compliance consultant

Skilled Persons Reports - Section 166 Reporting

Section 166 Reports are also known as Skilled Persons Reports (SPRs). The name comes from the part of the Financial Services and Markets Act, 2000 which gives the FSA the authority to request firms to seek specialist assistance.

Skilled Persons Reports are most often required as the result of an FSA visit to a firm. They are used to find out what further regulatory action may be needed and to see if there has been a breach of a rule or any failure of the firm's systems and controls, particularly where customer detriment is suspected.

 

The onus is then on the firm to produce a short list of Compliance Consultancies who they consider would be suitable and submit this to the FSA. The firm may nominate the consultancy which they would prefer. However, it is up to the FSA to make the final decision. If chosen, our approach to the skilled persons report is pragmatic and completely independent and takes into account all relevant factors.


The FSA will appoint a Skilled Person to produce a Section 166 Report on a regulated firm to:

  • Identify, assess and measure the risks it has identified.
  • Report and monitor the identified risks.
  • Suggest preventative action.
  • Propose any remedial action including any customer redress.

 

The Reports may be part of a FSA disciplinary process or enforcement action. A firm will have had a FSA visit to review its conduct in matters such as quality of advice and treating customers fairly. This is followed by a Risk Assessment Letter from the FSA setting out any concerns. One outcome is that the firm may be required to carry out an independent review requiring the appointment of a Skilled Person.

As part of the FSA process it is important that the firm is seen to:
  • Have a co-operative approach;
  • Have systems and records which provide the required information.
  • Be willing to provide the Report.
  • Have the knowledge or expertise to work with the Skilled Person to provide the Report.

 

How we can help

The FSA will need to outsource this work to consultants who are employed by the regulated firm to act on behalf of the FSA during the investigation. Visit the FSA website on using a compliance consultant.

The Simply Compliance service is able to supply specialist consultants for IFA's, Mortgage, Motor and General Insurance Brokers and is able to provide the reassurance that any Skilled Persons Report is carried out by someone who has spent years working in these sectors. This is critically important where a detailed understanding of Investments, Motor, Mortgage and General Insurance products is needed to assess any customer detriment and redress.

FSA policy for Skilled Persons Reports

The detailed rules are set out in the FSA Handbook and SUP 5.5.1 describes the required contractual arrangements between the firm and the skilled person. The firm will be asked to nominate a Skilled Person subject to the conditions in the FSA's enforcement letter.

These are some of the contractual requirements of a Skilled Person:
  • To be qualified and experienced.
  • To be insured.
  • To co-operate and communicate.
  • To notify any rule contraventions.
  • To supply materially significant information.
  • To notify any risk of the firm ceasing to be a going concern.
  • To agree an exchange of confidential information.

 

The nominated Skilled Person has to be approved by the FSA and is further required to provide:
  • Interim reports.
  • Copies of source data, documents and working papers.
  • Copies of draft reports given to the firm.
  • Detailed planning and progress reports.

 

Where a problem has been identified the Skilled Person will be asked to propose the amount of customer redress.  At all times the firm must provide reasonable assistance to the Skilled Person.

During the process the FSA has other powers it could seek to impose under FSMA. These allow the FSA to seek information or to carry out further general or specific investigations. This is likely to happen where problems are identified which were not part of the original FSA risk concerns. Such work may be outsourced by the FSA to the Skilled Person.

Cost

The cost of a Section 166 Report is paid by the firm to the Skilled Person as the FSA will have decided that a firm will benefit from this Report having explored other courses of action. The FSA will have agreed with the firm the scope of the Skilled Person Report, its likely cost and the identity of the Skilled Person.

Outcomes of the Report

These are likely to fall into two categories. Firstly, there is likely to be remedial action to be carried out by the firm to its systems and controls which will reduce its exposure to risk. Secondly, there may be a requirement for the Skilled Person to consider customer detriment, to agree redress and to communicate with the firm's customers.

For help and assistance with your Skilled Persons Report, contact us.
  Compliance Home Hot Topics Skilled Persons Reports - Section 166 Reporting

FSA Compliance & Regulatory Financial Consulting, from Retail Banking to Insurance Intermediaries

Our website is designed to provide you with information about us and the services we offer related to FSA compliance, financial regulations and regulatory compliance.  Please contact us on telephone number above or email us directly to discuss your specific requirements. Our Services include

Financial Regulation Skilled Person Reports
 FSA Regulation
Compliance Training Financial Compliance FSA Compliance
Money Laundering Regulations
 Banking Compliance
 FSA Authorisation
Compliance Consulting Regulatory Compliance Compliance Regulations
Compliance Mystery Shopping
 FSA Registration & Authorisation