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SUP 5.5 Duties of firms

Contract with the skilled person

SUP 5.5.1R

When a firm appoints a skilled person4 to provide a report under section 166 (Reports by skilled persons) or collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act,4 the firm must, in a contract with the skilled person:

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  1. (1)

    require and permit the skilled person during and after the course of his appointment:

    1. (a)

      to cooperate with the FCA3 in the discharge of its functions under the Act in relation to the firm; and

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    2. (b)

      to communicate to the FCA3 information on, or the skilled person's3 opinion on, matters of which the skilled person3 has, or had, become aware in the capacity of3 skilled person reporting on the firm in the following circumstances:

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      1. (i)

        the skilled person reasonably believes that, as regards the firm concerned (A) there is or has been, or may be or may have been, a contravention of any relevant requirement that applies to the firm concerned; and (B) that the contravention may be of material significance to the FCA3 in determining whether to exercise, in relation to the firm concerned, any functions conferred on the FCA3 by or under any provision of the Act other than Part VI3 (Official Listing); or

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      2. (ii)

        the skilled person reasonably believes that the information on, or the skilled person’s3 opinion on, those matters may be of material significance to the FCA3 in determining whether the firm concerned satisfies and will continue to satisfy the threshold conditions; or

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      3. (iii)

        the skilled person reasonably believes that firm is not, may not be or may cease to be a going concern;

  2. (2)

    require the skilled person to prepare a report or collect or update information,4 as notified to the firm by the FCA3 , within the time specified by the FCA3; and

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  3. (3)

    waive any duty of confidentiality owed by the skilled person to the firm which might limit the provision of information or opinion by that skilled person to the FCA3 in accordance with (1) or (2). (See also SUP 5.5.13 G and SUP 5.6)

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SUP 5.5.2G

In complying with the contractual duty in SUP 5.5.1 R (1) the FCA3 expects that a skilled person appointed by a firm4 under section 166 (Reports by skilled persons) or section 166A (Appointment of skilled person to collect and update information) of the Act4 will cooperate with the FCA3 by, amongst other things, providing information or documentation about the planning and progress of the report and its findings and conclusions, if requested to do so. A firm should therefore ensure that the contract it makes with the skilled person requires and permits the skilled person to provide the following to the FCA3 if requested to do so:

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  1. (1)

    interim reports;

  2. (2)

    source data, documents and working papers;

  3. (3)

    copies of any draft reports given to the firm; and

  4. (4)

    specific information about the planning and progress of the work to be undertaken (which may include project plans, progress reports including percentage of work completed, details of time spent, costs to date, and details of any significant findings and conclusions).

SUP 5.5.3G

If the FCA3 is considering asking for the information specified in SUP 5.5.2 G it will take into consideration the cost of the skilled person complying with the request, and the benefit that the FCA3 may derive from the information. For example, in most cases, the FCA3 will not need to request a skilled person to give it source data, documents and working papers. However, the FCA3 may do so when it reasonably believes that this information will be relevant to any investigation it may be conducting, or any action it may need to consider taking against the firm.

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SUP 5.5.4G

In complying with the contractual duty in SUP 5.5.1 R, the FCA3 expects that, in the case of substantial or complex reports, the skilled person will give a periodic update on progress and issues to allow for a re-focusing of the report if necessary. The channel of communication would normally be directly between the skilled person and the FCA3. However, the FCA3 would also expect firms normally to be informed about the passage of information, and the skilled person would usually be expected to keep the firm informed of any communication between the skilled person and the FCA3.

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SUP 5.5.5R

A firm must ensure that the contract required by SUP 5.5.1 R:

  1. (1)

    is governed by the laws of a part of the United Kingdom;

  2. (2)

    expressly:3.

    1. (a)

      provides that the FCA3 has a right to enforce the provisions included in the contract under SUP 5.5.1 R and SUP 5.5.5 R (2);

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    2. (b)

      provides that, in proceedings brought by the FCA3 for the enforcement of those provisions, the skilled person is not to have available by way of defence, set-off or counterclaim any matter that is not relevant to those provisions;

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    3. (c)

      (if the contract includes an arbitration agreement) provides that the FCA3 is not, in exercising the right in (a), to be treated as a party to, or bound by, the arbitration agreement; and

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    4. (d)

      provides that the provisions included in the contract under SUP 5.5.1 R and SUP 5.5.5 R (2) are irrevocable and may not be varied or rescinded without the FCA's3 consent; and

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  3. (3)

    is not varied or rescinded in such a way as to extinguish or alter the provisions referred to in (2)(d).

