Putting Consumers First

Delivering Access to Justice through

Ethical and Professional Standards

No let-up in firm’s actions that causes the Financial Services Authority [FSA] concern.


Earlier this month, the Financial Conduct Authority [FCA] released the Financial Services Authority [FSA] final annual report. As one would expect, it gives a fascinating insight into the year leading up to its abolition in April 2013.

What alarms me is the number of times the FSA had to use its special section 166 powers to investigate firm’s actions. These powers are only used when a firm’s behaviour give the regulator cause for concern.

Section 166 investigations

Section 166 of Financial Services and Markets Act 2000 [FSMA] gives the FSA/FCA the power to commission reports by ‘skilled persons’. Skilled Person’s Reviews/Section 166 reviews check for weaknesses or failings in a firm’s practices and the regulator uses these powers to obtain an independent view of aspects of a firm’s activities that cause them concern. The FCA has developed a panel of firms approved to carry out skilled person reviews to ensure a consistent, high quality and transparent approach to conducting Skilled Person Reviews.

Skilled Person’s Reviews enable the FCA to gain much more in depth analysis and investigation into firms, without bearing any of the costs. These reviews (which may or may not be part of an enforcement action) enable the FCA to identify, assess and measure the risks, consider preventative action and assess any remedial action including any customer redress.

Volume and costs of failings is worrying

The FSA final annual report shows the FSA used Section 166 powers in 113 cases in 2012/13 and that compares to 111 cases in 2011/2012. This shows the number of times the FSA had to intervene is not falling and, worse, the figures show that the FSA had to intervene roughly twice a week! Of the 113 cases, one significant Skilled Person Review was commissioned just prior to the year-end and the FSA do not yet have reliable cost estimates, but the total costs to the firms and individuals concerned for the remaining 112 cases was £176.4m.

What concerned the FSA?

The three main areas of concern have related to systems and controls, corporate governance and suitability of advice. With the importance of our banks to the financial stability of the UK and their recent track record of mis-selling products (from Payment Protection Insurance to Interest Rate Swaps) it is not surprising that they accounted for nearly half of the reviews (46%).

Will firms learn?

‘Treating Customers Fairly’ [TCF] has been at the core of financial service regulation and dictated the approach of the FSA during its lifetime. The simple fact that so many firms in one year have been made to undertake Skilled Persons Reviews shows that the message has not sunk in and the behaviour of firms does not mirror the thinking of regulators.

There is no doubt that the FCA will continue the drive to better governance and the right outcomes for consumers. The question is will firms continue to lag behind the regulator’s thinking!

PFCA Code of Practice

The members of the Professional Financial Claims Association wish to set professional standards for member firms...

Download the PDF
Visit the Code of Practice page

Membership Benefits & Services

The Benefits and Services of the Professional Financial Claims Association are intended to extend beyond its own membership. The Financial Claims Management sector needs a credible ‘voice’ at a time of change and increased scrutiny within the sector.