This is part one of a series on Section 166 reviews. You have just received an FCA S166 requirement notice, what do you do next?

Few letters land on a CEO’s desk with quite the same weight as a S166 notice. One minute you’re running the business as usual and the next, the FCA is telling you an independent Skilled Person will be reviewing your operations and reporting back.

It’s a moment that focuses minds quickly. Here’s what it actually means, what happens next, and what you can do to manage the process well from day one.

What the notice means

A S166 notice is issued under the Financial Services and Markets Act 2000 and gives the FCA the power to require your firm to appoint an independent Skilled Person to investigate a specified area of concern and report back. It is a supervisory tool, not an enforcement action. However, that distinction matters less than you might think in the moment. The FCA is concerned about something. They want an independent view. And they want it in writing.

Common triggers include the FCA identifying weaknesses in your financial crime controls, concerns about your governance or risk management framework, questions about whether you hold adequate financial resources, or patterns emerging from their supervisory data or peer reviews.

The first 48 hours

The temptation is to treat the notice as a legal document and hand it straight to your lawyers. That’s not wrong, legal advice is important, particularly around scope and privilege but it’s not sufficient on its own. The most important thing you can do in the first 48 hours is get the right people in the room: senior management, compliance, legal, and a Skilled Person firm you trust.

The scope of the review is not fixed at this stage. The FCA issues a Draft Requirement Notice first, and there is usually a window to engage constructively on what the review will and won’t cover. Firms that miss this window, or engage passively, can find themselves locked into a scope that is broader and considerably more expensive, than it needed to be.

Choosing your Skilled Person

Where a firm contracts with the Skilled Person directly, which is the more common arrangement, you put forward your preferred choice to the FCA for approval. This is a decision worth taking seriously.

The Skilled Person needs to be independent, but they are also working for you in the sense that you contract with them and pay their fees. A good Skilled Person understands both obligations: they will give the FCA what the review requires, but they will also work with your team in a way that is proportionate, practical and doesn’t generate more disruption than necessary.

The FCA maintains an approved Skilled Persons Panel, but firms are not required to choose from it. You can nominate any firm with the right expertise, subject to FCA approval. That said, being on the panel means the FCA has already assessed the firm’s capability, which speeds up approval.”

What the review involves

The Skilled Person will typically begin by agreeing a detailed scope and methodology with both the firm and the FCA. They will then conduct document reviews, interviews with key staff, and testing of systems and controls. The review concludes with a written report submitted to both the firm and the FCA.

The findings in that report carry real weight. They will inform the FCA’s supervisory position on your firm and, depending on what they find, may result in required remediation, voluntary requirements, or in serious cases, enforcement referral. The quality of the Skilled Person’s work and how your firm engages throughout can significantly affect that outcome.

The practical advice

Engage early on scope. Co-operate fully once the review is underway. Be transparent, the FCA responds badly to firms that appear to be managing the process rather than engaging with it honestly. And get the right Skilled Person in place before the review starts, not after it’s gone wrong.

fscom is appointed to the FCA Skilled Persons Framework 2026–2030 across Lot C (Controls and Risk Management), Lot E (Financial Crime) and Lot I (Prudential Risk). If your firm has received a requirement notice or you want to understand the process, speak to our team.