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Regulator to order 140 skilled persons reports

The FSA will force around 140 firms to hire auditors to conduct a skilled persons report in 2011/12.

The report, which can cost firms thousands of pounds, checks for weaknesses or failings in a firm’s practices and covers areas such as compliance, fraud, products and capital adequacy.

The FSA will finalise the number of firms involved at the end of March.

Under section 166 of the Financial Services and Markets Act, the FSA has the power to force a firm to appoint a skilled person to produce a report. That person must be independent to the firm and reports directly to the FSA.

The regulator uses the section to supervise firms and as an enforcement tool. It has not specified why it has chosen to invoke s166 for the 140 firms.

In a feedback statement published earlier this month, the FSA stated its intention to “increase the effectiveness of s166 SPRs as a supervisory tool”.

In 2009/10, the FSA ordered 88 s166 reports, costing firms a total of £24.8m, compared with 17 reports in 2005/06.

FSA auditing and accounting sector leader Richard Thorpe says: “We will continue to encourage regular dialogue between auditors and supervisors to increase the effectiveness with which auditors undertake their work and the effectiveness of supervision.”

Bill Warren Compliance managing director Bill Warren says: “With the FSA’s lack of resources to really get stuck into these issues, the use of s166, which is very expensive for individual firms, is an effective tool for the FSA.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Raising standards is one thing and a laudable regulatory aim, but many would argue that the FSA’s power to force its will on firms is excessive and unbridled. For example, have any of these 140 firms been given an opportunity to come up with an alternative, less costly plan to meet the FSA’s requirements? Or, if they have put forward their own plans, what has been the FSA’s response?

    It seems that if the evil eye of the FSA falls upon you, you just know that it’s going to cost you a painful chunk of your profits and you have no right to negotiate.

    The Statutory Code of Practice for Regulators states: “Effective and well-targeted regulation is essential in promoting fairness and protection
    from harm. However, the Government believes that, in achieving these and other legitimate objectives, regulation and its enforcement should be proportionate and flexible enough to allow or even encourage economic progress.”

    No sign of that as far as ther FSA is concerned.

  2. On the suspicion of system failure, firms are forced
    to undergo very expensive and financially damaging system review.

    What happens when the firm is found compliant, are they able to obtain recovery of cost and from who?

    Is this a ‘one problem fits all’ situation and the use of dragonian measures fully justification.
    What staff level at the FSA has the authority to order the review?

    O/K a firm is found at fault, does the cost punishment fit the crime, or is this just regulatory bullying.

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