The FCA is making increased use of its powers to subject firms to skilled person reviews.
The latest data published by the FCA shows that in the first three quarters of its financial year 2023/4 it commissioned 53 skilled person reports, more than in the whole of the previous financial year.
The FCA uses a skilled person review for a number of reasons, but typically where certain regulatory risks or concerns in the firm in question have been identified. While the skilled person is usually appointed by the firm, they report to the FCA and a firm will be expected to implement the measures recommended by the skilled person.
The PRA also makes use of skilled person reviews, commissioning 21 in its financial year 2023/4 and 31 the year before.
Managing a skilled person review
A skilled person review is often costly and time-consuming for the firm. We often see firms failing to present themselves in the best light, usually because of time pressure and lack of resource, or through not having fully understood and addressed concerns previously identified by the regulator.
Early and effective engagement is key whenever a firm faces the prospect of a skilled person review, and there may be opportunity to influence its timing and scope. Similarly, if a firm can proactively identify improvements or remediation and propose that to the regulator, that may help to narrow the scope of any review or avoid the need for it entirely.
A review may involve the management of a significant number of documents and other records, and this can give rise to legal issues around privilege and data protection obligations. A firm may need (constructively) to challenge the extent and nature of a skilled person’s request for documents and records and help them narrow down what will really assist. Doing so can also help reduce the cost of the skilled person’s work.
The skilled person may wish to conduct meetings or interviews with senior managers. Such individuals will need to prepare as carefully for these as they would if they being interviewed by the regulator directly. Legal advice and preparation ahead of meetings / interviews may be advisable. Even informal interactions of senior managers and others could influence the views of the skilled person and be reflected in the ultimate report, so appropriate care is needed in every interaction with them.
The firm may also need legal and regulatory advice on concerns and issues raised by the skilled person during the course of their review. For example, the skilled person’s views may differ from those of the firm. Timely advice could reset the skilled person’s views before these crystallise in the draft report.
It will also be important for the firm to set aside time to consider the draft report and take legal advice if required both on the skilled person’s findings and on the next steps for the firm.
"Effective and early engagement is key whenever a firm faces the prospect of a skilled person review."
We have extensive experience of assisting firms at all stages of the process, both in helping to head off a skilled person review and in guiding firms on how best to work with the skilled person and the regulator to achieve a constructive outcome.