SUP 5.5.6G

The Contracts (Rights of Third Parties) Act 1999, or Scots common law, enables the FCA3 to enforce the rights conferred on it under the contract required by SUP 5.5.1 R4 against the skilled person.

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SUP 5.5.7G

If the FCA3 considers it appropriate, it may request the firm to give it a copy of the draft contract required by SUP 5.5.1 R4 before it is made with the skilled person. The FCA3 will inform the firm of any matters that it considers require further clarification or discussion before the contract is finalised.

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SUP 5.5.8G

The FCA3 expects the firm, including where applicable4 in complying with Principle 11, to give the FCA3 information about the cost of the skilled persons report. This may include both an initial estimate of the cost as well as the cost of the completed report. This information is required to help inform the FCA's3 decision making in the choice of regulatory tools. Information about the number and cost of reports by skilled persons will be published by the FCA3.

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Assisting the skilled person

SUP 5.5.9R

A firm must provide all reasonable assistance to any skilled person appointed to provide a report under section 166 (Reports by skilled persons) or to collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act.4

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SUP 5.5.10G

In providing reasonable assistance under SUP 5.5.9 R, a firm should take reasonable steps to ensure that, when reasonably required by the skilled person, each of its appointed representatives or, where applicable, tied agents 1waives any duty of confidentiality and provides reasonable assistance as though SUP 5.5.1 R (3) and SUP 5.5.9 R applied directly to the appointed representative or tied agent1.

SUP 5.5.11G

Reasonable assistance in SUP 5.5.9 R should include:

  1. (1)

    access at all reasonable business hours for the skilled person to the firm's accounting and other records in whatever form;

  2. (2)

    providing such information and explanations as the skilled person reasonably considers necessary or desirable for the performance of his duties; and

  3. (3)

    permitting a skilled person to obtain such information directly from the firm's auditor as he reasonably considers necessary or desirable for the proper performance of his duties.

SUP 5. 5.11AG

2Section 166(7) of the Act (as applied by article 23(2)(b) of the MCD Order) imposes, in appropriate circumstances, a duty on CBTL firms to give the skilled person all such assistance as the skilled person may reasonably require. Where this duty applies to a CBTL firm, the FCA expects the CBTL firm to:

  1. (1)

    take reasonable steps to ensure that, when reasonably required by the skilled person, each of its appointed representatives waives any duty of confidentiality;

  2. (2)

    take reasonable steps to ensure that, when reasonably required by the skilled person, each of its appointed representatives complies with any duty under section 166(7) applicable to it, or provides assistance to the skilled person as though that duty applied directly to it;

  3. (3)

    allow the skilled person access at all reasonable business hours to the CBTL firm’s accounting and other records in whatever form;

  4. (4)

    provide such information and explanations as the skilled person reasonably considers necessary or desirable for the performance of his duties; and

  5. (5)

    permit the skilled person to obtain such information directly from the CBTL firm’s auditor as he reasonably considers necessary or desirable for the proper performance of his duties.

Responsibility for delivery

SUP 5.5.12G

When a firm appoints a skilled person to provide a report under section 166 (Reports by skilled persons) or collect or update information under section 166A (Appointment of skilled person to collect and update information) of the Act,4 a firm is expected, including where applicable in complying with Principle 11,4 to take reasonable steps to ensure that a skilled person delivers a report or collects or updates information4 in accordance with the terms of his appointment.

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Assistance to skilled persons from others

SUP 5.5.13G

In respect of the appointment of a skilled person under section 166 of the Act (Reports by skilled persons), section 166(7) of the Act4 imposes a duty on certain persons to give assistance to a skilled person. The persons on whom this duty is imposed are those who are providing, or have at any time provided, services to any person falling within SUP 5.2.1 G. They include suppliers under material outsourcing arrangements.

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SUP 5.5.14G

4In respect of the appointment of a skilled person under section 166A (Appointment of skilled person to collect and update information) of the Act, under section 166A(5) a skilled person may require any person to provide all such assistance as the skilled person may reasonably require to collect or update the information in question.