Outcome of Disciplinary Hearing: PricewaterhouseCoopers LLP, ICAEW member firm in connection with JP Morgan Securities Limited
06 January 2012
AADB PN 40
The AADB announces the outcome of the disciplinary hearing against PricewaterhouseCoopers LLP (“PwC”), a member firm of the ICAEW and auditors to JP Morgan Securities Limited (“JPMSL”).
The Executive Counsel of the AADB filed an admitted disciplinary Complaint against PwC in relation to its role in reporting to the FSA on JPMSL’s compliance with the FSA’s Client Money Rules, which govern the segregation and protection of client money.
In summary, PwC accepted that its conduct had, in relation to the reports it prepared and submitted to the FSA for the years ended 31 December 2002 – 31 December 2008, fallen short of the standards reasonably to be expected of members and member firms.
In particular, PwC accepted that it did not carry out its professional work in relation to these reports with due skill, care and diligence and with proper regard for the applicable technical and professional standards expected of it. As a consequence PwC wrongly reported to the FSA that JPMSL had maintained systems adequate to enable it to comply with the Client Money Rules throughout the relevant period and was in compliance with the Client Money Rules.
PwC admitted that it failed to obtain sufficient appropriate evidence on which to base these opinions and failed to identify and consequently did not report that JPMSL had not at all times held client money separate from the firm’s money and/or had not taken the necessary steps to ensure that client money was held at all times in an account identified separately from any accounts used to hold money belonging to JPMSL, in breach of the Client Money Rules.
The Tribunal found that PwC had committed misconduct in respect of each allegation in the disciplinary Complaint before it. The Tribunal found the misconduct in this case to be “very serious” and therefore imposed a severe reprimand on PwC. It further ordered that PwC should pay a record fine of £1.4 million, reduced from £2 million for cooperation and other mitigation, and the AADB’s costs in investigating and prosecuting the case.
The disciplinary Tribunal’s full report and the associated statement of agreed facts can be viewed here: http://www.frc.org.uk/aadb/tribunal/pub2689.html.
The AADB is independent of the professions it disciplines and operates in the public interest.
Notes to Editors
- The Financial Reporting Council (FRC) is the UK’s independent regulator responsible for promoting high quality corporate governance and reporting to foster investment.
The Accountancy and Actuarial Discipline Board ("AADB") is the independent, investigative and disciplinary body for accountants and actuaries in the UK. The AADB is responsible for operating and administering independent disciplinary schemes for these professions. The Accountancy Scheme covers Members of the following accountants' professional bodies:- the Association of Chartered Certified Accountants, the Chartered Institute of Management Accountants, the Chartered Institute of Public Finance and Accountancy, the Institute of Chartered Accountants in Ireland, the Institute of Chartered Accountants of Scotland and the Institute of Chartered Accountants in England and Wales. The Actuarial Scheme covers Members of the Institute and Faculty of Actuaries (formerly the Institute of Actuaries) and the Faculty of Actuaries (prior to its merger with the Institute of Faculty of Actuaries).
The focus of the AADB is on cases which raise important issues affecting the public interest; other disciplinary cases will continue to be dealt with by the relevant professional body. The purpose of an investigation is to determine whether there is evidence of misconduct on the part of Members or Member Firms of the professional bodies. An investigation does not always mean that an allegation has been made or that there is evidence of misconduct on the part of the Member or Member Firm involved.
Disciplinary complaints filed following an AADB investigation are heard by an independent Tribunal which will normally sit in public. If the Tribunal upholds a complaint, there is a wide range of sanctions which it can impose including an unlimited fine, exclusion from membership of a professional body covered by one of the Schemes and withdrawal of practising certificates or licenses.
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