Under the Financial Services and Markets Act, as amended by the 2012 Act, the FCA has the power to obtain a “skilled persons report” from a third party about aspects of a firm's activities where they have concerns about potential weaknesses or failings in a firm's practices.
These reports can cover areas such as business conduct, governance, controls, financial crime, and client assets. This activity can be completed by an approved “skilled person” within the firm or by someone appointed by the regulator directly. The cost of carrying out the report must be met by the selected firm. As well as business conduct, governance controls and risk management, a skilled person report may also concentrate on areas such as financial crime and client assets.
In the 3rd quarter of 2016 the regulator commissioned 15 skilled person reports, an increase of 60% from the previous quarter. Of these 15 reports, 5 were conducted on investment management firms and 5 on insurance companies. The Insurance Companies include Lloyd’s members’ agents, Lloyd’s managing agents and Lloyd’s Agents.
The largest proportion of reports were requested due to FCA concerns relating to business conduct, closely followed by issues relating to governance, controls and risk management frameworks, which accounted for 4 of the reports.
Andy Evans, Managing Director at Xactium commented “It is clear from this announcement that the FCA isn’t going to hesitate in exercising its additional powers of supervision to request wide-ranging assessments and impose remediation on firms. Organisations should ensure that their Enterprise Risk Management processes and supporting systems are up to date and that relevant information can be easily extracted.”
For more information about skilled persons reviews, visit the FCA’s website: https://www.fca.org.uk/about/supervision/skilled-persons-reviews