EWJ FEB 59 2025 web - Flipbook - Page 30
When it carries out a Supervisory Review Visit,the
FCA will normally request information and documents from the firm concerned. This could include
details of clients, advice provided (where relevant)
transactions carried out or other records relating to
the firm for the time period under investigation. The
FCA will normally also interview relevant people
including a firm’s directors, senior managers and
advisers or investment managers.
Compliance Healthcheck & Internal Audit
A Compliance Healthcheck and an Internal Audit are
very similar. Both are investigations initiated by a firm
to assess the strengths and/or weaknesses in its
policies, processes and procedures and/or in the
behaviour and compliance of its people.
A Compliance Healthcheck is often instructed on a
one off basis, whereas an Internal Audit is often carried out on a regular basis (usually annually). As well
as reviewing a firm’s operations more widely, an internal audit may have a rolling and in-depth focus on
one or more specific areas of a firm’s operations.
If the information provided to the FCA does not
clearly demonstrate compliance with the rules, then
the FCA may require the firm to take remedial action.
Where the FCA identifies actual or suspected breaches
of their rules, it may refer the firm to the Enforcement
Department who may then undertake an enforcement investigation and take disciplinary action against
the firm and/or its directors.
In both an Internal Audit or a Compliance
Healthcheck, it is normal to assess governance and
board oversight of the firm, risk assessment and risk
management, whether policies, processes and procedures are current and up to date, financial resources,
operational resilience and conduct of business.
The best way for a firm to prepare for an FCA visit is
for it to have a robust risk assessment and risk control
framework within the firm. This will include having
detailed and robust compliance policies and procedures. It will also include having a robust and up to
date system of accurate and timely record keeping and
of regular and frequent compliance monitoring
checks to make sure the firm complies fully with FCA
rules requirements at all times.
The logic of carrying out an Internal Audit or a
Compliance Healthcheck is for the firm to proactively
identify any weaknesses and have a chance to correct
them. In the worst case, it may deliver positive news
and confirm that there are no current weaknesses to
address.
Special Investigations
A special investigation is usually instructed by a client
firm that needs evidence relating to a suspected issue
or problem.
What is a S166 Skilled Person’s Investigation and
Report?
A Skilled Person’s Report is a report prepared at the
FCA’s request under Section 166 of the Financial
Services and Markets Act (FSMA) 2000.
A good example is a firm that suspected some
financial crime and fraud within its business. A Special Investigation identified that fraud and financial
crime was indeed taking place and the firm then had
the evidence to take decisive action.
A S166 Skilled Person’s Report (often referred to as a
“Section 166” or as a “Skilled Person’s Report”, is a supervisory tool used by the FCA to investigate matters
where FCA does not have or does not wish to deploy
FCA staff with the relevant knowledge, skills and
experience to carry out the investigation required.
If the firm suspects it may have a serious issue or
problem that may need to be reported to a regulator,
the firm may seek to instruct a Special Investigation
via its legal advisers.
The FCA maintains a Skilled Person Panel of firms
that it has vetted through a selection process. The vetting and appointment process is normally carried out
every four years. However, other organisations, such
as, the Association of Professional Compliance Consultants (APCC), also maintain lists of firms they have
accredited to carry out Skilled Person work.
The logic of asking its legal advisers to commission and
arrange a Special Investigation by experts or specialists, is to permit the findings to be disclosed to the legal
adviser as part of the legal advice provided to the client
firm. In this way it may be the case that Legal Professional Privilege may apply and that certain information may not need to be disclosed.
When FCA decides it wishes to instruct a S166 Skilled
Person’s Report, it will write to the regulated firm that
will be subject of the report and set out the scope and
other requirements for the investigation and report.
The firm is then invited to obtain proposals from three
Skilled Person firms and submit them to FCA for review indicating the firm they would like to use. Subject
to FCA approving the preferred firm, the regulated
firm and skilled person firm then enter into terms of
engagement. The fees of the Skilled Person firm are
normally paid by the regulated firm.
Where do you come in, if a firm has been subjected
to legal proceedings?
Where a firm is subject to legal proceedings, it may
well be the case that the firm and its directors or employees or their legal advisers may lack the necessary
expertise or experience to progress key aspects of a
claim or to defend key aspects of a claim. It is at this
point that they may seek an expert witness to provide
expert opinion on key aspects of the case.
Complyport often carries out Skilled Person
investigation and report for firms in a variety of
financial services sectors and across a variety of Skilled
Person “Lots” (subject areas).
A firm’s legal advisers will agree with the Court what
the key issues are for which expert opinion is
required and whether each party will appoint its own
expert or whether a Single Joint Expert will be
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