The FSA is becoming more pragmatic in its dealings with firms through an increasing use of “shadow” skilled persons reports, according to a compliance consultant.
Skilled persons 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 FSA can order firms to carry out costly s166 reports, which are conducted by a third party.
The Consulting Consortium client services director Ian Stott says over the last year the FSA’s supervision teams have been open to firms carrying out “shadow” skilled persons reports, which are instructed by the firm before being required to do so by the regulator.
Stott says: “We have seen an increasing trend of shadow s166s, which drive towards the same outcomes but in a more conciliatory fashion.
“The FSA is very happy to take that approach which I think is very positive. It is more pragmatic than aggressive.”
A recent freedom of information request, submitted by Money Marketing, revealed the number of skilled persons reports the FSA ordered IFA firms to conduct fell by more than 50 per cent in 2011/12. 14 out of 111 s166 reports related to IFAs during 2011/12, compared to 30 out of 95 in 2010/11.
Aurora Financial Planning chartered financial planner Aj Somal says: “It is a better way of regulation for the FSA to work with firms in co-operation rather than fear.”