Opinion: FCA flexing trigger finger around section 166 driven enforcement

The FCA means business.

After publishing a new five-year strategy in March 2025 and confirming its work to establish an extended footprint in the US and Asia-Pacific in April, a further trend supporting the regulator’s drive to be more proactive and deliberate is its increased usage of section 166 of the Financial Services and Markets Act 2000.

According to experts from regulation consultancy Sicsic Advisory, the FCA has been “much more active using the tool” as part of its enforcement armoury.

Section 166 empowers the FCA to require that an independent, external party conduct a report on a selected firm or person. Primarily, the objective of such a report is to obtain “expert analysis or recommendations for the purposes of seeking remedial action”, according to the FCA Handbook.

When section 166 is triggered, regulated firms may need to appoint a skilled representative to conduct the report, or the FCA may choose to commission the external party itself – particularly in cases where “it considers that the firm has failed to provide information required by the FCA or update information previously provided to the FCA”.

Nadege Genetay, partner at Sicsic Advisory, noted that the FCA’s involvement in appointing a reviewer is “not good news because that means a bit less trust”.

Typically, section 166 reports can be used for both the FCA’s supervisory or enforcement functions – but Sicsic Advisory emphasised that it is the latter purpose which is driving the majority of recent cases.

A freedom of information (FOI) request the consultancy submitted to the regulator, covering the general insurance and protection sectors, revealed that in the year ending March 2024, eight section 166 reports had been triggered – with three of these against intermediaries. Two of the intermediaries chose the skilled person completing the report, while the third was issued an FCA contracted reviewer.

Over the same time frame, the FOI request confirmed that six enforcement investigations remained open – four against individuals and two against firms.

A heavy impact arising from section 166 reports is the cost. Regardless of whether the FCA or firm being scrutinised commissions the skilled reviewer, the company under the spotlight must cough up to cover the costs – Sicsic Advisory’s FOI request found that across eight section 166 instances, including intermediaries and insurers, the direct cost amounted to £2.7m.

The direct cost of the report for the four firms that could choose their reviewer totalled £783,540, while the four firms that had an FCA commissioned reviewer spent an amalgamated £1,929,979 on their reports.

The second key impact is time. Genetay continued: “These processes take a long time. Meeting with the key person, [tackling a] big information request, trilateral meetings between the FCA, the key person and the firm – firms need support to prepare for this process. The senior management and staff time just to administer these processes is huge and the consequences can be significant.”

Despite its bids to be proportionate, the FCA’s increased interventionist stance is unquestionable – a fact supported by Sicsic Advisory’s data collection.

With the FCA therefore flexing its enforcement muscles, regulated firms must pay close attention to dotting the I’s and crossing the T’s of regulatory requirements as the increased threat of section 166 action adds further weight to existing reporting rules and the heavy lifting of industry admin.