Accountants’ disciplinary rules: FRC’s Accountancy Scheme 1 July 2013

The Financial Reporting Council (FRC) is the body responsible for setting and enforcing accountancy and auditing rules but also oversees the regulatory activities of the actuarial profession and the professional accountancy bodies including the implementation of independent disciplinary arrangements for public interest cases.

On 1 July 2013, the FRC’s new Accountancy Scheme rules came into effect replacing those of 18 October 2012.

The Accountancy Scheme was originally adopted in 2004. The scheme sets out the disciplinary rules by which the FRC investigates serious misconduct which raises important issues affecting the public interest in the UK.

Changes

The new Accountancy Scheme follows the same broad format as previously but includes numerous changes. Some of the more significant include:

• New rule 4 introduces and defines the Case Management Committee which takes on an important investigative function and supports the Executive Counsel and Conduct Committee.
• New rule 8 provides formal rules regarding settlement. The Executive Counsel can now negotiate a settlement agreement with the respondent but this is subject to approval by the Conduct Committee and, if after the delivery of a formal complaint, the disciplinary tribunal.
• The rules have been changed such that a respondent’s liability for costs no longer stops automatically on the making of an admission (new 9(8)(ii)).
• The new rules explicitly address how successor practices are to be dealt with. Under new rule 13(1)(ii)(c) successor practices are jointly and severally liable for any fines against a predecessor firm.
• New rule 15 introduces Interim Orders (set out in Appendix 2) which can suspend or attach conditions to a member’s practicing certificate or a member firm’s registration/authorisation licence.
• New rule 21 changes the requirements to amend the Scheme and introduces a formal mechanism (the appointment of a High Court Judge as adjudicator) for resolving any disputes between participating bodies as to amendments.
• Appendix 1 introduces a new “condition” sanction. These could include restrictions to the areas in which a member can practice, a requirement that a member attends specific training, that a firm implements training programmes, or that a firm complies with certain administrative requirements.

Comment

The amended scheme includes additional sanctions which add flexibility to the remedies available to the FRC. They also indicate an intention to encourage settlement; presumably with a view to speeding up the investigative process and to reduce the cost of disciplinary proceedings.

Further reading: The Accountancy Scheme 1 July 2013