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Guidance: Reaching determinations in respect of Proposed Settlement Agreements under the Accountancy Scheme and Actuarial Scheme (March 2017)
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Reaching a determination whether it would be appropriate for a Proposed Settlement Agreement to be entered into under the Accountancy Scheme or Actuarial Scheme
Introduction
1This guidance is issued by the Financial Reporting Council ("the FRC") Conduct Committee under the Accountancy Scheme and the Actuarial Scheme (“Scheme” or "Schemes"). Paragraph 3(ii) of both Schemes empowers the Conduct Committee to provide the Convener and any Tribunal with guidance concerning the exercise of their duties under the Schemes, who shall have regard to such guidance. Terms defined in the Schemes shall have the same meaning in this guidance.
2Pursuant to paragraph 8 of the Schemes, where, following settlement discussions, terms of settlement are agreed between the Executive Counsel and a Member and/or Member Firm (as applicable):-
- prior to the delivery of a Formal Complaint;
- the Executive Counsel shall deliver a Proposed Settlement Agreement ("PSA”) to the Conduct Committee, and
- the Conduct Committee shall send a copy of the PSA to the Convener who shall appoint a Legal Chair from the Tribunal Panel to consider the PSA and determine whether it would be appropriate for the PSA to be entered into;
- after delivery of a Formal Complaint;
- the Executive Counsel shall deliver a PSA to the Tribunal to which the determination of that Formal Complaint has been allocated; and
- that Tribunal shall take such steps as it considers necessary to determine whether it would be appropriate for the PSA to be entered into.
3This document is intended to provide guidance to the Convener, Legal Chairs and Tribunals on the process to be followed and approach to be taken when reaching a determination whether to approve a PSA. In addition, it is designed to:
- promote clarity, consistency and transparency in the decision-making in respect of PSAs; and
- ensure that the parties to PSAs are aware from the outset of the approach likely to be taken by a Legal Chair or Tribunal when determining whether to approve a PSA.
The process in respect of PSAs received by the Conduct Committee prior to the delivery of a Formal Complaint
4Where the Conduct Committee receives a PSA prior to the delivery of the Formal Complaint, pursuant to paragraph 8(4)(i) of the Schemes, the Committee Secretary, on behalf of the Conduct Committee, shall send it to the Convener who shall as soon as practicable appoint a Legal Chair from the Tribunal Panel to consider the PSA.
5The Convener:
- provides the Legal Chair appointed with the PSA and any supporting documents, and the contact details of the parties or their legal representatives;
- provides the Conduct Committee with details of the person appointed and notifies the parties to the PSA.
Thereafter, the Convener has no role in the process and no Secretary is appointed.
6Pursuant to paragraph 8(4)(ii) of the Schemes, the Legal Chair appointed shall determine whether it would be appropriate for the PSA to be entered into having regard to the matters set out at paragraph 17 below.
7The Legal Chair appointed may make direct contact with the parties with any queries or requests for information in relation to:
- the facts stated in the PSA;
- the financial means of the Respondent(s), if appropriate;
- any precedents emerging from Tribunal decisions and approved PSAs.
8Once the Legal Chair has reached a determination in draft form, he may provide this to the parties as a confidential draft for error correction.
9Thereafter, and pursuant to paragraph 8(4)(iii) of the Schemes, the Legal Chair shall inform the Conduct Committee of his decision, and the reasons therefore, by sending an electronic or paper copy of his signed decision to the Committee Secretary. Once this has been received, the Committee Secretary shall provide it to the Conduct Committee who will in turn provide the decision to the parties and the relevant Participant(s).
The process in respect of PSAs received by a Tribunal to which the hearing of (a) Formal Complaint(s) has(/have) been allocated
10Under paragraph 8(5) of the Schemes, after delivery of a Formal Complaint, the Tribunal to which the determination of that Formal Complaint has been allocated shall take all such steps as it considers necessary to determine whether it would be appropriate for the PSA to be entered into.
11The Executive Counsel shall deliver the PSA to the Tribunal by sending it to the Tribunal Secretary and the Tribunal Secretary will provide the PSA and associated documents to the Tribunal as soon as is practicable.
12Paragraph 8(5) of the Schemes requires the Tribunal to take such steps as it considers necessary to determine whether it would be appropriate for the PSA to be entered into, having regard to the purpose for which the applicable Scheme has been established and to any guidance issued by the Conduct Committee. Such steps may include requesting further information from the parties in respect of the maters set out at paragraph 7 above or convening a hearing to receive submissions from the parties.
13If the terms of the PSA are based on admissions of fact and acts of Misconduct that are different to those set out in the Formal Complaint(s), the Tribunal will also be asked to approve any proposed amendment to the Formal Complaint(s) further to regulation 24 of the Accountancy Regulations, or regulation 23 of the Actuarial Regulations, as applicable.
14Once the Tribunal has reached a determination in draft form, this may be provided to the parties as a confidential draft for error correction.
15Thereafter, as soon as reasonably practicable, the Tribunal shall advise the Conduct Committee of its decision. Although paragraph 8(5) of the Schemes does not expressly require the Tribunal to give reasons for its decision, the Tribunal should do so to preserve the integrity of the decision.
The approach to be taken when reaching a determination whether to approve a PSA
16Where the PSA is considered prior to the delivery of a Formal Complaint, inevitably the Legal Chair must place trust in the assessment made by the Executive Counsel as to whether the Misconduct admitted properly reflects the evidence. Where the PSA is considered following the delivery of a Formal Complaint, the Tribunal may be in a similar position where the PSA is entered into at an early stage in proceedings.
17When reaching a determination whether to approve a PSA, the Legal Chair or Tribunal, as applicable, in addition to this guidance, shall have regard to the:
- purpose for which the applicable Scheme has been established as set out in paragraph 1(2) of the Schemes which are to protect the public, maintain public confidence in the accountancy profession and uphold proper standards of conduct; and
- applicable Sanctions Guidance.
18In deciding whether to approve a PSA, the decision-maker, be that the Legal Chair or the Tribunal, is required to determine whether:
- the nature and seriousness of the Misconduct, and any aggravating and mitigating factors, are fairly summarised in the PSA;
- the sanctions agreed fall within the range of appropriate sanctions for the Misconduct that has been admitted.
19Where the PSA is considered prior to the delivery of a Formal Complaint, and the Legal Chair does not approve the PSA, the Executive Counsel may proceed to deliver a Formal Complaint or the parties may agree on the terms of a different PSA which shall be delivered to the Conduct Committee, (see paragraph 2(a) above), and the process as described at paragraphs 4 to 9 shall be followed.
20Where the PSA is considered after the delivery of a Formal Complaint, and the Tribunal does not approve the PSA, the matter will proceed to a hearing of the Formal Complaint, although the parties may enter into a further PSA in the meantime which shall be delivered to the Tribunal, (see paragraph 2(b) above), and the process as described at paragraphs 10 to 15 above shall be followed.
Issued by the Conduct Committee of the Financial Reporting Council March 2017
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