BusinessCorporate FinanceWe’re David to firms’ Goliath, pleads FRC

We're David to firms' Goliath, pleads FRC

Executive counsel Cameron Scott defends the FRC’s position on paying costs to defendants ­ against whom AADB charges have been unsuccessful ­ only if misfeasance could be proved

Cameron Scott, AADB Executive Counsel

Cameron Scott, AADB Executive Counsel

Disciplinary cases are like a battle between David and Goliath for the
Financial Reporting Council, the lawyer for the
Accountancy
and Actuarial Discipline Board
claimed.

Executive counsel Cameron Scott defends the FRC’s position on paying costs to
defendants ­ against whom AADB charges have been unsuccessful ­ only if
misfeasance could be proved, in this week’s Accountancy Age .

The firms view the changes as erecting an almost insurmountable barrier to
claiming back their legal costs, as it would amount to claimants needing to
prove a deliberate and dishonest use of powers by the office of the
AADB.

The FRC has argued that it should not fear ‘ruinous costs’ in bringing cases
which need to be publicly heard.

‘These cases need to be dealt with. They will often pit us against large
firms and professional indemnity insurers which have almost unlimited resources
to fight any disciplinary case.

‘It is a “David against Goliath” situation and it is not in the public
interest for us to be deterred from pursuing cases by the risk of a ruinous
cost,’ Scott writes.

Although the FRC’s own regulatory strategy document, published last November,
suggests case costs are met by the individual participating bodies to which the
members or firms involved belong, this is not the case with cost awards against
the FRC.

A spokesman clarified that the FRC would raise funds from its stakeholders at
large to pay for a cost award made against it.

If the AADB’s charges are successful, however, the defendant could end up
footing the bill ­ if the tribunal chooses ­ of the entire running costs of the
case, together with the legal costs to the FRC.

The FRC is also proposing to change its rules to allow the disciplinary board
to reprimand professionals for breaches of ‘guidance’ as well as breaching
standards, a move that some say is tantamount to introducing rules-based
accounting.

Until now, only a standards breach would have been punishable.

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