Purpose
The Conduct Committee (the ‘Committee’) shall be responsible for oversight the FRC’s enquiries, investigations and enforcement function, ensuring that appropriate cases are investigated and conducted fairly, in the public interest, in a timely manner and in accordance with due process and the Regulators code.
The Committee will also provide strategic input and constructive challenge to the FRC’s supervision and monitoring activities, identifying key areas of risk and monitoring the progress of operating plans.
Membership
The Committee is a formal business Committee of the Board.
Membership shall comprise of up to ten members, which shall include:
- Chair of the Conduct Committee who shall be a non-executive member of the Board.
- Other non-executive Directors of the FRC Board.
- Other Committee members appointed by the People Committee with the use of an independent assessor.
The Chair of the Board may serve as a member of the Committee, if independent on appointment, but shall not be the chair of the Committee.
Appointments to the Conduct Committee shall be for a period of up to three years. Termination of a non-executive Board member’s term on the Board will also result in the termination of their membership of the Conduct Committee.
The Committee shall have a majority of members who are not practising accountants, auditors and/or actuaries and no member shall be:
- a member of the Regulatory Standards & Codes Committee;
- practising auditor or an individual who has during the previous 3 years has:
- carried out statutory audits;
- held voting rights in an auditing firm;
- been a member of an administrative management or supervisory body of an audit firm; or
- been a partner, employee or otherwise contracted by an audit firm; or
- an officer of any of the accountancy or actuarial professional bodies.
Only members of the Committee have the right to attend Committee meetings. However, relevant executive directors and General Counsel or their nominees will normally be invited by the Chair of the Committee to attend meetings.
Other post-holders, Senior Advisors, members of the Advisory Panel and external advisors may be invited by the Chair to attend all or part of any meeting, as and when appropriate.
Secretary
The Company Secretary or their nominee shall act as Secretary of the Committee (the Secretary).
Frequency of Meetings
The Committee shall meet as required to fulfil its remit and will meet no less than 8 times within each calendar year.
The Committee may consider and decide urgent matters through correspondence.
Quorum
A meeting shall be quorate when at least 60% of the total membership of the Committee are in attendance. Attendance is considered to be the ability able to hear, speak and vote at the same time as other members.
Only members of the Committee shall have the right to vote.
Decisions of the Committee will be taken by majority. In the case of equal votes, the Chair of the Committee will have a casting vote or can refer the matter up to the full Board for further consideration.
Notice of Meetings
Meetings of the Committee shall be convened by the Secretary at the request of any of its members.
Unless otherwise agreed, notice of each meeting confirming the venue/electronic platform, time and date, together with an agenda of items to be discussed and supporting papers, shall be forwarded to each member of the Committee and any other person required to attend, no later than 5 working days before the date of the meeting.
Minutes of Meetings
The Secretary shall minute the proceedings and resolutions of all meetings of the Committee, including recording the names of those present and in attendance. Minutes of Committee meetings shall be circulated promptly to all members of the Committee and to the Board, unless a conflict of interest exists.
Written resolutions of the Committee shall be recorded by the Secretary.
The Secretary shall ascertain, at the beginning of each meeting, the existence of any conflicts of interest and minute them accordingly.
Responsibilities
Matters reserved to the Committee
The Committee shall
- Exercise the delegated functions of the Secretary of State under section 457 Companies Act 2006 and section 14(2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004.
- Maintain the Conduct Committee operating procedures for reviewing corporate reporting.
Matters delegated to the Committee by the FRC Board
The Committee shall:
- Oversee the FRC’s supervisory, monitoring and enforcement work in line with FRC’s mission to promote transparency and integrity in business.
- Oversee the executive’s monitoring of compliance with the conditions of the delegation arrangements with each recognised supervisory body (RSB) under SATCAR16.
- Oversee the executive’s monitoring of compliance with the requirements of the Companies Act 2006 by each (RSB) and recognised qualifying body (RQB).
- Advise the FRC Board on its exercise of the functions of the competent authority under SATCAR16 including on the delegation of tasks to the RSBs or their removal or retention.
- Advise the FRC Board on its exercise of the delegated functions of the Secretary of State under Part 42 of the Companies Act 2006 and its exercise of the functions of the Independent Supervisor appointed under Chapter 3 of Part 42 of the Companies Act 2006 including on:
- the continued recognition of bodies to offer a recognised audit qualification and/or to supervise auditors
- the need to impose a direction or penalty on an RSB or RQB
- the need to apply to the court for an Order to require a RSB or RQB to meet its statutory obligations
- the recognition of an Overseas audit qualification
- the maintenance and exercise of the arrangements necessary to supervise the Auditors General.
- Advise the FRC Board on the approach to be taken to non-statutory oversight of the actuarial and accountancy professions.
- Exercise those functions delegated to the Conduct Committee in accordance with the Accountancy and Actuarial Schemes, the Auditor Regulatory Sanctions Procedure, Crown Dependency Auditor Regulatory Sanctions Procedure and the Audit Enforcement Procedure.
- Exercise those functions delegated to the Conduct Committee in accordance with the FRC’s processes pursuant to Articles 4(2), 17(6) and 17(8) EU Audit Regulation and section 511A Companies Act 2006.
- Advise the FRC Board on the publication of annual public reports of the FRC’s conduct and supervisory activities.
- Consider and respond to requests for advice from the Regulatory Codes & Standards Committee.
- Appoint members of the Enforcement Committee.
- Approve operating plans governing the FRC’s supervisory, monitoring and enforcement activities and oversee the quality of work and delivery of the plan.
- Set strategic goals for the FRC’s supervisory, monitoring and enforcement work, including by identifying the main areas of risk that need to be addressed.
- Approve audit monitoring public reports on individual firms.
- Oversee investigation progression against milestones.
- Review requests from firms to reconsider AQR gradings and decide on the final grading assessment.
- Approve any plans for thematic studies and the publication of any findings from such work.
- Perform such other functions as shall be determined by the Board from time to time.
Reporting Responsibilities
The Committee shall report to the Secretary of State on the exercise of the delegated functions of the Secretary of State under section 457 Companies Act 2006 and section 14(2) of the Companies (Audit, Investigations and Community Enterprise) Act 2004.
The Committee Chair shall report to the Board:
- on the Committee’s proceedings including any enforcement decisions at each Board meeting;
- on the Committee’s oversight of enforcement matters including its oversight of the progress of current investigations on a quarterly basis;
- on the FRC’s monitoring work at least two times a year; and
- on the other matters reserved to and delegated to the Committee at least two times a year.
The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit.
The Committee Chair shall make a statement in the FRC Annual Report about its activities including the frequency of, and attendance by members at, Committee meetings.
Other
The Committee shall review its own performance and terms of reference and report to the Board and implement and/or recommend any necessary changes.
Approved by the FRC Board with effect from 1 January 2021.