FRC fines treble to £43m as regulator sends “clear message”

The Financial Reporting Council (FRC) dealt out a record £43m in fines during the past year for misconduct and breaches, as the regulator accelerated cases to conclusion.

The regulator’s Annual Enforcement Review, published at the end of July, shows the FRC almost tripled its fines in 2018/19 – to £42.9m from £15.5m in 2017/18 – as the watchdog beefed up resources and concluded more legacy cases against auditors and accountants.

Along with a spike in the value of fines, the FRC has stepped up regulatory intervention in the year to 31 March 2019, striking off six individuals from memberships of professional bodies and ramping up non-financial sanctions by nearly 250% – to 38 from 11 the year before.

The watchdog also increased headcount in its enforcement division by 25% and escalated the use of horizon scanning techniques to identify issues which required new investigations. Some 15 new probes into auditors and accountants were opened.

“The significant increase in the number, range and severity of sanctions sends a clear message that where behaviour falls short of what is required, we will hold those responsible to account,” said Elizabeth Barrett, executive counsel of the FRC.

The FRC’s action in 2018/19, along with the annual review, could signal a tougher regime ahead for audit and accountancy firms. The review’s details on fines and sanctions provides a baseline against which the FRC’s future performance will be measured. This will be significant as the watchdog transitions into the new regulator, the Audit, Reporting and Governance Authority (ARGA), which will have a bolstered range of enforcement powers.

But the review also indicates a collaborative regulatory approach – for those who engage with the watchdog. A total 16 cases were concluded through constructive engagement in the financial year, although the FRC still has 41 ongoing investigations.

Last Updated: 1 August 2019