SUP 5.4 Appointment and reporting process

Where the appropriate regulator requires a report by a skilled person under section 166 of the Act (Reports by skilled persons), the appropriate regulator2 will send a notice in writing requiring the person in SUP 5.2.1 G to provide a report by a skilled person, or notifying the person in SUP 5.2.1 G in writing of the appropriate regulator's appointment of a skilled person to provide a report,2 on any matter if it is reasonably required in connection with the exercise of its functions conferred by or under the Act. The appropriate regulator may require the report to be in whatever form it specifies in the notice.

2Where the appropriate regulator requires the updating or collection of information by a skilled person under section 166A of the Act (Appointment of skilled person to collect and update information), the appropriate regulator will send a notice in writing requiring the firm to appoint a skilled person, or notifying the firm of the appropriate regulator's appointment of a skilled person, to collect or update the relevant information.

As part of the decision making process the appropriate regulator2 will normally contact the person in SUP 5.2.1 G or in SUP 5.2.2 G2 to discuss its needs before finalising its decision to require a report or the updating or collection of information 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, who should appoint, 2and the likely cost.

The appropriate regulator2 will give written notification to the person in SUP 5.2.1 G or SUP 5.2.2 G2 of the purpose of the report or collection or updating of information,2 its scope, the timetable for completion and any other relevant matters. The appropriate regulator2 will state the matters which the report is to contain, or the information which is to be collected or updated,2 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 appropriate regulator2 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 or the firm in SUP 5.2.2 G, as relevant2, keeping to that timetable.

The written notification in SUP 5.4.3 G may be preceded or followed by a discussion of the appropriate regulator's2 requirements and the reasons for them. This may involve the appropriate regulator,2 the person in SUP 5.2.1 G or in SUP 5.2.2 G2 and the person who has been, or is expected to be, appointed as the skilled person. The appropriate regulator2 recognises that there will normally be value in holding discussions involving the skilled person at this stage. These discussions may include others if appropriate.

The appropriate regulator2 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.

Where the2 skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the appropriate regulator2 will normally seek to agree in advance with the person in SUP 5.2.1 G or SUP 5.2.2 G2 the skilled person who will make the report or collect or update the relevant information.2 The Act requires that such2 skilled person be nominated or approved by the appropriate regulator:2

1. (1)

   if the appropriate regulator2 decides to nominate the skilled person who is to make the report or collect or update the information,2 it will notify the person in SUP 5.2.1 G or SUP 5.2.2 G2 accordingly; and

   2
2. (2)

   alternatively, if the appropriate regulator2 is content to approve a skilled person selected by the person in SUP 5.2.1 G or SUP 5.2.2 G,2 it will notify the latter person of that fact.

   2

The appropriate regulator2 may give the person in SUP 5.2.1 G or SUP 5.2.2 G2 a shortlist from which to choose.

A skilled person must appear to the appropriate regulator2 to have the skills necessary to make a report on the matter concerned or collect or update the relevant information.2 A skilled person may be an accountant, lawyer, compliance consultant,2 actuary or person with relevant business, technical or technological skills.

When considering whether to nominate, approve or appoint a skilled person to make a report or collect or update information, the appropriate regulator will have regard to the circumstances of the case, including whether the proposed skilled person appears to have:2

1. (1)

   the skills necessary to make a report on the matter concerned or collect or update the relevant information;2

2. (2)

   the ability to complete the report or collect or update the information within the time expected by the appropriate regulator;2

   2
3. (3)

   any relevant specialised knowledge, for instance of the person in SUP 5.2.1 G or SUP 5.2.2 G2, the type of business carried on by the person in SUP 5.2.1 G or SUP 5.2.2 G, or the matter to be reported on or information to be collected or updated;2

4. (4)

   any professional difficulty or potential conflict of interest in reviewing the matters to be reported on, or the information to be collected or updated, for instance because it2 may involve questions reflecting on the quality or reliability of work previously carried out by the proposed skilled person; and

   2
5. (5)

   enough detachment, bearing in mind the closeness of an existing professional or commercial relationship, to be able to collect or update the information or2 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 SUP 5.2.2 G2 or in relation to their systems and controls); or2

   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 or SUP 5.2.2 G2, 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).

In appropriate circumstances, it may be cost effective for the appropriate regulator2 to nominate or approve the appointment of, or appoint itself,2 a skilled person who has previously acted for, or advised, the person in SUP 5.2.1 G or SUP 5.2.2 G.2 For example, the appropriate regulator2 may nominate or approve the appointment of, or appoint,2 the auditor of a person in SUP 5.2.1 G or SUP 5.2.2 G2 to prepare a report or collect or update the information2 taking into account, where relevant, the considerations set out in SUP 5.4.7 G.

Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the appropriate regulator2 will normally require the skilled person to be appointed to report to the appropriate regulator2 through that person. In the normal course of events the appropriate regulator2 expects that the person in SUP 5.2.1 G or SUP 5.2.2 G2 will be given the opportunity to provide written comments on the report or the collection of the relevant information prior to its submission to the appropriate regulator.2

2Where the skilled person is to be appointed by the appropriate regulator itself, the skilled person will report directly to the appropriate regulator.

The appropriate regulator2 may enter into a dialogue with the skilled person, and is ready to discuss matters relevant to the report or the collection or updating of the relevant information2 with him, during the preparation of the report or the collection or updating of the relevant information.2 Such discussions may2 involve or be through the person in SUP 5.2.1 G or SUP 5.2.2 G.2

The appropriate regulator2 will normally specify a time limit within which it expects the skilled person to deliver the report or collect or update the relevant information. Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, the2 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, or collection or updating of the relevant information may not be,2 on time, he should inform the appropriate regulator2 and the person in SUP 5.2.1 G or SUP 5.2.2 G2 as soon as possible. Where the skilled person is appointed by the person in SUP 5.2.1 G or SUP 5.2.2 G, if2 the skilled person becomes aware that there may be difficulties delivering the report or collecting or updating the relevant information2 within cost estimates, he will no doubt wish to advise the firm.

The appropriate regulator2 may meet with the person in SUP 5.2.1 G or SUP 5.2.2 G2 and the skilled person together to discuss the final report. The appropriate regulator2 may also wish to discuss the final report with the skilled person present but without the person in SUP 5.2.1 G or SUP 5.2.2 G.2