RegulationAug 29 2014

Tyrie questions FCA over skilled persons costs

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Treasury Select Committee chairman Andrew Tyrie has written to the chief executive of the Financial Conduct Authority, Martin Wheatley, with concerns over costs that will be incurred by firms, and consequently their customers, of ‘Section 166’ skilled person reports by the FCA.

In his letter, which was written on 23 June, but published today, Mr Tyrie asked for the cost and date of each skilled person review required by the FCA, and the cost and date of each review commissioned by the Financial Services Authority in its last five years.

Mr Tyrie also asked what the process is by which the decision is taken to require a report by a skilled person under Section 166 of the Act and what level of seniority is approval given for such a decision to be made, amongst a number of other questions surrounding the reports.

The letter reads: “I am particularly concerned with the costs that must be borne by firms - and consequently by their customers - when the FCA requires such a report.”

Last year, the Financial Conduct Authority rejected criticism of its use of skilled person reports, which require firms to pay for a review into their own practices, after receiving a number of complaints from the industry in response to a transparency paper published in March.

In a response published by the FCA, Mr Wheatley refuted the suggestion that it has been increasing its use of the supervisory tool, saying that “whilst some industry commentators express concern that the FCA is substantially increasing its use... that is not borne out by the facts.”

He adds: “Over the past few years the number of skilled person reviews has not significantly increased, and it is not our strategic aim to significantly increase the use of Section 166’s going forward.”

In his letter to Mr Tyrie, Mr Wheatley presented figures showing the FCA had ordered 50 skilled person reviews in 2013/2014 at a cost of £145.7m, down from 113 at a cost of £176.4m in the previous year.

Costs have risen substantially in the past two years, however. In the four years from 2008 aggregated bills of £12.8m, £24.7m, £32.2m and £31.2m were respectively recorded.

An FCA spokesperson said today: “Skilled person reviews are an important supervisory tool for the FCA. We always take account of the costs of the review to the firm before and have a process in place to ensure that it’s used only where it is appropriate and that the costs are proportionate.

“Last year, with the PRA, we used skilled person reviews 83 times, which is down on 2012-13.”