Regulations and Law

Duty of Care or Fiduciary Duty to Investors?

The Financial Conduct Authority (FCA) have published two papers on their approach to consumers (i.e. retail savers/investors in their terminology). These cover whether a new “Duty of Care”, or...

UK Corporate Governance Code and new Companies (Miscellaneous Reporting) Regulations 2018

On July 16th, 2018 the FRC published its latest revision of the UK Corporate Governance Code, which is in my view shorter, simpler and better. The code can be read here: https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-UK-Corporate-Governance-Code-FINAL.PDF A summary of the main changes is here https://www.frc.org.uk/getattachment/524d4f4b-62df-4c76-926a-66e223ca0893/Key-highlights-of-the-Code.pdf The FRC have also published a report on their consultation about the Code which explains the changes and the arguments for and against specific changes https://www.frc.org.uk/getattachment/90797f4b-37a1-463e-937f-5cfb14dbdcc4/2018-UK-Corporate-Governance-Code-Feedback-Statement-July-2018.pdf The changes to the Code complement the changes announced by Government in June 2018 to the Companies (Miscellaneous Reporting) ...

Investment Platforms Market Study

The Financial Conduct Authority (FCA) have just published an interim report on their study of “investment platforms”. It makes for very interesting reading. That is particularly so after the revelations from Hardman last week. They reported that the revenue per assets held on the platform from Hargreaves Lansdown (HL) was more than twice that of soon to be listed AJ Bell Youinvest. HL is the gorilla in the direct to consumer platform market with about 40% market share. HL earns £473 ...

FRC Enforcement Video

The FRC is working hard to improve its transparency. Some would say they are not working hard enough and need a much more fundamental review. Recently there has been a marked increase in the number and level of fines they have levied on audit firms and audit partners, which we regard as positive On 12 July 2018, the FRC issued a News Alert about FRC executive Claudia Mortimore discussing the FRC’s enforcement process. In the video clip, Claudia Mortimore discusses how the team approaches ...

Watch out FRC – there’s a new Guv’nor in town

One of our members - Tony Johnson - who is a Chartered Secretary and longstanding member of ICSA, has brought to my attention ICSA’s planned rebranding to become “The Chartered Governance Institute”. See here for more details - https://www.icsa.org.uk/. ICSA or, should I say, CGI, appear to be positioning themselves as the “go-to” organisation for good corporate governance. Here’s what their President, David Vernon, had to say recently in his letter to members: “Over the last two years, your Council has been implementing ...

The Quindell Story and the FRC

5 years on and the FRC has fined KPMG for its performance over Quindell. It has taken far too long. The settlement received a huge amount of coverage in the press, e.g. https://www.ft.com/content/e8ce1a30-6d3d-11e8-852d-d8b934ff5ffa The FRC's official announcement can be found here: https://www.frc.org.uk/news/june-2018/sanctions-in-relation-to-the-audit-of-quindell-plc The KPMG fine of £3.15 million is derisory. It is absurd when compared with the (£2bn) shareholder losses as a result of being misled by the accounts. The average KPMG partner was paid £519k in 2018, and many were paid more. To ...

BEIS Consultation on Insolvency and Corporate Governance

We have submitted jointly with the UK Shareholders Association our response to the consultation on Insolvency and Corporate Governance. The response was written by  Cliff Weight - Director, UK Individual Shareholders Society (ShareSoc) and Peter Parry - Policy Director, UK Shareholders' Association. Click here to read it.

Belated Action by FRC Re Autonomy

I commented previously on the conviction of former Autonomy CFO Sushovan Hussain for fraud in relation to the accounts of Autonomy Plc (see https://www.sharesoc.org/blog/regulations-and-law/they-do-things-differently-in-the-usa/ ). Just to show that this was not solely a case prompted by Hewlett Packard over their disastrous acquisition of the company, supported by a partisan California court as some have alleged, the Financial Reporting Council (FRC) have now announced formal complaints over the conduct of auditors Deloittes and senior finance staff of Autonomy – including Mr ...

FRC review and the future of audit: break up or shape up?

Sir John Kingman has been appointed to undertake a thorough review of the FRC. ShareSoc and UKSA will be making a submission to this. The FT on 16 May had a front page article on this headed Carillion’s demise spurs call for action against Big Four. MPs’ report on collapse asks for possible break-up of ‘cosy’ auditors by Gill Plimmer. The key points were Outsourcer’s fate exposed 'systemic flaws' in corporate Britain and its ‘toothless’ and 'feeble' regulators, say Commons committees Damning ...

They Do Things Differently in the USA

Former Autonomy CFO Sushovan Hussain has been found guilty of 16 counts of fraud in a Federal Court in California. He was convicted on all 16 counts of wire and securities fraud. This case was based on allegations of false accounting to ramp up the value of the Autonomy business prior to its acquisition by Hewlett-Packard. The latter subsequently wrote down most of the $10.3 billion cost of that acquisition. More background on this case is given in a previous blog post ...