S166 Requests: Levels, Categories, and Costs 2023/24
Lee Werrell Chartered FCSI
Compliance Doctor ? FCA Regulatory Specialist ? Guiding UK Businesses to Achieve Seamless Compliance ? Chartered FCSI ? Solicitor's & Accountants ? Payment Services API/EMI ? Regulatory Compliance Consultant, London?
The Financial Conduct Authority (FCA) utilises Section 166 of the Financial Services and Markets Act 2000 (FSMA), denoted as 's166', to gain an independent assessment of a firm's activities when concerns arise, or further analysis is required. This process involves appointing a 'skilled person' or firm to conduct the review. The firm under scrutiny bears the cost of the review, regardless of whether the FCA or the firm itself appoints the skilled person.
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In the 2023/24 financial year, the FCA employed its s166 powers in 83 cases. Out of these, the FCA directly appointed the skilled person in 17 instances, while the regulated firm made the appointment in the remaining 66 cases. Notably, 20 different skilled person firms were engaged to carry out these 83 reviews.
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The FCA Report present the data on s166 requests through various classifications, providing a multifaceted view of their application:
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By FCA Sector:
??? * Retail Banking and Payments: 20 requests
??? * Retail Lending: 15 requests
??? * Retail Investments: 19 requests
??? * General Insurance and Protection: 8 requests
??? * Pensions and Retirement Income: 1 request
??? * Investment Management: 3 requests
??? * Wholesale Financial Markets: 17 requests
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By FCA Firm Supervision Category:
??? * Dedicated Supervision: 11 requests
??? * Portfolio Supervision: 72 requests
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By Subject Area ("Lots"):
??? * Client Assets: 1 request
??? * Prudential: 1 request
??? * Governance and individual accountability: 4 requests
??? * Controls and risk management frameworks: 26 requests
??? * Conduct of Business: 28 requests
??? * Financial Crime: 23 requests
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The aggregate cost shouldered by regulated firms for s166 reviews conducted during the 2023/24 financial year totalled ￡38.3 million. This figure encompasses the costs of reviews initiated in previous years but still ongoing.
Many of these could have been avoided if independent compliance audits and governance reviews had been implemented. The costs would have been a small fraction of the overall S166 costs. Don’t forget the costs do not include the management time involved in responding and reporting to the skilled person and any follow ups.
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