About the FRC Procedures and Policies The FRC & The Regulators' Code

The FRC & The Regulators' Code

In carrying out our regulatory work we comply with the Regulators’ Code and follow the principles of good regulation set out in the Legislative and Regulatory Reform Act 2006. We seek to be proportionate, accountable, consistent, transparent and targeted in the way we discharge our responsibilities. In all our work our primary responsibility to pursue the public interest in high standards of auditing, reporting and governance, independent of those we regulate.

 

This webpage summarises the ways in which we currently meet the provisions of the Code:

 

1.Regulators should carry out their activities in a way that supports those they regulate to comply and grow 

1.1 Regulators should avoid imposing unnecessary regulatory burdens through their regulatory activities1 and should assess whether similar social, environmental and economic outcomes could be achieved by less burdensome means. Regulators should choose proportionate approaches to those they regulate, based on relevant factors including, for example, business size and capacity.

We consult extensively on all aspects of our policies and procedures to ensure that they are both effective and proportionate.
 
We pursue our regulatory objectives through statutory arrangements and, where such an approach is likely to be effective, through non-statutory means.
 
We undertake impact assessments for all new regulatory proposals. 

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1.2 When designing and reviewing policies, operational procedures and practices, regulators should consider how they might support or enable economic growth for compliant businesses and other regulated entities.

We believe that high standards of auditing, reporting and governance support the efficient working of the capital markets and help attract investment; they benefit market participants as well as investors and the wider public who rely on their work.

 

We publish annual assessments of those issues we have identified through our work and provide specific updates on aspects of auditing, reporting and governance where we believe that these will be helpful to market participants.

1.3 Regulators should ensure that their officers have the necessary knowledge and skills to support those they regulate, including having an understanding of those they regulate that enables them to choose proportionate and effective approaches.

We employ a high proportion of professionally qualified and experienced accountants, lawyers and actuaries. We support continuing professional development for all our staff. This ensures that our regulatory teams have the skills and experience necessary to carry out regulatory work to the highest standards and engage constructively with market participants.

1.4 Regulators should ensure that their officers understand the statutory principles of good regulation3 and of this Code, and how the regulator delivers its activities in accordance with them. 

As an essential component of our organisational values and culture, staff are expected to operate with integrity and transparency in line with the principles underpinning the Code.

2. Regulators should provide simple and straightforward ways to engage with those they regulate and hear their views

2.1 Regulators should have mechanisms in place to engage those they regulate, citizens and others to offer views and contribute to the development of their policies and service standards. Before changing policies, practices or service standards, regulators should consider the impact on business and engage with business representatives.
 

We consult publicly each year on our regulatory priorities, and commission surveys of stakeholders’ views, including the views of the general public.

 

We engage extensively and openly with business and professional bodies with an interest in our work.

2.2 In responding to non-compliance that they identify, regulators should clearly explain what the non-compliant item or activity is, the advice being given, actions required, or decisions taken, and the reasons for these. Regulators should provide an opportunity for dialogue in relation to the advice, requirements or decisions, with a view to ensuring that they are acting in a way that is proportionate and consistent.
*This paragraph does not apply where the regulator can demonstrate that immediate enforcement action is required to prevent or respond to a serious breach or where providing such an opportunity would be likely to defeat the purpose of the proposed enforcement action.*  
 

We operate our monitoring and enforcement work rigorously, reflecting the public interest in high standards of auditing, reporting and governance and the harm to the public interest that failure to meet those standards can cause.

 

We have procedures in place to ensure that we operate in line with the requirements of the law and the principles of natural justice. 

 

In all our regulatory work we seek to be proportionate and consistent.

2.3 Regulators should provide an impartial and clearly explained route to appeal against a regulatory decision or a failure to act in accordance with this Code. Individual officers of the regulator who took the decision or action against which the appeal is being made should not be involved in considering the appeal. This route to appeal should be publicised to those who are regulated. 

The procedures for our monitoring and enforcement activities are designed to be both effective and fair and include appropriate separation of powers.

 
 
 
 
 
2.4 Regulators should provide a timely explanation in writing of any right to representation or right to appeal. This explanation should be in plain language and include practical information on the process involved.
 

We clearly set out the rights as well as responsibilities of all regulated entities in relation to the pursuit and outcome of regulatory decisions through our published procedures and in action in relation to an individual regulated entity.

2.5 Regulators should make available to those they regulate, clearly explained complaints procedures, allowing them to easily make a complaint about the conduct of the regulator.
 

The FRC operates a complaints process which is published on our website at “Make a Complaint”.

2.6 Regulators should have a range of mechanisms to enable and regularly invite, receive and take on board customer feedback, including, for example, through customer satisfaction surveys of those they regulate4.
 

The FRC employs a number of feedback mechanisms including (but not limited to) our complaints procedure, public consultations, survey evidence and citizens’ juries.

3. Regulators should base their regulatory activities on risk 

3.1 Regulators should take an evidence-based approach to determining the priority risks in their area of responsibility and should allocate resources where they would be most effective in addressing those priority risks.

We target our monitoring programmes based on an assessment of those sectors and issues we consider pose the greatest risk to the public interest. We publish annual summaries of our assessments.  

 
 
3.2 Regulators should consider risk at every stage of their decision-making processes, including choosing the most appropriate type of intervention or way of working with those regulated; targeting checks on compliance; and when taking enforcement action.
 
We have processes in place in relation to all our regulatory decisions to ensure that they are proportionate to the conduct under consideration.
3.3 Regulators designing a risk assessment framework5, for their own use or for use by others, should have mechanisms in place to consult on the design with those affected, and to review it regularly. 

