Dear CEO: Our Custody and Fund Services Supervision Strategy Letter
MoreCall: 0845 139 4444
Email: hello@square4.com
Call: 0845 139 4444
Email: hello@square4.com
Where the FCA or PRA are concerned about aspects of a regulated firm's activities or want further analysis, they can get an independent view from a third party (known as a 'Skilled Person').
This power is granted under the Financial Services and Markets Act (FSMA), section 166. These are commonly referred to as Skilled Person reviews, and they have become an important and frequently used supervisory tool.
Preparing for a Skilled Person Review
The scope of a skilled person review is detailed in SUP 5.4 of the FCA Handbook. It outlines the appointment process, the review’s scope, and reporting requirements.
For those in the financial services sector, particularly in governance and compliance roles, it’s essential to be prepared for a Skilled Person review. Proactive steps can be taken to ensure governance and reporting are aligned with regulatory expectations, which can help mitigate the risk of adverse findings or enforcement actions.
Service Benefits
How Square 4 Can Help
Should your firm become subject to a Skilled Person review, Square 4 has the experience and expertise to support you. We can act as either the designated Skilled Person, or, particularly if you are a firm experiencing a Skilled Person review for the first time, we can work with your in-house teams as a trusted adviser guiding you through the appointment and selection process. We will not only bring our extensive experience to the engagement, but will act in a proportionate and pragmatic way to ensure you are able to deliver what is required and reach a successful outcome.
Q. Can a firm choose its preferred skilled person?
A. The FCA has the power to appoint a Skilled Person of their own choosing, however, by far the most common is where the firm identifies three skilled persons who could be appointed, and with the FCA’s agreement, one of the three is chosen.
Q. Will the FCA take enforcement action against my firm following the Skilled Person review?
A. The Financial Conduct Authority (FCA) does use Skilled Person reviews for enforcement purposes, although, it should be noted that a Skilled Person review is a core part of the ‘supervisory toolkit’ and will be used by the FCA and PRA where they are concerned about aspects of a regulated firm’s activities or want further analysis. Although there is no data published by the FCA in this area, in our experience, the vast majority of Skilled Person reviews will not lead to enforcement.
Q. Which business areas or sectors are more likely to receive a Skilled Person review?
A. The Financial Conduct Authority (FCA) publishes on a quarterly basis the number of Skilled Person reports commissioned, the sectors and subject matter. Details can be found on the FCA Website.
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