FOI: too much information?

News that the Financial Reporting Council is expecting to come under the
remit of the Freedom of Information Act, as reported by Accountancy Age last
month, will have caused some sharp intakes of breath across UK boardrooms.

While transparency and public scrutiny are worth striving for, there will be
those who immediately claim this should not be done at the expense of a strong
and effective regulatory framework.

Extremely sensitive information is regularly passed to the FRC to help
Financial Reporting Review Panel and Accountancy Investigation & Discipline
Board investigations. In most cases, these are submitted on the condition of

Should the FOI threaten that confidentiality, companies could baulk at
handing over their most sensitive documents, and this would potentially
undermine the very regulatory framework that, it is argued, increased
transparency would improve.

If the FRC were to come under the Act, ICAEW chief executive, Eric Anstee,
has indicated a great deal of sympathy for its chief executive Paul Boyle. He
agrees with Boyle when he says that successful self-regulation cannot be carried
out completely in the public eye. ‘Confidentiality is needed, at least during
the process,’ says Anstee.

While updates of an investigation’s progress are to be welcomed and public
statements upon completion of an enquiry should be encouraged, both Anstee and
Boyle argue that companies would simply refuse to co-operate with an
investigation if it meant sensitive documents came under the public eye.

Perhaps a good example of why Boyle and Anstee have concerns about the FRC’s
work, if it was to come under the FOI, came last week when the FRRP issued a
statement on the report and accounts of the Royal Bank of Scotland.

In July last year, it started the ball rolling on an enquiry into the bank’s
accounting treatment of Tesco Personal Finance Group, which RBS consolidated in
its group accounts as a subsidiary. Following the conclusion of the enquiry, it
was found that RBS should be accounting for TPFG as a joint venture. A small,
but important clarification.

The risk is that, if news of the FRRP investigation had leaked before the
panel had a chance to publish its findings, the share price of RBS could have
suffered. And for every enquiry that leads the FRRP to issue a statement, there
could be 10 or even 20 that do not warrant further mention.

Publication of such enquiries by the back door of the FOI could lead to a
situation that Anstee refers to as ‘putting people into the dock without

FRC board meeting minutes, correspondence between the AIDB and individuals or
firms it is investigating or considering whether to investigate, would offer
essential and compulsive reading to business journalists.

But while this may be the case, Patricia Peters, head of corporate governance
at the Institute of Directors, says that opening up the FRC to the FOI would
also offer an attractive option to the business world.

‘Business itself might say that we could find out how this organisation
actually works,’ she says.

The FRC is, it seems, gearing up for coming under the remit of the Act
sometime in the next 12 to 18 months. As Boyle says, his organisation is
‘starting to think internally about what the implications’ of this would be.

The first of those could be to give UK companies a bit of a heart flutter.
Observers hope that the second will not be to weaken a regulatory system that
has only recently been strengthened, but to offer a sceptical public greater
confidence in what many see as the rather murky and secretive world of

Related reading

New Logo Saffery Champness