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FRC Investigations

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Ross Dixon

Partner

The Financial Reporting Council (FRC) is the regulatory oversight body for accountants, actuaries and auditors in the UK and Ireland. It conducts investigations into alleged misconduct by practising and non-practising members of chartered accounting institutes including the ICAEW, CIMA or ACCA.

For an individual, the prospect of being investigated by the FRC can be extremely daunting. Hickman & Rose specialises in advising individuals under investigation by the FRC, and is one of the few law firms to have represented a client in contested proceedings before an FRC Disciplinary Tribunal. Business Crime partner Ross Dixon has written a blog detailing the basic facts anyone facing FRC investigation should know.

Investigations undertaken by the FRC often arise out of criminal investigations by law enforcement agencies like the police, or action taken by other regulators. Hickman & Rose has extensive experience representing individuals accused of financial misconduct by the SFO, FCA and HMRC and are used to dealing with the complexities of multiple, overlapping, investigations.

When will the FRC start an investigation?

The FRC starts an investigation into a member of one of the applicable professional bodies where it has reasonable grounds to suspect that there may have been misconduct and where it also considers the case to raise important issues affecting the public interest in the UK.

While most FRC investigations concern allegations of financial misconduct carried out in connection with a person’s employment, the FRC can investigate any conduct it suspects falls significantly short of the standards reasonably to be expected of an accountant, or which is likely to bring discredit to the accountancy profession. A member need not be employed or practising as an accountant at the time that the alleged misconduct occurred.

What will happen if I am investigated by the FRC?

Once the FRC has started an investigation, its Executive Counsel will write to the subject of the investigation to inform them of this. Counsel will likely invite the subject to attend an interview and also to supply the FRC with relevant documents in their possession.

Anyone who finds themselves in this situation should respond promptly to requests from the Executive Counsel. They should also take great care to prepare properly for an interview. Expert legal advice is strongly recommended at this stage.

If, after concluding their investigation, the Executive Counsel determines that there is sufficient evidence to continue (and that it is in the public interest to do so) they will serve a Proposed Formal Complaint. The subject of the Proposed Formal Complaint then has the opportunity to make representations in response, and/or to seek to enter into settlement arrangements.

Having received any such representations, the Executive Counsel will then decide whether to proceed. If so, they will deliver a Formal Complaint for consideration by a Disciplinary Tribunal.

More detail on the basic steps anyone facing the prospect of FRC investigation should take can be found here.

What can happen if I am found guilty of misconduct?

Anyone who admits to misconduct, or is found to have committed misconduct by the Disciplinary Tribunal, is liable to sanctions. These will likely include a financial penalty (a combination of a fine and payment of some of the FRC’s costs) and some action related to membership of the person’s professional body. This can range from a reprimand to permanent exclusion.

How our expert FRC Investigation lawyers can help

Hickman & Rose has extensive experience representing accountants, financial professionals and senior managers accused of financial crimes and other forms of misconduct.

The firm is also one of very few to have represented a client in contested proceedings before an FRC Disciplinary Tribunal.

Hickman & Rose has been at the forefront of defending individuals accused of some of the largest and most complex allegations of accounting fraud. These include:

The ongoing defence before the FRC Disciplinary Tribunal of a senior financial professional accused of misconduct in connection with the accounts of Autonomy plc, prior to its purchase by HP. HP has alleged that it was defrauded by over £2bn.
Assisting the former chief financial officer of BT Global Services, who is being prosecuted in Italy over allegations of false accounting, which had resulted in the group writing off £530m.
Representing former directors of both Serco and G4S who are being prosecuted by the SFO in respect of costs alleged to have been falsely reported to the Ministry of Justice.

Often a regulator will seek to focus on one particular event, taken out of context from the reality of how the business was operating. This can sometimes involve a detailed scrutiny of transactions, years after they took place, with a clarity of hindsight which simply was not available to those involved in the transactions at the time. We will work to piece together what took place, put events in their proper context, and respond to any allegations of impropriety.

Where appropriate, we will engage a forensic accountant or other financial expert to opine on the application of the relevant accounting standards. We also regularly work with the leading counsel in this field, who we will engage to appear before any disciplinary tribunal.

Cases involving accusations of improper application of the accountant standards, or other forms of false accounting, can be highly technical, and require lawyers who specialise in this area. It is especially important that anyone facing the competing risks of a criminal prosecution and regulatory action instruct lawyers with experience of both types of investigation.