RegulationCorporate GovernanceFRC disciplinary revamp: a knee-jerk reaction

FRC disciplinary revamp: a knee-jerk reaction

FRC criticised for proposed changes to disciplinary procedures after just one case

Peter Wyman

Critical: Peter Wyman

The Financial Reporting
Council
’s best statisticians wouldn’t dream of conjuring up a trend from
just one example. So why is the FRC looking to revamp its disciplinary
procedures after just one case?

The rules make it virtually impossible to claim costs when a firm wins a
case, and extend the remit of the disciplinary body.

The profession has not only unanimously disapproved, but suggested the board
withdraw its proposals.

PricewaterhouseCoopers partner Peter Wyman pointed out that there isn’t
enough of a compelling trend of disappointing results to give rise to such
dramatic reforms.

‘There is almost no track record at all to the new scheme ­ which has had
only one case that’s gone from start to finish,’ Wyman said.

The Accountancy and
Actuarial Discipline Board
got off to a rough start as it failed to prove
that PwC and Mayflower finance director David Donnelly’s actions fell short of
the standards of the profession, forcing it to pay out £1m in costs.

The FRC argues that it shouldn’t be prevented from bringing cases out of the
fear of ruinous costs ­an argument
KPMG has disputed, saying
that the ‘concern over lack
of FRC reserves should not cloud the issue of avoiding any unfairness that could
occur by placing greater costs burden on a member or member firm’.

The firms are additionally puzzled as to why the board would wish to revise
‘misconduct’ as the basis for charges, to that of ‘relevant conduct’ ­ which is
to constitute ‘failure to comply with any relevant law, charter, bye-law,
regulation or guidance, as well as the event that the defendant could likely
bring discredit to himself or itself or the accountancy profession’.

Herbert Smith, the law firm that acted for Arthur Andersen in Mayflower ­ the
first case brought by the board ­ warned that the change in definition ‘is too
much of an indiscriminate catch-all, particularly as it lacks any concept in
materiality’.

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