in a variety of S166 Skilled Persons Reports as we were appointed as Skilled Persons in 2012. We elected not to fight to get listed on the panel system as we specialise in response and remedial compliance and risk management work. Over the years, through white-labelling our services to the panel consultancies we have provided services to a range of firms. We have a core team of expert consultants who deliver pragmatic and compliant solutions, packaged in a way that helps you deliver value to the regulator and all other stakeholders. At Compliance Consultant we make sure that we are able to guide firms successfully and as painlessly as possible through the often difficult and emotional stages.
REMEDIAL COMPLIANCE & RISK POST YOUR S166
GETTING IT RIGHT
Preparing for the selection of your SPR needs to be done right and with the right considerations. While they are all professional and will undoubtedly provide the right recommendations, it is as well to interview them and weigh up the pro’s and cons. At Compliance Consultant we can help you make the best decision – CLICK HERE FOR DETAILS
Typical S166 Stages
Selection: As stated above, this is critical and needs to be done calmly and in a detached manner.
Review: This is actually commenced at a mutually convenient agreed date. You cannot postpone the inevitable for too long, but there may be acceptable operational reasons that we can help you prepare to negotiate the best time for your firm.
Report: The Firm you choose will prepare their report after they have completed the site work and may discuss various elements with you as they go through the process. Sometimes it is tempting to pick at the “low-hanging fruit” but this can lead to further issues if not done properly. We can help you construct a strategy framework for dealing with the recommendations.
Risk Mitigation Plan: This is the resulting plan of prioritised actions that the regulator discusses with you. They will state what they expect, what outcomes they wish to see and what period they expect the work completed in. Additionally, there are governance elements to be taken into consideration here and further ways required for testing the embedding of any new practices into your firm’s culture. We can help you negotiate the right elements of a practical plan.
As a Specialist Consultancy in Remedial Compliance & Risk, as well as being small and flexible, we can react quickly and provide support for you in days, often with the initial meeting within 48 hours.
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Call us now on 020 7097 1434 or email email@example.com