FCA Skilled Person Reviews (s166)

Receiving a s166 requirements notice is a challenging experience for any firm, particularly those unfamiliar with the process. Concerns about operational disruption, cost, and the ultimate outcome are justified.

At Bovill we have undertaken s166 work for a wide range of firms both as a Skilled Person and as an adviser to those undergoing the process. Our work spans a number of the FCA's 'Lots' in this area, including:

  • Financial crime
  • Conduct of business
  • Governance and individual accountability
  • Client assets
  • Prudential.

The Bovill s166 approach

The type of project we're asked to do varies enormously, but we always maintain the same overarching principles:

  • We are proportionate – we understand that you are ultimately paying the bill for the s166. So our scope of work will follow the requirements notice, and our budget will be based on achieving the objectives, at a reasonable costs. Our long experience of s166 work enables us to price accurately and competitively.
  • We are independent, but fair – our consultants have worked with, or for, firms in your market, so understand the operational and commercial challenges.
  • No surprises – the findings in our draft report should not come as a surprise to you. We will have discussed the issues with you beforehand and highlighted any areas we have concerns about. You will have an opportunity to feedback on the draft report, before the final report is released.
  • Your firm is unique – while the regulator’s motivation for initiating the s166 may have come from an industry-wide thematic review, your firm’s structure and circumstances are unique. We will take the time to get to know you, and will not make assumptions.
  • You have a story to tell – over the course of the engagement we will give you the opportunity to put forward your case, and describe how you arrived at the decisions and choices you made. We believe this input from the firm is essential to arriving at fair and balanced findings.

Redress and back-book reviews

For firms offering consumer products, the inclusion of a back-book review (and the potential for customer redress to follow) is the most concerning part of the requirements notice. Back-book reviews have the potential to identify historic evidence of miss-selling, going back many years. Often these issues occurred at times when controls and processes may have been weaker. Management may have changed in the interim period, and customer records may be incomplete.

We have conducted many back-book review exercises, over the years. This means our workflows and processes are efficient and cost effective. It also means we understand the issues and constraints firms are operating under. We will provide you with constructive and actionable feedback and recommendations on how to approach the back-book review and any subsequent redress exercise.

Firm-side support

In addition to acting as a Skilled Person we can also provide firm-side support during the s166 process. These are separate engagements, where someone else is acting as the Skilled Person.

Based on our s166 experience and our understanding of the market we can help firms prepare for a s166, and guide them through the process.

Find out what your options are

If the regulator has told you to appoint a Skilled Person, or you think they might be considering doing so, drop us a line to see how we can help. Our consultants can provide you with guidance on what to expect, and how best to proceed.

What is a s166 FCA Skilled Person review?

Under section 166 of the Financial Services and Markets Act – known as s166 – the regulator has the power to require a firm to appoint a ‘Skilled Person’ to produce a report on specified matters or to appoint a skilled person directly. This could be, for example, a review of past business in a particular area or sales of a particular product; a review of a firm’s compliance with the client money and asset rules; or a review of a firm’s systems and controls.

The FCA and PRA maintain panels of approved skilled persons in various subject areas or ‘Lots’ for which regulatory specialists must apply every five years. You can see the panels in full on the FCA and PRA websites. The FCA sees the s166 process as supervision rather than enforcement, and the cost of the work falls on the firm in question.

A s166 requirement can be triggered by regular supervision, a thematic review or other reasons for example a tip off.

In two thirds of cases the firm is asked to appoint the skilled person themselves. They can seek proposals from three organisations on the panel and state which of the three is their preferred supplier – although the regulator has the final say. The skilled person is paid for by the firm, but work is directed by the FCA in accordance with the Requirements Notice. The main output is a report sent to both the firm and the regulator. There can be several stages of review and remediation.

In more serious cases the FCA goes out to skilled persons direct to invite them to tender. The FCA goes on to appoint the skilled person and impose them on the firm concerned.