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Cost of skilled persons reports hits £145m

Costs of skilled persons reports have quadrupled since the FCA was set up, with the average cost at almost £3m and the total cost at £145m.

Skilled person reports, also known as section 166 reports, check for weaknesses or failings in a firm’s practices and cover areas such as compliance, fraud, products and capital adequacy. 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.  

Figures released in response to a letter from Treasury select committee Andrew Tyrie show that in 2013/14, the first year the FCA was operational, there were 50 skilled person reviews at a total cost to firms of £145.7m, working out as an average of £2.9m each.  

In comparison, between 2008 and 2013 the FSA commissioned 463 reviews at a total cost of £277.3M, and an average cost of £598,920.

In Tyrie’s letter he says he is “particulalry concerned” about how much skilled person reports are costing firms and asked for dates and costs of reports.

An FCA spokeswoman says some of the cost of s166s under the FCA actually relates to a review started by the FSA, but is unable to say how much this accounts for. The document does not say what the review relates to though the spokeswoman says it does not relate to interest rate swap mis-selling.

She adds: “Skilled person reviews are an important supervisory tool for the FCA. We always take account of the costs of the review to the firm before and have a process in place to ensure that it’s used only where it is appropriate and that the costs are proportionate.”

Since 2013, the regulator has been able to commission the review itself, passing the cost onto the firm. Before that it had to send a notice to the firm and either nominate a third party to carry out the work or ask the firm to nominate a reviewer who they would then deal with themselves. The FCA has admitted the change could push up the cost for firms.

Tyrie’s letter also asked the FCA to explain how it tries to keep the costs of these reports down. The FCA’s response says they use a “competitive tendering exercise” when they approach firms to carry out the work. When the firm which will be subject to the report gets a company in to carry out the work it is down to them to “negotiate the most competitive price”, though the regulator can query any prices it is unhappy with.

In response to Tyrie’s question about whether s166 reports, which are paid for by the firm which is being investigated, are used to keep regulatory costs down, Wheatley said they provide a “flexible” way of delivering on its objectives while staying within budget.

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  1. It really works then, a case of BS baffles brains if you ask me.

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