The FSA recently changed a number of start dates for the new reporting requirements, and issued a consultation paper on where external assurance is required on regulatory returns.
The FSA has changed the start dates for some of the new reporting requirements scheduled to begin in January 2008 and January 2009.
For reporting that was due to start in 2008, with the exception of data items FSA003 (Capital Adequacy) and FSA004 (Additional Information on Credit Risk) for investment firms, the start date for data items has been deferred from 1 January 2008 to 30 June 2008. As such, BIPRU firms will continue to submit their old IPRU (INV) returns for the first half of 2008, but will not submit FSA009, as this will be replaced with FSA003.
For reporting due to start in 2009, the FSA has brought forward the start date for these data items from 1 January 2009 to 31 August 2008. This will affect the following firms.
- From 31 August 2008, investment firms not subject to the CRD or Markets in Financial Instruments Directive (MiFID) should stop submitting their ‘old’ returns.
- Exempt CAD firms will no longer be required to submit FSA043 (Key Data) from January 2008, but will continue to submit their ‘old’ returns until the new reporting begins on 31 August 2008.
The FSA has listed the changes in reporting start dates on its website: www.fsa.gov.uk/ pages/doing/regulated/returns/irr/dates/ summary/index.shtml
External assurance on regulatory returns
There is currently a mismatch between the FSA’s risk-based approach to supervision and the type of firms required to have their annual regulatory returns audited.
To level the playing field, the FSA has issued consultation paper CP07/15, which proposes to remove the regulatory audit requirement in SUP3.9 for non-BIPRU firms. The aim is to make more use of reports by experts in the form of Return Assurance Reports (RARs).
It is envisaged that RARs will be used in two ways.
1. s.166 RARs will allow the FSA to exercise its right under s.166 of the Financial Services and Markets Act to review specific firms where there is a perceived risk. This is expected to be used in instances where there have been historic problems with regulatory returns or where regulatory returns have never been subject to external audit.
2. Thematic RARs will form part of the FSA’s thematic reviews. Firms falling within the scope of the reviews may have their regulatory returns assessed.
The FSA also plans to remove the SUP3.9 requirement for auditors to submit a management letter to firms on matters concerning internal controls. Similar letters for client asset audit work will still be needed, but these will be a requirement of SUP3.10 rather than SUP3.9. This will not impact on the current requirement for audit reports on client assets for MiFID firms.
Although it is not directly related, it is worth noting that under TP1 of the transitional provisions of the SUP handbook, BIPRU firms are not required to submit annual returns, or balance sheet reconciliations, if applicable, between 1 January and 31 December 2007.
Finally, the Auditing Practices Board has at last issued a consultation draft of the revised Practice Note 21, The Audit of Investment Businesses in the United Kingdom. The most significant change is the inclusion of new guidance on reporting on client assets under SUP3.10. Guidance on reporting to the FSA under SUP3.9 has not yet been removed from the draft, but will be excluded from the final version if the FSA’s proposals in CP07/15 are implemented.
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