Industry forks out £83.3m for regulatory reviews

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Industry forks out £83.3m for regulatory reviews

Financial services firms paid £83.3m for reviews commissioned by the Financial Conduct Authority (FCA) in the year to April, according to the regulator’s annual report.

The regulator used its so-called section 166 powers 29 times in the year, meaning it asked 29 firms to commission an internal review of their business at their own cost.

In three of these cases, typically the more severe ones, it directly contracted the investigator the firms were to use.

The total cost figure represents the cost of the work carried out during the year and includes cases carried over from previous years, some dating back as far as April 2013, when the FCA was established.

The reviews examined a number of regulatory issues, including past business and quality of advice; adequacy of systems and controls, including the effectiveness of control functions; corporate governance and senior management arrangements; and financial crime.

They also included client money and client asset arrangements, risk management, including prudential risk, and complaint handling.

Conduct of business and financial crime related issues made up the bulk of the work, causing the launch of 10 and 11 reviews respectively.

The FCA said one of the reviews was responsible for "a significant proportion" of the total costs quoted.

The total number of reviews commissioned so far is 50, 15 of which relate to reviews of interest rate hedging products first stated in the 2013/14 annual report, which have incurred a cost of £416.1m.

A skilled person report gives the FCA the power to commission independent reviews to examine aspects of a firm’s activities which might cause concern.

In 2015 City law firm Reynolds Porter Chamberlain criticised the FCA regime after data revealed only 2 per cent of skilled persons reviews resulted in enforcement action in 2014.

carmen.reichman@ft.com