The FCA has allowed the Treasury Select Committee to review its s.166 report into RBS' Global Restructuring Group (GRG) and has published an interim summary of the report. It is possible that the threat of publication will play on the minds of firms subject to s.166 reports, which may reduce cooperation with skilled persons and therefore the efficacy of this investigatory power.
The FCA has allowed a legal adviser appointed by the Treasury Select Committee to review its s.166 report into the Royal Bank of Scotland ("RBS").
A "skilled persons report" can be required by the FCA under s.166 of the Financial Services and Markets Act 2000 ("FSMA"). The report is confidential under s.348 FSMA, and would therefore not be disclosable without the permission of the subject, RBS. A summary which does not contain information relating to an identifiable person would be disclosable.
Despite this, in August the BBC claimed that it had seen the report, which was commissioned to investigate RBS' Global Restructuring Group ("GRG").
Following the leak, the Treasury Select Committee wrote to Andrew Bailey stating that the balance had "tipped firmly in favour of full publication". In his response, Andrew Bailey recognised the public interest in the outcome of the report but emphasised the importance of confidentiality to the process; the reports are conducted on the basis that they will not be published. He instead offered to provide a "detailed summary" which had been reviewed by external Counsel.
This offer was rejected by the Committee: in a further letter Andrew Bailey agreed that a legal adviser appointed by the Committee would be allowed to review the full s.166 report. On the 23rd October the FCA confirmed that the report had been provided.
In addition, the FCA has published an interim account, reviewed by the legal adviser, whose comments will be incorporated into a final account. The legal adviser will however have to consider the "justification and reasonableness of any explanation" for any omissions in the published account.
In order to publish, the FCA must either obtain consent from RBS and Promontory, who conducted the skilled persons review, or use a "gateway". The FCA used the so-called 'self-help' gateway at Reg 3(1)(a) of the FSMA (Disclosure of Confidential Information) Regulations. This allows the FCA to disclose confidential information if the disclosure assists them in discharging their public functions. One of the FCA's functions is to give guidance under s.139A FSMA: it is this function the disclosure is assisting.
The legal advisers will report to the Committee on 27th October, with Andrew Bailey appearing before the Committee on 31st October.
The FCA is due to make a decision soon on whether a formal investigation will take place. FCA action will be limited as many GRG activities were unregulated; however it is possible that publication of accounts will lead to civil claims from GRG customers who may feel they have been mistreated.
The interim account notes the unregulated nature of the GRG's activities, stating that the review was conducted in reference to applicable laws and regulations as well as the standards set by the GRG itself and RBS, and general principles of "fair and reasonable treatment". This is set within the context of contractual freedom and the commercial nature of the GRG.
In a letter to the Committee Chair Nicky Morgan, the FCA's Chief Executive Andrew Bailey states that this publication is an "exceptional case and does not establish a precedent". It is likely however that the threat of publication will play on the minds of firms subject to s.166 reports, which may reduce cooperation with skilled persons and therefore the efficacy of this investigatory power.