Independent review of Financial Reporting Council sanctions: report published
21 November 2017
The report of an independent review (PDF) into the Financial Reporting Council’s (FRC) enforcement sanctions chaired by former Court of Appeal Judge Sir Christopher Clarke is published today.
The report makes a number of recommendations, including:
- Greater attention should be given to the use of non-financial penalties, to be imposed to maintain and enhance the quality and reliability of future audit and accountancy work;
- The removal of any requirement for tribunals to consider themselves bound by previous cases when determining the appropriate sanction to impose; and
- The adjustment of settlement discount provisions to encourage timely settlement.
Whilst the report concludes that it is not appropriate to set a tariff or range for financial sanctions, it suggests that in certain circumstances a fine of £10 million or more could be appropriate for cases involving seriously poor audit work, carried out by a Big Four firm.
The FRC welcomes the report and is grateful to the review panel for its work. The FRC will now carefully consider the report in order to decide which recommendations to adopt and incorporate into revised sanctions guidance to ensure that sanctions imposed continue to be fair, effective and in the public interest.
The review panel also comprised Peter Chambers and Andrew Long who brought extensive subject matter and regulatory expertise.
Notes to editors:
1. The FRC’s mission is to promote transparency and integrity in business. The FRC sets the UK Corporate Governance and Stewardship Codes and UK standards for accounting and actuarial work; monitors and takes action to promote the quality of corporate reporting; and operates independent enforcement arrangements for accountants and actuaries. As the competent authority for audit in the UK the FRC sets auditing and ethical standards and monitors and enforces audit quality.
2. Links to the Sanctions Policy and the Sanctions Guidance can be found here.
3. Responses to the review can be found here.
4. Biographies of the independent panel members
Lord Justice Christopher Clarke
Sir Christopher Clarke read Classics and Law at Gonville & Caius College Cambridge. A Harmsworth Scholar, he was called to the Bar in 1969 and took silk in 1984.
From 1990-2004 he was a Recorder and a Deputy High Court Judge from 1993-2004. He sat as a High Court Judge in the Commercial Court from 2005 to 2013 and was appointed a Lord Justice of Appeal in 2013.
In 1975 he became an Attorney of the Supreme Court of Turks and Caicos Islands. He was formerly in practice at and became Head of Brick Court Chambers. He was a Judge of the Courts of Appeal of Jersey and Guernsey from 1998 to 2004. He was a Councillor of the International Bar Association from 1988-1990; Chairman of the Commercial Bar Association from 1993-95; and a Member of the Bar Council from 1993-99. He was Counsel to the Bloody Sunday Inquiry, 1998-2004. He is member of the Court of Ecclesiastical Causes Reserved and of the Court of Appeal of Bermuda. He was the Treasurer of the Middle Temple for 2016.
Peter Chambers is a former Chief Executive Officer of Legal & General Investment Management (LGIM).
Previously Peter held a range of key positions in several prominent investment management businesses. Before joining LGIM, he was Chief Executive Officer for Framlington Group, Chief Investment Officer at Gartmore, Chief Investment Strategist for James Capel & Co. Ltd, Head of International Equities at Citibank Global Asset Management and managed UK Pension funds at Lazard Brothers. Peter has a broad range of industry expertise ranging from developing a hedge fund business to managing money for Sovereign Wealth Funds.
Peter is Chairman of CRAG (Company Reporting & Auditing Group) and a Senior Advisor to a number of companies including Casey Quirk by Deloitte, the US management consultancy business. Peter was a Non-Executive Director of the Financial Reporting Council between 2007 and 2014 and a member of the Conduct Committee. He was also a Director of the Investment Management Association, a member of the Supervisory Board of EFRAG and sat on the joint FSA and Treasury review panel, considering rights issues. Peter holds a MBA from the Manchester Business School.
Andrew Long is an experienced decision maker specialising in financial regulation. He was previously Chair of the Regulatory Decisions Committee of the Financial Conduct Authority. He now chairs the Determinations Panel of the Pensions Regulator, has been a Judge of the First Tier Tax Tribunal since 2009, and is a member of the Ofgem Enforcement Decisions Panel. He was a Deputy District Judge of the High Court and County Court for 15 years.
Andrew’s previous roles included being a Board member of the Solicitors Regulation Authority board. He is a published author on the law of financial regulation.
Andrew’s main career was as a partner at Pinsent Masons, solicitors, where he led the financial regulation team.