UK FRC publishes guidelines for disciplinary sanctions

A new Financial Reporting Council (FRC) public document provides guidelines for FRC Disciplinary and Appeal tribunal members as they determine sanctions for FRC members or member firms that commit misconduct or fail to meet certain obligations.

The guidance for sanctions under paragraphs 9(8)(i) and 10(12)(i) of the Accountancy Scheme (the “Scheme”) and Accountancy Regulations, published Wednesday, was established to:

• Promote proportionality, clarity, consistency and transparency in sanctions decisions.
• Make all parties aware of the approach a tribunal is likely to take when determining sanctions.
• Promote and maintain public confidence in the regulation of the accountancy profession.

The guidance is not binding on tribunals, but it says a tribunal that departs from the guidance should explain reasons for the departure. The guidance also is relevant for executive counsel and members of the FRC’s Case Management Committee when they perform their duties under the Scheme.

The FRC’s Conduct Committee issued the guidance, which takes effect immediately in areas where it is compatible with the Scheme. Where the guidance is not compatible with the Scheme, it will become effective upon amendment of the Scheme. The Scheme’s provisions will prevail in the event of a conflict with the guidance.

The Chartered Institute of Management Accountants (CIMA) participated in the consultation process and made suggestions – many of which were incorporated.

One objective of the guidance is to help tribunals impose sanctions that:

• Improve the behaviour of the offending member or member firm.
• Are tailored to the facts of a case.
• Consider the nature of the misconduct and circumstances of the member or member firm.
• Are proportionate to the nature of the misconduct and the harm or potential harm caused.
• Eliminate financial gains or benefits resulting from misconduct.
• Deter misconduct by the member, member firm and others.

Potential sanctions include exclusion from membership; withdrawal of a member or member firm’s practising certificate or licence; repayment of client fees; fines; and reprimands.

—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.