SUP 5.5 Duties of firms
Contract with the skilled person
When a firm appoints a skilled person to provide a report under section 166 of the Act (Reports by skilled persons), the firm must, in a contract with the skilled person:
- (1)
require and permit the skilled person during and after the course of his appointment:
- (a)
to cooperate with the FSA in the discharge of its functions under the Act in relation to the firm; and
- (b)
to communicate to the FSA information on, or his opinion on, matters of which he has, or had, become aware in his capacity as skilled person reporting on the firm in the following circumstances:
- (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 FSA in determining whether to exercise, in relation to the firm concerned, any functions conferred on the FSA by or under any provision of the Act other than Part VI. (Official Listing); or
- (ii)
the skilled person reasonably believes that the information on, or his opinion on, those matters may be of material significance to the FSA in determining whether the firm concerned satisfies and will continue to satisfy the threshold conditions; or
- (iii)
the skilled person reasonably believes that firm is not, may not be or may cease to be a going concern;
- (i)
- (a)
- (2)
require the skilled person to prepare a report, as notified to the firm by the FSA, within the time specified by the FSA; and
- (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 FSA in accordance with (1) or (2). (See also SUP 5.5.13 G and SUP 5.6)
In complying with the contractual duty in SUP 5.5.1 R (1) the FSA expects that a skilled person appointed under section 166 of the Act (Reports by skilled persons) will cooperate with the FSA 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 FSA if requested to do so:
- (1)
interim reports;
- (2)
source data, documents and working papers;
- (3)
copies of any draft reports given to the firm; and
- (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).
If the FSA 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 FSA may derive from the information. For example, in most cases, the FSA will not need to request a skilled person to give it source data, documents and working papers. However, the FSA 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.
In complying with the contractual duty in SUP 5.5.1 R, the FSA 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 FSA. However, the FSA 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 FSA.
A firm must ensure that the contract required by SUP 5.5.1 R:
- (1)
is governed by the laws of a part of the United Kingdom;
- (2)
expressly
- (a)
provides that the FSA has a right to enforce the provisions included in the contract under SUP 5.5.1 R and SUP 5.5.5 R (2);
- (b)
provides that, in proceedings brought by the FSA 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;
- (c)
(if the contract includes an arbitration agreement) provides that the FSA is not, in exercising the right in (a), to be treated as a party to, or bound by, the arbitration agreement; and
- (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 FSA's consent; and
- (a)
- (3)
is not varied or rescinded in such a way as to extinguish or alter the provisions referred to in (2)(d).
The Contracts (Rights of Third Parties) Act 1999, or Scots common law, enables the FSA to enforce the rights conferred on it under the contract against the skilled person.
The FSA expects the firm, in complying with Principle 11, to give the FSA 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 FSA's decision making in the choice of regulatory tools. Information about the number and cost of reports by skilled persons will be published by the FSA.
Assisting the skilled person
A firm must provide all reasonable assistance to any skilled person appointed to provide a report under section 166 of the Act (Reports by skilled persons).
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 waives 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.
Reasonable assistance in SUP 5.5.9 R should include:
- (1)
access at all reasonable business hours for the skilled person to the firm's accounting and other records in whatever form;
- (2)
providing such information and explanations as the skilled person reasonably considers necessary or desirable for the performance of his duties; and
- (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.
Responsibility for delivery
In complying with Principle 11, a firm is expected to take reasonable steps to ensure that a skilled person delivers a report in accordance with the terms of his appointment.
Assistance to skilled persons from others
Section 166(5) of the Act (Authority's power to require information) 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.