Prudential Regulation Authority Rulebook

6.1

FSMA^[8] requires that a scheme report may only be made by a person:

1. (i) appearing to the PRA to have the skills necessary to enable the person to make a proper report; and
2. (ii) nominated or approved for the purpose by the PRA.

6.2

The PRA expects the skilled person making the scheme report to be a person who:

1. (i) is independent, insofar that any direct or indirect interest or connection he/she or his/her employer has (or has had) in either the transferor or transferee should not be such as to prejudice his status in the eyes of the court and that this should remain the case throughout the RFTS process; and
2. (ii) has relevant knowledge, both practical and theoretical, and experience of the types of business transacted by the transferor and transferee.

6.3

The principles set out in PRA Supervisory Statement SS7/14 also apply to the skilled person.^[9]

6.4

The PRA considers that a firm’s external auditor is eligible to be nominated as the expert making the scheme report, provided the skilled person can demonstrate that the criteria set out in 6.1 and 6.2 are satisfied. The external auditors are responsible for also satisfying themselves that they could continue to act in their capacity as auditor if they were to be appointed as the skilled person. The PRA will consider each nomination on a case-by-case basis.

6.5

The PRA may only nominate or approve an appointment after consultation with the FCA.

6.6

The suitability of a person to act as a skilled person depends on the nature of the scheme and the firms concerned.

6.7

Under FSMA^[10], the application to the court may be made by the transferor, the transferee or both. When reasonably practical, the intended applicant should choose their nominee for skilled person, in the light of any criteria advised by the PRA. The intended applicant(s) should then advise the PRA of their choice, unless the PRA wishes them to defer nomination or to make its own nomination. The notification should be accompanied by reasons why the transferor or transferee considers the nominee to be a suitable person to act as skilled person. Other relevant details provided should include:

1. (i) information about the nominee's experience and qualifications;
2. (ii) the proposed terms and conditions of the nominee's appointment, including any remuneration arrangements;
3. (iii) any current or previous professional or commercial arrangements with the transferor, transferee or their associated companies, including the remuneration (direct or indirect) for those arrangements with the nominee and/or with any professional firm or company in which the nominee has or has had any interest in the past five years;
4. (iv) steps taken to assess any potential conflicts of interest arising from these relationships and, where conflicts of interest are identified, the measures taken to mitigate these. This should also be disclosed within the scheme report; and
5. (v) any other matters that the PRA may consider necessary in order to form a view.

6.8

An overview of any arrangements whereby the skilled person sub-contracts work to third parties, as well as information of any planned review process (including the identity of the proposed peer reviewer), should also be submitted with the nomination. This should include the details outlined above where relevant.

6.9

The PRA may wish to have preliminary discussions with the nominee about the transfer before the PRA determines if they are suitably qualified to address issues arising from the transfer. These discussions may explore the scope of the work the nominee has previously undertaken and the existence of safeguards to mitigate any actual or perceived conflicts. The PRA, in consultation with the FCA, will consider the suitability of the nominee and will inform the firm that nominated them whether they have been approved. The firm should directly contract the skilled person. Since the nature of the scheme is a factor in determining the suitability of the nominee, the PRA cannot approve a nominee before the broad outlines of the scheme have been determined.

6.10

The PRA may itself nominate the skilled person (following consultation with the FCA), either where it indicates that a nomination is not required by the firm, or where it does not approve the firms' own nomination. In either case, the PRA will inform the applicant.

6.11

The PRA expects firms to cooperate fully with the skilled person and provide him or her with access to all relevant information and appropriate staff.