Skilled Persons Reviews, also known as a Section 166, are used by the FCA and PRA to gather information on financial service firms, using its powers under the Financial Services and Markets Act (2000). This ensures that firms are carrying out their duties according to FCA and PRA rules.
Why do we need one?
Usually, the FCA and PRA will opt to undertake a Skilled Persons Review where they are concerned that a firm is not meeting its regulatory obligations. This could be following a visit or discussion with the regulator, or as part of a Risk Mitigation Programme (RMP).
FCA and PRA engage these reviews to ensure that firms are operating within the FCA and PRA’s regulations, and with constant focus on providing the appropriate customer protection – so you should have nothing to worry about if you’re playing by the rules!
How does it work?
If you are issued with an S.166 Requirement Notice, your firm will usually be asked to nominate a ‘Skilled Person’ from the FCA/PRA skilled persons panel.
You will need to agree the Terms of Reference and budget before the review begins to ensure the Skilled Person and Regulator are agreed on the scope, timescales and limitations of the review up front. Depending on the type of review to be conducted and the firm’s relations with the regulator, negotiation over the terms of the review can be limited.
The Skilled Person will then conduct a thorough review of the evidence which may be files, emails, telephone logs, interviews and committee agendas and notes. In most cases the Skilled Person is likely to request a lot of information, which will hopefully prove that your firm has been meeting the standards required.
Where the Skilled Person finds processes, outcomes or governance to be unsatisfactory, they will make this clear to both you and the regulator. In many cases you will be able to agree an approach with the Skilled Person to remedy the breach and ensure that similar problems do not arise again.
In future articles, we will give some worked examples of anonymised Skilled Person Reviews to show greater detail of particular reviews.
How can you prepare for it?
- For starters, you can try and avoid the S.166 in the first place! If the FCA/PRA bring up a problem with you, get on top of it and get it sorted before official remediation is brought in. A Skilled Persons Review is expensive and time consuming.
- Make sure that your firm chooses the right Skilled Person for the job, and not just the right firm, also try and agree the team you will get. The Skilled Persons Panel has a detailed overview of the possible people and their firms, so you can ensure that the one you choose knows about your specific niche industry and has a good track record of helping firms and individuals to improve. When you have an inkling that you may be asked to appoint, it is worth thinking about who you might like to be the Skilled Person and any potential conflicts.
- Get a firm to perform a mock S.166 review for you, including mock interviews to get you prepared for the real thing.
- Get your records in order and get yourself ready for the review – we can’t say this enough. It is simple to say but much harder to do in practice. Don’t rely on the Skilled Person and the regulator to tell you what you’re doing wrong!
If you need more information on Skilled Person Reviews, just give us a call. We’ll be happy to discuss our recent experience, and assure you that it’s not quite as hair-raising as it first might seem.
Call us on 01273 651 500 or drop us a message: firstname.lastname@example.org