Over the quarter to the end of June – covering the stretch where the FCA introduced panels of experts to complete the reports – the watchdog ordered just 19 Skilled Person investigations, with just one being commissioned at an investment management firm.
It is the first time in a year that the number of Skilled Person reports, which are also called Section 166 reports and ordered where the regulator believes its rules have been broken, has fallen beneath 20. Moreover, it marks a sharp shift in a trend which over recent years has seen the former City watchdog, the FSA, ramp up its use of the controversial documents. In 2006/07, for example, 18 reports were commissioned, versus 140 in 2010/2011. Over 2012/13, the number of reports ordered fluctuated between 23 (in quarter one) and hit a peak of 38 in quarter two.
Over this time, the regulator’s use of its power to commission Skilled Person reports has been fiercely criticised, with both the IMA and Wealth Management Association (formerly Apcims) raising concerns about their cost. It has been found that some firms have had to shoulder bills linked to Section 166 orders totalling millions of pounds, while IMA data revealed that up to 500 staff hours had been swallowed completing the reports.
Numbers drop
But according to the first set of figures since the FCA revamped its regime, fewer Section 166 reports have been commissioned. Insurance companies accounted for the bulk of the 19 reports ordered in the regulator’s first quarter, followed by firms involved in securities and futures. Personal investment firms and investment managers ranked close to the bottom of the heap in terms of numbers, along with banks and building societies, which historically have come out top when the regulator revealed its use of Skilled Person powers.
S166 revamp
Under the FCA’s new Section 166 arrangements, which were introduced at the start of April, the regulator can now contract directly to the Skilled Person panel.
The panel has been split into seven categories or ‘lots’ and each one focuses on a separate area such as client assets, governance controls and risk, conduct of business, data and financial crime.
Firms had to throw their hat in the ring in order to be included on the panel, which remains in place for four years. RSM Tenon and Smith & Williamson feature on the list, along with the larger consultancy firms like Deloitte, and magic circle law firm Clifford Chance.
The regulator was granted the authority to contract directly with the so-called Skilled Person firms back in 2012, though its panel will be monitored on a regular basis.
Unveiling the new arrangements, the FCA said the panel would “ensure a consistent and transparent approach to conducting Skilled Person reviews".
A spokesman for the regulator said it does not take a view on its quarterly report numbers, and viewed Section 166 as one of the tools at its disposal to gain an independant view of firms’ practices
