Skilled Person Reviews and Monitorships

What are s. 166 reviews for?

The FCA and PRA employ s.166 for various reasons, including:

• Supervisory Concerns: where the regulator identifies potential issues during routine supervision or following a notification, they may order a Skilled Person review to delve deeper.
• Thematic Reviews: as part of broader industry-wide examinations, s. 166 may be used to investigate specific firms in more detail.
• Consumer Complaints: a spike in complaints about a firm’s products or services could trigger a s. 166 review.
• Market Abuse: suspicions of market manipulation or other misconduct can lead to the appointment of a Skilled Person.
• Remediation: following regulatory engagement or enforcement, to oversee and/or validate systems and controls changes.

Following a consistent decline in the use of s.166 skilled person reviews, there has recently been a clear up-tick in their use.

Key stages of s. 166 reviews and common “pinch-points”

1. Scoping: it is vital to fully understanding the FCA/PRA’s concerns, and from there, seek to agree an appropriate scope for the review that balances a swift and efficient resolution, with avoiding scope-creep, limiting disruption and controlling costs.
2. Skilled Person Appointment: the right Skilled Person will depend on the circumstances.  Typically, a Skilled Person will be a business consultancy or an accountancy firm, but if the regulators’ concerns include aspects of conduct, policies, or issues that engage specific points of law, lawyers may be better placed to act.
3. Management of the Skilled Person: regardless of who is the Skilled Person, lawyers are commonly instructed to manage the Skilled Person’s review.  Here, lawyers take on the delicate role of monitoring the Skilled Person and helping to ensure that the review is fair, limited to the stated scope, and adheres to agreed procedures.  In this role, lawyers often take the lead on engagement with the Skilled Person, internal stakeholder management, internal reporting, facilitating data requests, and sitting-in on employee interviews.
4. Data requests and employee interviews: depending on the “type” of review, these two tasks often represent the bulk of a firm’s work when subject to a Skilled Person review.  They often entail legal and logistical challenges around data protection, legal privilege, employment rights and stakeholder management.  It is vital that the processes and controls around these tasks are carefully agreed at an early stage.
5. Reporting and Issues: it’s key to remain pro-active during a Skilled Person review.  Any emerging issues should be addressed head-on and, if at all possible, resolved in dialogue with the Skilled Person.  Simply leaving issues or misunderstandings to develop into a report is inviting further complication, cost and potentially, further reviews.

How Jeremy Gordon can help

The first step is to engage with the FCA or PRA as early as possible.  It may be that by understanding the regulators’ concerns and objectives, and by packaging a response to those concerns in a way that is digestible to the regulator, a Skilled Person Review or Monitorship can be avoided.

If a Skilled Person review or Monitorship is ordered, there are a number of ways that we can help

1. Acting as the Skilled Person or Monitor: our experience of s.166 and Monitor reviews, our FI sector expertise, and our Partners having previously worked in the FCA’s oversight and enforcement teams mean that we are ideally positioned to conduct the review with the skill, care but also the sensitivity, that is appropriate.
2. Assisting with he scoping and timetabling of the review: putting the review on the right track and embedding early discipline over: costs; Skilled Person/Monitor expectations; and limiting disruption to the business.
3. Managing the review: the Skilled Person or Monitor will likely be team(s) of people (sometimes numbering in the hundreds).  Managing the review to best represent the firm, keeping internal stakeholders engaged and informed, and working to ensure the scope and costs of the review do not spiral is a significant and pivotal role.
4. Co-ordinating data requests and employee interviews: the Skilled Person or Monitor will seek extensive documents and data, and interviews with a range of employees, including senior executives.  We can co-ordinate your approach to document provision to ensure that privilege is maintained, a consistent approach is adhered to, and information is provided in accordance with all applicable laws.  We can help individuals prepare for interviews and also attend interviews, to record their contents and to ensure that they are properly conducted.
5. Resolving emerging issues: perhaps of greatest added value, we can engage with the Skilled Person, Monitor and regulator to address issues as they emerge.  We can seek to close-out the review ahead of schedule, and to avoid the common pitfall of an extended review, or a report recommending that further reviews are conducted.