FRC Enforcement of its Rules

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

by Cliff Weight, ShareSoc Director

Very belatedly, the FRC has substantially increased tough action to tackle poor quality audit. To me, these were the key words which showed that for the last ten years the FRC had dreadfully understaffed this activity – “The Enforcement Division has grown significantly in recent years reflecting the FRC’s investment in what has become recognised as one of the organisation’s key functions. A decade ago the team comprised just six members. By 31 March 2019 it had been expanded to 35.” (page 10 of the review).

It sounds positive and is written to sound positive, but it’s just spin. The reality is that the FRC has seriously failed us over the past ten years. They have understaffed this activity, not enough people have gone to jail and too many investor disasters have happened.

On the positive side, there has been:

  • Record £43m of fines for misconduct and standards breaches
  • Significant increase in number of concluded cases
  • Enforcement Review also highlights role of non-financial sanctions such as exclusions and ongoing monitoring to address misconduct and improve behaviour



    The FRC has just published its Annual Enforcement Review for 2019 and circulated the email below to all members of its Stakeholder Advisory Panel (the SAP). The FRC has kindly agreed that we can circulate the email (and links) to all UKSA and ShareSoc members.

     The full Review press notice can be accessed here.

    There is plenty of interesting content in the Review. You may not have time to peruse the whole Review but for those with a penchant for the ‘war stories’ Section 4 is a good place to start.

    From: Lydia Smith
    Sent: 02 August 2019 15:03
    Cc: Lydia Smith
    Subject: Financial Reporting Council – Annual Enforcement Annual Review 2019

    Dear SAP member,

    This week, the FRC published its first Annual Enforcement Review. The report has been produced following Sir John Kingman’s recommendation that the FRC should report annually on our enforcement performance in our annual report. We have decided to go further and publish a standalone report, which is intended to give greater insight and transparency into our enforcement processes, mechanisms and performance and which I hope you find useful.

    Key findings from the Review include:

    • A near trebling in annual fines, from £15.5m in 2017/18 to £42.9m in 2018/19.
    • Far greater use and range of non-financial sanctions, rising from 11 in 2017/18 to 38 in 2018/2019.
    • Significant reduction in “legacy” cases.
    • Increased use of horizon scanning techniques to identify issues requiring investigation.
    • 25% in year growth in the Enforcement Division.

    The full Review press notice can be accessed here.

    Do let me know if you have any questions, would like any further information or have any feedback on the Review.

    Best wishes,




    Lydia Smith

    Strategy Assistant

    Financial Reporting Council


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