Tougher punishments for misbehaving beancounters loomed on Thursday after the financial watchdog threatened a crackdown on the sector.
The Financial Reporting Council — charged with regulating auditors, accountants and actuaries — has launched an independent review of the fines it can impose for wrongdoing after feedback from institutional investors and the sector’s clients.
The body said the review will consider the “fairness and the effectiveness of the range of sanctions available under the enforcement procedures, and whether the financial penalty sanctions, in particular, are adequate to safeguard the public interest and deter wrongdoing”.
There is technically no limit to how large a fine the FRC can impose. However, its biggest penalty so far was £4 million in November last year when Deloitte and its partner John Clennett were found to have fallen “significantly” short of the profession’s standards over the audit of collapsed aircraft-parts seller Aero Inventory. In contrast, the largest fine levied by the Financial Conduct Authority was £284 million in May 2015 for currency rigging at Barclays.
The FRC’s own guidance on fines says they should be “proportionate to the misconduct”, act as a deterrent to future misconduct, and “promote public confidence in the regulation of the accountancy profession and in the way misconduct is tackled”. The body can also ban offenders from practising.
As well as the level of its fines, the FRC has also faced criticism over the length of time it takes to investigate a case.
The body — which outsources much of its investigations — has just 25 enforcement staff out of a total of 176, a fraction of the FCA’s 4000 staff.
The review will be chaired by former Court of Appeal Judge, Sir Christopher Clarke, and will include former Legal & General Investment Management chief executive Peter Chambers and former Pinsent Masons partner Andrew Long. The panel will seek evidence from a range of relevant organisations and individuals, the FRC added.