UK's Senior Managers And Certification Regime - All Change On 9 December?
The total number of skilled persons reports which firms have been ordered to carry out by the Financial Conduct Authority (FCA) is slightly up on the same figure for this time last year but considerably down on the figure for the year before that.
This report, also known as a section 166 report, is one of the key tools in the FCA’s regulatory armoury. The power is used by the FCA to gain an independent oversight (at the firm’s cost) of any aspects of the firm’s activities which give rise to concern.
Do these figures represent a trend away from deploying this power? It seems counter-intuitive. While no reference was made to the use of its s.166 powers in its recent Business Plan, why would the FCA, facing its current budgetary pressure, not seek to make greater use of what is for them an extremely efficient and cost-effective investigation tool?
Yet recent data from law firm Reynolds Porter Chamberlain suggests that only 2% of such reports last year resulted in enforcement action, down from 4% the year before. The FCA has robustly defended its record, stating that such interventions are not expected to lead to enforcement action.
This raises the question of what, exactly, is the purpose of s.166 reports? Given the huge costs incurred by firms in complying with these orders, perhaps it is time for the FCA to explain its policy in relation to s.166. This would add a welcome degree of transparency to its use of what is an extremely powerful tool.
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