The FSA has powers to commission a skilled person to report on known or suspected deficiencies within an authorised firm.  These reports are known as “s166 reports” after the relevant section of the Financial Services and Markets Act 2000.

As a direct result of the FSA’s more intrusive approach to supervision and its ethos of credible deterrence, the number of s166 reports commissioned by the FSA has increased significantly over the past few years.

These reports may be carried out as part of the supervisory process, for example where the FSA requires a deep dive into a specific issue uncovered during an ARROW or other supervisory visit.  They may also be commissioned as a precursor to possible enforcement action.  In either case, they must be taken extremely seriously by an authorised firm.  Should the FSA advise you that they are going to commission a s166 report or are considering commissioning such a report you must move quickly to appoint an independent skilled person.

As the appointment of a third party to undertake a s166 review often indicates a strained relationship with the FSA, it is advisable to appoint a firm that can steer you in the right direction, in terms of managing and, ideally, repairing that relationship to best effect.

If you are in such discussions with the FSA, please contact Iain Wright, Partner and Head of Regulatory Practice, for a confidential discussion of your requirements.

Download a copy of the practice note here.