New sanctions guidance for accountants and actuaries' investigations

New sanctions guidance for accountants and actuaries' investigations

The Financial Reporting Council ("FRC") has published its first Sanctions Guidance for individuals and member firms under investigation.

The FRC had suggested in a consultation last year that it intended to base fines upon a percentage of a member firm's annual group turnover. This was heavily criticised by many firms who felt that this would be disproportionate, likely to cause entrenched litigation, and could adversely impact the profession. In news which will be welcomed by many firms, the new Sanctions Guidance suggests that the FRC's original suggestion has now been abandoned.

In general, the Guidance (which is intended to be advisory, not binding in nature) still provides that a member firm's revenue may be considered when assessing any fine, but the Guidance has moved away from a rigid percentage application.

The Sanctions now available follow those already in place (such as reprimands, fines, costs orders and exclusions), but they also now include direction orders - for example for an individual to undergo certain training programmes, or restrict an individual from carrying out certain types of work (eg audits of public listed companies).

It is also noteworthy that the Sanctions Guidance allow for prescribed discounts to be achieved for early settlement, in much the same way as FCA enforcement proceedings. The greatest discount that may be applied is up to 35% if an investigation is settled before a Formal Complaint is delivered.

This article first appeared in RPC’s Professional and Financial Risks Blog and has been reproduced with their permission. To view RPCs blog, click here.