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Skilled persons reports commissioned by FCA increase


The number of third party skilled persons reports commissioned by the Financial Conduct Authority (FCA) into the activities of regulated firms increased in the third quarter of 2016, according to the latest figures from the regulator.

The FCA commissioned 15 such reports over the three-month period, up from just nine in the previous quarter. Five of those reports were for investment management firms and five for insurance companies, up from one and zero respectively in the previous quarter, according to the data (2-page / 172KB PDF).

The largest proportion of reports commissioned during the relevant period related to conduct of business issues, which accounted for six out of the 15 reports. Three of these were for firms classified as 'fixed portfolio' firms for conduct supervision, determined by factors such as their size, market presence and customer footprint. These firms require the highest level of supervision.

There were also three firms from those classified as 'flexible' portfolio, which is the category in which the majority of firms are classified for conduct supervision. Governance, controls and risk management frameworks accounted for the second largest share, with four reports commissioned.

The FCA has had the power since 2013 to order a firm to carry out a skilled persons report where they have concerns about potential weaknesses or failings in a firm's practices.

These reports can cover areas such as business conduct, governance, controls, financial crime, and client assets. Reports can be carried out by either a skilled person chosen by the regulated firm and approved by the regulator, or by a skilled person appointed by the regulator directly. The cost of carrying out the report will be met by the affected firm. The FCA contracted with a skilled person directly in one case during the period covered by the data, according to its report.

"As these figures show the FCA is not shy about using these additional powers to impose a comprehensive review and remediation process on firms that breach its rules," said financial regulation expert David Heffron of Pinsent Masons, the law firm behind Out-Law.com.

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