A number of developments regarding stories that we have been covering for quite a while here in Financial Regulation Matters have taken place recently, so in this post we will look at some updates on each one to see how the issues are developing. Fiat-Chrysler Finally Merge with PSA Peugeot We last looked at developments within the automotive industry in September with the credit downgrade of Ford , but one of the underlying sentiments within the industry has been that companies may, or will need to merge in order to survive their environment. Tougher regulations, increased costs, potentially saturated marketplaces, the need to keep up with technological advancement, and inconsistent and unpredictable economic and social arenas are making the job of manufacturing and selling cars much harder. The three largest automotive players are Toyota, Volkswagen, and the Renault-Nissan alliance. Now, the fourth largest is this new PSA-Fiat Chrysler merged partnership which, according...

On a number of occasions here in Financial Regulation Matters we have discussed the credit rating and audit industries. They have taken up a number of posts on account of their negative and impactful behaviour, and in most of the posts we attempt to conclude as to why they a. act in such a manner, b. are allowed to continue acting in such a manner, and c. what may be done to alter that behaviour. Often, we conclude by discussing the oligopolistic features of their industry and implying that those dynamics are the fundamental answer to all three aspects. However, the word oligopoly is sometimes defined within the posts, but often it is not elaborated what the concept is and why it is so impactful within these financial industries that are so crucial. In this post we will dissect the concept of an oligopoly and examine why the two identified industries are absolutely defined by the concept. The term oligopoly roughly derives from the Greek words oligoi – meaning ‘few’ – and p...

As usual here in Financial Regulation Matters , today’s post looks at something we have assessed on a number of occasions (which likely hints at the systemic and continued nature of these issues that are identified on a regular basis here). Today’s post focuses on the Financial Reporting Council (FRC) as pressure upon continues to increase. Its position, and future as a regulator, is being called into question more and more recently on the back accounting scandals (like that seen with Carillion), but recently the FRC has announced measures which it hopes will be seen as being representative of a proactive regulatory culture within the organisation. The news came yesterday that the FRC is endeavouring to incorporate new procedures into its regulation of the audit industry, with the regulator taking specific aim at the so-called ‘Big Six’ (in reality it is probably a ‘Big Four’). The new approach dictates that when one of the six firms cited – KPMG, Deloitte, PwC, EY, Grant Thornt...

The second post today is a short follow up from a post earlier in the year that looked at the leniency of the deterrent selected for the accounting industry. In that post we looked at how the SEC and the Financial Reporting Council (FRC) were handing out ‘record fines’ of £5m here or $6 million there, something which onlookers noted was ‘ less than half a day’s work ’ for these top-four Auditors. Therefore, you can imagine this author’s delight when reading the headline in the Financial Times yesterday that a ‘ review recommends larger fines for accountancy firms ’; yet, regular readers of Financial Regulation Matters know that there was no such delight, because the rest of the article could have been written without one having read it. Obviously, the article goes on to confirm that, as suspected, the increase in fines was not really worthy of a headline, if the increase even goes ahead at all. In the report commissioned by the FRC and led by for Court of Appeal Judge Christ...

Today’s post looks at the news that KPMG has been fined by the U.S. Securities and Exchange Commission (SEC) for ‘ misinforming ’ investors about the value of a certain company. This follows the news from the U.K. where the Financial Reporting Council (FRC) have fined PricewaterhouseCoopers (PwC) for ‘ extensive misconduct ’ relating to its audit of a professional services group. This recent flurry of regulatory activity has led some to discuss the ‘ growing concerns ’ regarding the quality of the Big Four’s output, but in this post we shall see that it is a surprise that this behaviour is not expected of the Big Four, and that the regulatory response should certainly be expected. Only very recently here in Financial Regulation Matters did we discuss the ever-growing problem of accounting firm quality standards, with it being suggested that Andrew Tyrie may be looking to establish some sort of oversight board to further regulate the accounting industry. These suggestions fol...

Today’s post covers a topic that will be of interest to a lot of people all across the world. According to figures from the last couple of years, the Premier League – the highest football league in the U.K. – is massively popular, and its rates of growth in terms of expansion, income, and transmission across the globe grows year on year. The Premier League, which sells the ability to televise its games to multimedia companies like Sky or BT, is preparing to auction off the rights to televise its product at the end of the year, with the expectation that this round of auction will produce new record amounts of revenue. Whilst that is likely, there are external factors that may affect this incessant growth, and those factors are the focus of today’s post. Simply put, the ‘Premier League’ has been an incredible success since its inception in 1992 . Figures taken from the last few years confirm this, with the Premier League being broadcasted to 156 countries with 4.2 billion fans wa...

In today’s post the focus is on a story that has not picked up much ground in the financial press, but one which raises massive issues. The story, reported by Sky News , describes how the former Chair of the Treasury Select Committee and someone who we have profiled before here in Financial Regulation Matters , Andrew Tyrie, is potentially considering establishing some sort of ‘board’, akin to the Banking Standards Board , to oversee the regulation and standards in the auditing industry. Whilst there is very little to the story so far, the inference that emanate from the story inspire the direction of this post, with the aim being to ask whether such an organisation would be required, and welcome, should it come to fruition. The news report simply states that Tyrie has been recently speaking to members of the Big Four auditing firms – PricewaterhouseCoopers (PwC), Deloitte, Ernst & Young (E&Y), and KPMG – and their regulator – the Financial Reporting Council (FRC) – a...

Today’s post looks at the news that BT, the giant telecommunications company, has switched its auditor for the first time in 33 years due to the failings of PricewaterhouseCoopers (PwC) regarding the recent Italian accounting scandal that cost BT £530 million. Although we spoke about the scandal very briefly here in Financial Regulation Matters before, it will be worth going over the scandal again to examine what the actual failings of the auditing firm were. Upon doing this, it will be good to examine the recent trends affecting the accountancy industry in terms of regulations because, in a move that is echoed in a forthcoming book by this author regarding credit rating agencies, a powerful position does not have to mean one is immune to regulation – in fact, it should be the opposite. The accounting scandal at the Italian division of BT started in October of last year, when the company reported that it had taken a £145 million hit after uncovering ‘ inappropriate management ...