The incoming Financial Conduct Authority (FCA) will have greater powers to select and commission past business reviews and send the bill to the firms involved.
In a consultation paper on changes to regulatory rules and guidance, the Financial Services Authority (FSA) listed alterations to the way the new regulators the FCA and Prudential Regulatory Authority will issue section 166’s, which are handed to firms asking them to undertake an independent review of operations.
Earlier this year Wealth Manager revealed that the FSA has used its section 166 powers 114 times, costing discretionaries millions. The new regulators' powers were outlined in the upcoming Financial Services Bill.
The FSA currently issues section 166s, also known as a skilled person report, by sending a notice to a firm and either suggests an independent third party or asks the firm to nominate one. The firm then contacts the skilled person directly to produce the report required by the FSA.
In the proposals published by the FSA, the FCA will be able appoint a skilled-person itself and contact them directly.
It said: ‘The bill permits the regulator to appoint the skilled person to conduct the work and to contract directly with them.’
‘We will also issue a new rule to enable the regulator to levy a fee on the individual firm concerned to recover the costs of the skilled person where the skilled person is appointed directly by the regulator. The firm will be provided with an indication of the costs expected to be incurred by the appointment of the skilled person, before the work begins.’
According to a Freedom of Information Act request, wealth managers could find these reports cost them between £2 million and £292,000, according to the details of the requested in the past year by the FSA.
The amendments are also updated to reflect the power of the regulators to commission a skilled person to gather and keep information up-to-date when a firm or authorised person has previously broken the rules.
The Financial Services Bill is due to go through the House of Lords for further analysis in October.