The number of skilled persons reports ordered by the FCA could increase 10-fold to 1,000 a year, warns consultants BDO.
Skilled persons reports, also known as section 166 reports, check for weaknesses or failings in a firm’s practices. The regulator orders these reports to be carried out where it has concerns, and firms have to meet the cost of carrying out the report.The number of skilled persons reports ordered by the FCA could increase 10-fold to 1,000 a year, warns consultants BDO.
The FSA instructed 113 s116 reports in 2012/13, at a cost to firms of £176.4m. The FCA instructed 19 s166s between April and June.
Speaking at an Institute of Chartered Accountant in England and Wales conference in London last week, BDO financial services risk partner David Morrey said the FCA is adopting a far more “intrusive style” than its predecessor.
Morrey said: “We have gone hit over 100 s166s a year and the FCA has talked about reaching 400 while I have been told it could go as high as 1000. Organisations are much more likely to be subject to such a review than they have been before.
“My theory is the FCA really struggles to get a firm through enforcement as there are lawyers’ costs and it has limited resources. It seems to me s166s are a way of punishing a firm as it will be forced to pay for the review.”
Jacksons Wealth Management managing director Pete Matthew says: “I am worried about this power being overused. Our fees are already huge and rising so I hope these reports are not slapped on firms for minor transgressions.”
An FCA spokesman says: “We use these powers to obtain an independent view of aspects of a firm’s activities that for example cause us concern or where we require further analysis.”