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Protect Association Meeting FCA s166 Skilled Person Reviews 4 March 2016

Protect Association Meeting FCA s166 Skilled Person Reviews 4 March 2016. Mark Davies Associate Director Financial Services Group T: 020 7865 2134 E: mark.j.davies@uk.gt.com. Agenda. What is a Skilled Person Review?.

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Protect Association Meeting FCA s166 Skilled Person Reviews 4 March 2016

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  1. Protect Association Meeting FCA s166 Skilled Person Reviews 4 March 2016 Mark Davies Associate Director Financial Services Group T: 020 7865 2134 E: mark.j.davies@uk.gt.com

  2. Agenda

  3. What is a Skilled Person Review? • oneof the regulatory tools the FCA can employ under the Financial Services and Markets Act (FSMA) as amended by the 2012 Act • allows the FCA and the firm to obtain an independent view of aspects of the firm's activities that cause concern or require further analysis • Section 166 of FSMA gives the FCA the power to commission two types of reviews by Skilled Persons as required: • s166 Reports by Skilled Persons; and/or • s166A Appointment of Skilled Person to collect and update information • since 2012 the FCA has powers to contract directly with the Skilled Person, but the firm pays the cost of the review • the FCA operates a panel of Skilled Persons.

  4. What is the purpose of a Skilled Person Review? • diagnostic -identify, assess and measure risks • monitoring -track the development of identified risks, wherever these arise • preventative actionto limit or reduce identified risks and so prevent them from crystallising or increasing • remedial actionto respond to risks when they have crystallised

  5. s166 Skilled Person reviews – numbers* Reduction in numbers Q3 2015/16– what does this tell us? Source: http://www.fca.org.uk/about/what/regulating/how-we-supervise-firms/reports-by-skilled-persons*

  6. s166 Skilled Person reviews - topics

  7. s166 Skilled Person reviews by firm classification

  8. How could I get one? • Regulated firms have three supervisory touch-points: • proactive supervisory risk assessment • reactive supervision – visit provoked by intelligence • thematic work.

  9. Warning signs - examples of where the FCA may consider the Skilled Person tool • poor management, governance and culture • ineffective three lines of defence (individually and collectively) • failure to protect client money and assets • poor sales practices (mis-selling, objection handling etc) • remuneration structures where incentives drive behaviour that is not in customers' interests • ineffective/inconsistent training and competence regime • barriers to claim/complain • ineffective (or no) approach to identify potential customer vulnerability • poor record keeping, systems and controls • oversight and control of Appointed Representatives • ineffective product design • oversight, management and control of outsourced arrangements (DUA and claims) • conflicts of interest identified but not managed • transparency, disclosure and conflicts of interest (inc profit commission, volume overriders, profit share etc) • to oversee and report on remedial action plan • financial crime – fraud, AML, anti-bribery and corruption, third party payments • limited customer utility, customer understanding and poor 'value measures' performance (declined claims, loss ratio) • a change of circumstances e.g. proposed entry into new business area, new control structure, merger etc

  10. s166 Skilled Person Review – basic process • Includes: purpose of report or collecting/updating of information, scope, timetable for completion, report format and other relevant matters Includes: an assessment of technical capabilities, resources available, and potential conflicts of interest

  11. Effectiveness of s166 Skilled Person Review • The FCA considers Reviews are most effective where: • they include regular communication with FCA • the Skilled Person provider demonstrates independent, robust challenge • Reports clearly identify issues and explicitly reference the Requirement Notice • Skilled Person demonstrates expertise and value add from the outset

  12. Potential post-review activities • implement Skilled Person recommendations • customer contact/remediation • Internal Audit or third party assurance review • attestation • lessons learned – root causes not symptoms

  13. Enforcement • repeat behaviour - firm and individual (Approved Persons) reaction and failure to cooperate • behaviour and standards in broader financial market - relevant to FCA strategic priority, widespread behaviour, related to poor conduct or governance • very serious breaches - undermines public confidence, (potential) harm to customers, market integrity or competition • need to remove wrong-doers from the industry or impose other restrictions – not 'fit and proper'

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