The dreaded Section 166 is one of the most feared tools the FCA have at their disposal to try to correct financial organisations that they believe have gone awry. But what does it actually mean and what should you do if your company receives one?
The 166 is the part of the Financial Services and Markets Act 2000 that gave regulatory bodies (the FSA, at the time, now the FCA and PRA) the power to require firms to have a ‘skilled person’ report on them. This skilled person will generally look at four areas: the identification, assessment and measurement of risks, monitoring already identified risks, proposing preventative actions, and suggesting remedial actions including customer restitution. People commonly think of the 166 as a punitive measure but it can also be used for diagnostic, monitoring or preventative purposes.
In 2006 the FSA issued just 18 Section 166 notices, in their final year that number had soared to 113. Since the FCA’s inception they’ve not quite hit those heights with 52 Skilled Person Reports commissioned in 2013 and 54 in 2014. There are many contributing elements to that steep reduction in the number of reports, but I think one key factor has to be that regulations now require dedicated people covering risk and compliance within every regulated financial organisation. With so many more skilled people working to keep their companies from being issued with a 166 to begin with, there’s just less need for the FCA to deploy it.
In April 2013, alongside the creation of the FCA, Section 166 was amended to allow regulatory bodies to directly appoint a skilled person of their choosing to go in to a firm, giving the FCA end to end control of the process and leading to the possibility of a huge bill for the company depending on who is chosen – the highest reported cost for a report being £2 million.
Kind Consultancy have a panel of FCA endorsed compliance experts who can make sure this situation is avoided, and if you already have been issued with a 166 notice or fear this may be the next step, get in touch Contact the Governance Risk & Compliance team at Kind on 01216432100 or firstname.lastname@example.org and we can begin assisting you immediately.