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Status: You are viewing the version of the handbook as on 2009-03-31.

SUP 5.4 Appointment and reporting process

Scope of report

SUP 5.4.1GRP

The FSA will send a notice in writing requiring the person in SUP 5.2.1 G to provide a report by a skilled person on any matter if it is reasonably required in connection with the exercise of its functions conferred by or under the Act. The FSA may require the report to be in whatever form it specifies in the notice (SUP 5 Annex 2 summarises the appointment and reporting processes).

SUP 5.4.2GRP

As part of the decision making process the FSA will normally contact the person in SUP 5.2.1 G to discuss its needs before finalising its decision to require a report by a skilled person. This will provide an opportunity for discussion about the appointment, whether an alternative means of obtaining the information would be better, what the scope of a report should be, who should be appointed, and the likely cost.

SUP 5.4.3GRP

The FSA will give written notification to the person in SUP 5.2.1 G of the purpose of the report, its scope, the timetable for completion and any other relevant matters. The FSA will state the matters which the report is to contain as well as any requirements as to the report's format. For example, a report on controls may be required to address key risks, key controls and the control environment. The FSA attaches importance to there being a timetable for each report and to the skilled person, with the cooperation of the person in SUP 5.2.1 G, keeping to that timetable.

SUP 5.4.4GRP

The written notification in SUP 5.4.3 G may be preceded or followed by a discussion of the FSA's requirements and the reasons for them. This may involve the FSA, the person in SUP 5.2.1 G and the person who has been, or is expected to be, appointed as the skilled person. The FSA recognises that there will normally be value in holding discussions involving the skilled person at this stage. These discussions may include others if appropriate.

SUP 5.4.5GRP

The FSA will wish to conduct the discussion with the firm, its skilled person and any others within a timescale appropriate to the circumstances of the case.

Appointment process

SUP 5.4.6GRP

The skilled person is appointed by the person in SUP 5.2.1 G. The FSA will normally seek to agree in advance with the person in SUP 5.2.1 G the skilled person who will make the report. The Act requires that the skilled person be nominated or approved by the FSA:

  1. (1)

    if the FSA decides to nominate the skilled person who is to make the report report, it will notify the person in SUP 5.2.1 G accordingly; and

  2. (2)

    alternatively, if the FSA is content to approve a skilled person selected by the person in SUP 5.2.1 G, it will notify the latter person of that fact.

The FSA may give the person in SUP 5.2.1 G a shortlist from which to choose.

SUP 5.4.7GRP

A skilled person must appear to the FSA to have the skills necessary to make a report on the matter concerned . A skilled person may be an accountant, lawyer, actuary or person with relevant business, technical or technological skills.

SUP 5.4.8GRP

When considering whether to nominate or approve a skilled person to make a report, the FSA will have regard to the circumstances of the case, including whether the proposed skilledperson appears to have:

  1. (1)

    the skills necessary to make a report on the matter concerned;

  2. (2)

    the ability to complete the report within the time expected by the FSA;

  3. (3)

    any relevant specialised knowledge, for instance of the person in SUP 5.2.1 G, the type of business carried on by the person in SUP 5.2.1 G, or the matter to be reported on;

  4. (4)

    any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, for instance because the matters to be reported on may involve questions reflecting on the quality or reliability of work previously carried out by the proposed skilled person; and

  5. (5)

    enough detachment, bearing in mind the closeness of an existing professional or commercial relationship, to give an objective opinion on matters such as:

    1. (a)

      matters already reported on by the skilled person (for example, on the financial statements of the person in SUP 5.2.1 G or in relation to their systems and controls);

    2. (b)

      matters that are likely to be contentious and may result in disciplinary or other enforcement action against the person in SUP 5.2.1 G, its management, shareholders or controllers; or

    3. (c)

      matters that the skilled person has been involved in, in another capacity (for example, when a skilled person has been involved in developing an information system it may not be appropriate for him to provide a subsequent opinion on the adequacy of the system).

SUP 5.4.9GRP

In appropriate circumstances, it may be cost effective for the FSA to nominate or approve the appointment of a skilled person who has previously acted for, or advised, the person in SUP 5.2.1 G. For example, the FSA may nominate, or approve the appointment of, the auditor of a person in SUP 5.2.1 G to prepare a report taking into account, where relevant, the considerations set out in SUP 5.4.7 G.

Reporting process

SUP 5.4.10GRP

The FSA will normally require the person in SUP 5.2.1 G to appoint the skilled person to report to the FSA through that person. In the normal course of events the FSA expects that the person in SUP 5.2.1 G will be given the opportunity to provide written comments on the report prior to its submission to the FSA (SUP 5 Annex 2 summarises the reporting process).

SUP 5.4.11GRP

The FSA may enter into a dialogue with the skilled person, and is ready to discuss matters relevant to the report with him, during the preparation of the report . Such discussions will normally involve or be through the person in SUP 5.2.1 G.

SUP 5.4.12GRP

The FSA will normally specify a time limit within which it expects the skilled person to deliver the report. The skilled person should, in complying with its contractual duty under SUP 5.5.1 R, take reasonable steps to achieve delivery by that time. If the skilled person becomes aware that the report may not be delivered on time, he should inform the FSA and the person in SUP 5.2.1 G as soon as possible. If the skilled person becomes aware that there may be difficulties delivering the report within cost estimates, he will no doubt wish to advise the firm.

SUP 5.4.13G

The FSA may meet with the person in SUP 5.2.1 G and the skilled person together to discuss the final report. The FSA may also wish to discuss the final report with the skilled person present but without the person in SUP 5.2.1 G.