Most banks operating in the UK will be aware of the regulators’ box of supervisory tools, especially the one described under section 166 (S166) of the Financial Services and Markets Act (FSMA 2000) that gives the FCA and PRA the power to commission reports by “Skilled Persons” in order to obtain an independent view of any aspect of a firm’s activities.
This investigation, commonly referred to as a S166, is carried out at the expense of the firm, but on behalf of the regulator and almost always results in a comprehensive list of findings and requirements, which will undoubtedly result in some remediation action.
Regulatory supervision can quickly become intrusive oversight and then intervention. This will clearly have an impact on a firm’s ability to carry out its business as usual, as senior management and key staff are removed from their daily jobs to respond to the demands of the regulator.
The FCA recently reported that the number of S166 reviews it commissioned had increased by 68% from year 2018/19 to 2019/2020; with 24 being commissioned within the first 4 month of 2020. This clearly shows an increased appetite of oversight and potential enforcement by the regulator. The area (or “lot”) which has had the most skilled person reviews commissioned is financial crime.
With the costs of a S166 spiralling (the average cost of a review is reported to be c.£3m), firms will want to do all they can to avoid losing control when the supervisor calls.
Managing regulatory intervention and running a business at the same time is a difficult task and should not be underestimated. It’s crucial that you respond to a remediation request or s166 Requirement Notice in a timely manner, liaising appropriately with the regulator during the course of the process. Getting the initial response right will determine:
Supervision going forward.
Whether enforcement action should be taken against the firm or individuals.
Whether a post s166 review should be conducted.
During a S166 BAU will suffer but engaging the right help, up front will see you through this challenging time.
When under regulatory scrutiny, delivering on the commitments made to the regulator is critical, both to reduce the potential for further regulatory action and to build credibility with stakeholders, the regulator and senior management as well as reducing the overall cost of extended regulatory intervention.
HOW LYSIS FINANCIAL SUPPORTS CLIENTS THROUGH A S166
Our remediation change roadmap delivers clearly defined, tangible results with a known duration and cost.
Beginning with an initial discovery phase, we work with you, understand and identify the gaps before setting out the steps to build the necessary capability and embedded process for permanent, long-term success.
Each phase is structured to meet key milestones and deliver specified outcomes. Our set programme alleviates risk by removing the open-ended doubt that surrounds so many traditional consultancy engagements, which can leave you with little more than a large bill and questions to answer.
We enable you to engage specialists to help overcome your challenges efficiently and effectively.
For the past 15 years, Lysis Financial has helped businesses reduce their operational losses and free up regulatory capital. Lysis solves firms’ regulatory problems, and helps keep them on a sound footing. Lysis takes a risk based strategic approach into its projects and operational decision-making, enabling our clients to be assured of sustainable success.
For more information please contact email@example.com
By Tom Griffiths, Associate Director at Lysis Group