A test of skill
Last week, the Administrative Court granted permission to judicially review the s.166 process for reviewing redress awarded as part of the interest rate hedging product scheme.
In very brief terms, the FCA (and the PRA) can use the powers at s.166 and s.166A of FSMA to appoint a skilled person to conduct a review and/or to collect and update information on behalf of the regulator. This power will usually be used where an aspect of a firm's activities has given the regulator cause for concern in relation to matters such as conduct issues or financial crime and the FCA would like to obtain more information to be able to assess how best to proceed.
The interesting point to note is that the company concerned, Holmcroft Properties, has been granted permission to review the process used by the skilled person appointed under s.166 - rather than the regulator itself.
In this case, the skilled person appointed by the FCA oversaw the creation and operation of the redress scheme established by a UK bank. Holmcroft was awarded compensation by the bank but was not compensated for consequential losses; the skilled person agreed with this determination by the bank. Holmcroft is now looking to challenge the decision of the skilled person (KPMG LLP) on the basis that in making its assessment of the bank's offer of redress the skilled person had followed a procedurally unfair process resulting in a flawed assessment being made of the adequacy of redress.
We are fairly used to seeing judicial review applications against the regulator, but an application against a skilled person is novel. What impact this might have will be determined by the outcome of the substantive hearing. However, in a time when the regulator is increasingly using its powers under s.166 it certainly seems likely that we could see further challenges both against skilled persons themselves and the FCA, particularly if the outcome of the hearing is favourable to Holmcroft.
As always, keep an eye on this blog for further updates...