We set out our risk management framework in our annual report, including our assessment of principal risks. We consult stakeholders annually on our priorities, including priority sectors and issues for our monitoring programmes, to help identify risks to our regulatory objectives.

3.4 Regulators, in making their assessment of risk, should recognize the compliance record of those they regulate, including using earned recognition approaches and should consider all available and relevant data on compliance, including evidence of relevant external verification. 
 

We recognise that the majority of market participants seek to comply with the codes and standards we set; and we consult and communicate with them accordingly.  

3.5 Regulators should review the effectiveness of their chosen regulatory activities in delivering the desired outcomes and make any necessary adjustments accordingly.
 

We publish indicators in our annual Plan and Budget against which the effectiveness of  regulatory outcomes can be measured.

4. Regulators should share information about compliance and risk 

4.1 Regulators should collectively follow the principle of “collect once, use many times” when requesting information from those they regulate.

We only collect information when it is necessary to pursue our regulatory activities and we share that information within the FRC subject to our established procedures.

4.2 When the law allows, regulators should agree secure mechanisms to share information with each other about businesses and other bodies they regulate, to help target resources and activities and minimize duplication.
 
We have agreements in place with other regulators that provide for information sharing.

5. Regulators should ensure clear information, guidance and advice is available to help those they regulate meet their responsibilities to comply

5.1 Regulators should provide advice and guidance that is focused on assisting those they regulate to understand and meet their responsibilities. When providing advice and guidance, legal requirements should be distinguished from suggested good practice and the impact of the advice or guidance should be considered so that it does not impose unnecessary burdens in itself.
 

We distinguish between guidance that complements regulatory requirements and guidance that identifies best practice.   

5.2 Regulators should publish guidance, and information in a clear, accessible, concise format, using media appropriate to the target audience and written in plain language for the audience.
 

We act in a timely manner, having proper regard to the legitimate interests of all affected parties and the wider UK regulatory framework.

5.3 Regulators should have mechanisms in place to consult those they regulate in relation to the guidance they produce to ensure that it meets their needs. 

We consult market participants on the usefulness of the guidance we produce.

5.4 Regulators should seek to create an environment in which those they regulate have confidence in the advice they receive and feel able to seek advice without fear of triggering enforcement action. 

Our primary responsibility is to the public interest and we discharge our regulatory responsibilities accordingly. However, we frame our codes and standards to help market participants apply them in practice. We have established a Financial Reporting Lab to enable open dialogue between investors, companies and their advisers on reporting issues. 

5.5 In responding to requests for advice, a regulator’s primary concerns should be to provide the advice necessary to support compliance, and to ensure that the advice can be relied on.

Market participants are responsible for achieving the necessary high standards of auditing, reporting and governance. We provide guidance where necessary, but this cannot substitute for market participants’ own judgement on often complex technical matters. 

5.6 Regulators should have mechanisms to work collaboratively to assist those regulated by more than one regulator. Regulators should consider advice provided by other regulators and, where there is disagreement about the advice provided, this should be discussed with the other regulator to reach agreement.

We work closely and with other regulators, including the FCA, PRA and the Pensions Regulator and share information with them subject to the relevant information gateways.

 

Our annual reviews of auditing and corporate reporting describe our joint working with other regulators.

6.  Regulators should ensure that their approach to their regulatory activities is transparent  

6.1 Regulators should publish a set of clear service standards, setting out what those they regulate should expect from them.
 

Our regulatory processes involve an annual selection of entities for review. Our procedures set out how we engage with individual entities. While the matters we address are frequently  complex and technical and cannot therefore be resolved within a set timetable, we seek to act expeditiously and fairly in seeking information and responding to enquiries. For example, we aim to resolve issues identified in our corporate reporting reviews in time for companies to reflect agreed improvements in their next reports and accounts.

6.2 Regulators’ published service standards should include clear information on:
a) how they communicate with those they regulate and how they can be contacted;
b) their approach to providing information, guidance and advice;
c) their approach to checks on compliance, including details of the risk assessment framework used to target those checks as well as protocols for their conduct, clearly setting out what those they regulate should expect;
d) their enforcement policy, explaining how they respond to non-compliance; 
e) their fees and charges, if any. This information should clearly explain the basis on which these are calculated, and should include an explanation of whether compliance will affect fees and charges; and
f) how to comment or complain about the service provided and routes to appeal.
 

a) Contact details are on our website.
 
b) Our Plan & Budget is published annually.
 
c) We regularly publish a variety of reports including the Annual Enforcement Review, Annual Review of Corporate Reporting, as well as periodic Thematic reviews, all of which provide information relevant to compliance with this Code.
 
d) We publish our conduct procedures and the decisions reached in accordance with those procedures. Disciplinary Tribunal hearings are open to the public. We publish updated Enforcement notices on our website.
 
e) We explain the basis for all our levies and fees.
 
f) Our complaints process is published on our website alongside the relevant appeals procedure.

6.3 Information published to meet the provisions of this Code should be easily accessible, including being available at a single point7 on the regulator’s website that is clearly signposted, and it should be kept up to date. 

The information required to meet this code is freely available across our website – it is clearly signposted and updated as often as required.

6.4 Regulators should have mechanisms in place to ensure that their officers act in accordance with their published service standards, including their enforcement policy.

We act proportionately when exercising our powers, including carrying out inspections, pursuing investigations or reporting.

Where our procedures provide for it, we take account of the cooperation of and/or actions taken by any party or parties involved in any enforcement proceedings.
 
6.5 Regulators should publish, on a regular basis, details of their performance against their service standards, including feedback received from those they regulate, such as customer satisfaction surveys, and data relating to complaints about them and appeals against their decisions.

Our Annual Report summarises the feedback we have sought and received on our regulatory activities.

 
 

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