The House of Commons’ Treasury Committee has just published the following responses from the FCA and PRA regarding an earlier request from Andrew Tyrie, Chairman of the Treasury Committee, on how they use their power to require a skilled person report under Section 166 of the Financial Services and Markets Act.
These letters illustrate the approach taken by the FCA and PRA when issuing a s166 report and also the approach to ensure that the resultant costs are scalable and kept to a minimum.
Kinetic Partners’ perspective
- We have seen recently that there have been fewer examples of Skilled Person reports being issued for broader governance issues. Instead, recent Skilled Person reports have focused on more thematic issues such as AML and Market Conduct. The FCA uses these thematic reviews (also known as issues and products supervision) to assess current or emerging risk related to specific issues or products and they are a key part of their current supervisory approach.
- We are not seeing a marked increase in the number of s166 reports being commissioned, which falls in line with FCA comments.
- Both the FCA and PRA highlight that they have robust internal systems and controls to ensure that s166 reports are used proportionally and effectively and that they are cost effective.
- Both regulators use a panel of approved Skilled Persons firms.
- There is regular coordination between the FCA and PRA when scoping s166 reviews in case the remit covers both regulators.
- The FCA commented that contrary to some industry concerns, they have not significantly increased the number of commissioned s166 reports and it is not their strategic aim to significantly increase the use of s166 reports in the future.
- From 2008-2013, the FCA commissioned 463 skilled person reviews at a cost of £277.3 million.
- In 2013-2014, the FCA commissioned 50 skilled person reviews at a cost of £145.7 million.
- From April 2013 to March 2014, the FCA only commissioned skilled person reviews on 0.2% of the firms they regulate.
- From 1 April 2013 to 28 February 2014, the PRA commissioned 33 skilled person reviews at a cost of £11.4 million.