The End of the Line for the Financial Reporting Council

In this very short post we will react to the news that broke today regarding the future of the Financial Reporting Council. We have covered the FRC on a number of occasions here in Financial Regulation Matters and the posts have been highly critical of what was a feeble regulator. We had only looked previously at the regulator and the fact that it was under review, but today the final decision was made on the future of the FRC.

Founded in 1990, the Financial Reporting Council was today confirmed by the Government as being no more. In its official press release, the Government stated that, after considering the Kingsman Review, the FRC would be replaced with a new regulator. That regulator will be called the Audit, Reporting and Governance Authority. The business media are reporting that the new regulator ‘will have stronger statutory powers, including the ability to make direct changes to accounts and powers to require rapid explanations from companies and publish reports about their conduct in the event of a corporate failure’. Sir John Kingsman, the author of the report that has underpinned this shakeup of the regulatory arena, probably set the process in motion when he labelled the regulator a ‘ramshackle house’ when the official report was published. In establishing the new regulator, the Government has been noted as stating that it was ‘strong’ leadership that will ‘change the culture’ within the accounting sector. However, it is worth noting that altering the culture in this particular field will be no easy task and, in truth, it is difficult to see how a different regulator will achieve this. The first indication of whether there is change on the horizon or whether it is business as usual will likely be the new regulator’s take on the Big Four’s claim that they will separate the consultancy arms from the audit arms themselves – if this is allowed, on the auditor’s terms, then it is business as usual. Another question is whether the audit industry can indeed undergo any major change in respect to the tumultuous period awaiting the UK once the country leaves the European Union – do the Government really have the capital to take on such a corporate behemoth?

Ultimately, the FRC pushed its luck. Clear conflicts of interest and token gestures to eradicate such conflicts were a step too far in the wake of Carillion and BHS – now the regulator has to stop accepting all of its dinner invitations from those it was supposed to protect the public from.


Keywords – FRC, Audit, Regulators, Financial Regulation, Business, UK, @finregmatters

Comments

Post a Comment

Popular posts from this blog

Lloyds Bank and the PPI Scandal: The Premature ‘Out of the Woods’ Rhetoric

Image
Today’s very short post focuses upon the news that the Financial Conduct Authority (FCA) has recently extended the deadline to claim compensation for mis-sold ‘Payment Protection Insurance’ (PPI). Whilst a lot of financial institutions will have to prepare to offset the extended deadline, it is Lloyds that has grabbed the business headlines by apportioning an extra £350 million to offset any further claims that may be made of it – however, this comes only a week or two after the Bank posted its best performance figures in over a decade, as was previously discussed in Financial Regulation Matters . This post will therefore argue that the rhetoric being advanced recently regarding Lloyds – rhetoric like Lloyds represents ‘ a modern day success story ’ is wide of the mark and creates a false sense of security that we simply cannot afford to believe in. The ‘ robust recovery ’ was heralded far and wide upon the publication of Lloyds Bank’s financial performance for the previous fi
Read more

The Analytical Credit Rating Agency: A New Entrant That Will Further Enhance Russia’s Isolation

Image
This short post is based upon a forthcoming article by this author that examines the viability of the latest entrant into the credit rating arena, the Analytical Credit Rating Agency (ACRA). The article, which is due to be published in the European Company Law Journal (and is available here in a pre-published version), looks at the chances of the ACRA succeeding when viewed within the parameters of perception , an aspect that underpins the credit rating sector. For this post, the focus will be upon introducing the ACRA, and then on examining the effect it may have upon the wider political issues affecting the Russian Federation. The Analytical Credit Rating Agency was established in November 2015 and comprises of 27 major Russian companies and financial institutions that serve as its shareholders. The agency, which became the first rating agency to receive accreditation from the Russian Central Bank under the new N 222-FZ Law which was designed to protect investors, has a re
Read more

The Case of Purdue Pharma, the Sackler Family, and the Opioid Crisis

Image
In the first of two short posts today, we will look at the case of the billionaire Sackler Family and their remarkable effect upon American society. The family, who own Purdue Pharma amongst a list of other ventures, have this week seen a massive legal action taken against them by the State of New York who argue that the company is ‘ responsible for the opioid epidemic ’ sweeping through the United States. The attorney-general for New York has called the lawsuit the ‘ nation’s most extensive ’ with respect to the pharmaceutical industry and comes right on the heels of a $270 million suit that was settled in the State of Oklahoma on exactly the same grounds. Whilst the company and the billionaire family who own it did not admit guilt (settling parties rarely do, hence why they settle outside of court) it has potentially opened the trapdoors for litigation. It comes as no surprise then that the company is reportedly considering bankruptcy proceedings in the face of such an onsl
Read more