Disciplinary Procedure Made More Transparent in Regulator’s New Guidance

Jack Humphrey, Regulatory journalist
April 04, 2011 /

The Accountancy and Actuarial Discipline Board (AADB) of the Financial Reporting Council (FRC) has released a revised guidance to its Executive Counsel regarding the conduct of disciplinary procedures under its Accountancy Scheme.

In February 2010, the Accountancy Scheme was similarly revamped by the AADB following a consultation on its proposed ‘Guidance on the Delivery of Formal Complaints’ where it met wide support from all respondents. The AADB sought to issue a guidance to the Executive Counsel that detailed how to apply a test when running a disciplinary procedure.

The new guidance just released by the AADB includes a summary of the comments made to the consultation draft and the board’s response.

“This guidance is being issued by the Board with the intention of providing further transparency in the AADB’s processes and promoting consistency in the decision-making process,” AADB Chairman Timothy Walker said.

According to the AADB, the guidance was developed to particularly compensate for the absence of an alternative to a disciplinary procedure for dealing with alleged misconduct.

It “is designed to ensure that a case that meets evidential requirements should normally be the subject of a disciplinary hearing unless that is clearly not in the public interest.”

The guidance includes two tests in conducting disciplinary procedures – evidential and public interest tests.

Under the evidential test, the Executive Counsel makes ‘informed assessment’ based on evidence. The assessment is expected to turn in a likely outcome of a formal complaint that complies with the law and fact.

“He must decide whether it is more likely than not that an Adverse Finding will be made against a Member or Member Firm,” the AADB noted.

According to the Board, this decision is different from the Disciplinary Tribunal’s which will be applied later once formal complaint has been delivered.

The AADB specifies the task of the Executive Counsel to be limited within making decisions on the formal complaint, whether it “is made out applying the civil standard of proof (balance of probabilities) laid down in paragraph 10 of the Scheme to the evidence as it then emerges.”

The public interest test is carried out under certain points. Under the guidance, all cases are considered to be a matter of public interest if they raise issues necessarily affecting the public.

Additionally, a formal Complaint satisfying the evidential test should usually be delivered to the Board unless contrary public interest factors clearly outweigh those favoring delivery.

According to the AADB, in applying the public interest test, “the Executive Counsel must carefully and fairly weigh each factor, and then make an overall assessment” as there is no “single factor or combination of factors is necessarily determinative.”


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