UK: Financial Services Regulatory Initiatives Forum - Regulatory Initiatives Grid published

The third regulatory initiatives grid has been published by the chairs of the Financial Services Regulatory Initiatives Forum: see here. The grid provides a timeline for current initiatives - over 120 - from organisations including HM Treasury, the Bank of England, Financial Conduct Authority and Financial Reporting Council.  

UK: CMA report and recommendations - statutory audit market

The Competition and Markets Authority has today published its final report followng its statutory audit market study: see here (pdf). A summary of the final report is available here (pdf) and a press release highlighting the recommendations is available here. The recommendations include:

• An operational split within (initially) the 'Big Four', requiring separate governance and management structures (e.g., a separate CEO and board; separate financial statements for the audit practice).  If this does not deliver the anticipated benefits, the case for a structural split should be revisited.
• Mandatory joint audits, with challenger firms working with the 'Big Four' and having joint liability.
• Greater regulation of audit committees by the new Audit, Reporting and Governance Authority (ARGA), the proposed successor of the Financial Reporting Council. ARGA should have the power to request information from audit committees and to issue public reprimands; it should have the power to appoint an observer on the committee.
• A review of progress in five years, by the ARGA.

UK: FRC position paper for the revision of Auditing and Ethical Standards

The Financial Reporting Council has today published a position paper explaining its proposed timetable for the revision of its Auditing and Ethical Standards: see here (pdf). This follows a consultation that concluded last month (about which see here, pdf).

The FRC states that a public consultation on the revised text of the standards will start in July 2019, in order that the revised standards can apply to financial periods beginning on or after 15 December 2019. The FRC also explains how it will address some of the issues raised by the Kingman Review and the on-going Competition and Markets Authority review of the UK statutory audit market.

The position paper also explains the implications for certain independence requirements in the current standards should the UK leave the European Union without a withdrawal agreement or transition period (see further the Statutory Auditors and Third Country Auditors (Amendment) (EU Exit) Regulations 2018). These implications are also covered in the letters the FRC has sent to Heads of Audit and CEOs: see, respectively, here (pdf) and here (pdf).

UK: CMA statutory audit enquiry - draft proposals published

The Competition and Market Authority has today published an update paper as part of its market study of the statutory audit market: see here. Views are sought on proposed remedies including enhanced regulatory scrutiny of audit committees; the introduction of mandatory joint audits; introducing a cap on market share; and requiring the full structural or operational split between audit and non-audit services.

UK: BEIS Committee launches future of audit inquiry

The House of Commons Business, Energy and Industrial Strategy Committee has begun a new inquiry on the future of audit: see here. The inquiry will, to quote directly from the information provided about it, "focus on the likely impact of the CMA market study and the review of the FRC (by Sir John Kingman) in improving quality and competition in the audit market and reducing conflicts of interest". Written submissions are invited and should be received by 11 January 2019: see here.

UK: developments in auditing - a CMA study and FRC reviews

The Competition and Market Authority's invitation to comment, in respect of its market study of the statutory audit market, will close towards the end of October: see here (pdf). A review of the role of the external auditor - and the external audit report - is the focus of work being done by the Financial Reporting Council, as explained in its recent report on development in audit: see here (pdf).

UK: BEIS/WP Committees publish joint second Carillion report

The second, joint report concerning the collapse of Carillion plc has been published by the Work and Pensions and Business, Energy and Industrial Strategy committees: see here or here (pdf). Various recommendations are made, including referring the statutory audit market to the Competition and Markets Authority; a focus on a more active and interventionist approach in the next edition of the UK Stewardship Code; and a more prominent role for regulators, including the Financial Reporting Council which, it is argued, should become more proactive and aggressive.

UK: CMA secures its first director disqualification for breach of competition law

The Competition and Markets Authority has secured its first disqualification of a company director for a competition law infringement: see here. The individual was managing director of a company that operated online and used automated repricing software to implement an illegal cartel.

UK: CMA retail banking market investigation - provisional decision on remedies

The Competition and Markets Authority has today published its provisional decision on remedies, as part of its retail banking market investigation: see here (pdf, 3.72MB, 405 pages). A summary is available here. The CMA states that competitive pressures are weak. Breaking-up the largest banks is not proposed; the CMA relies, instead, on other measures including improved disclosure and the better use of technology to improve the switching process. The CMA also proposes requiring banks to set a monthly maximum charge for unarranged overdrafts.

UK: CMA to undertake retail banking market investigation

The Competition and Markets Authority has confirmed, following a provisional decision in July this year, that it will undertake an in-depth market investigation into the personal current account and SME retail banking sectors: see here.

UK: statutory audit services market - CMA publishes final Order - mandatory tendering of the statutory audit engagement

The Competition and Markets Authority has published, following consultation, the final Order that will implement the recommendations made by the Competition Commission (one of the bodies the CMA has replaced) in respect of the market for statutory audit services. A copy of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 is available here (pdf). An explanatory note is available here (pdf).

The Order comes into force on 1 January 2015 and applies in relation to financial years beginning on or after this date. The Order requires, amongst other things, FTSE 350 companies to put the statutory audit services engagement out to tender every ten years or earlier. It also sets out the audit committee's responsibilities in this regard and also in respect of other areas including, for example, the influence exerted over the appointment of the audit engagement partner.

UK: statutory audit services market - comments on CMA's draft Order

Earlier this year the Competition and Markets Authority published a draft of the Order that will implement the recommendations made by the Competition Commission (one of the bodies the CMA has replaced) in respect of the market for statutory audit services: see here (pdf). The Order covers audit tendering and audit committee responsibilities. Responses received in respect of the draft Order have now been published: see here.

UK: market for statutory audit services - CMA publishes draft Order

The Competition and Markets Authority has published for comment a draft of the Order that will implement the recommendations made by the Competition Commission (one of the bodies the CMA has replaced) in respect of the market for statutory audit services: see here (pdf). The Order covers audit tendering and audit committee responsibilities in this regard. An explanatory note accompanying the Order is available here (pdf). Further background information, including all of the Competition Commission's inquiry publications, can be found here.

UK: Competition and Markets Authority - guidance published on exercise of powers

Guidance was published today by the Competition and Markets Authority regarding the manner in which it proposes to exercise some of its powers (including the power to impose penalties) when it formally comes into existence in April this year: see here. For further information about the role of CMA, see here.

UK: Creating the Competition and Markets Authority - consultation on secondary legislation

Part three of the Enterprise and Regulatory Reform Act 2013 contains the framework for the creation of a new Competition and Markets Authority to replace the Office of Fair Trading and Competition Commission. This framework will be supported by secondary legislation, the second tranche of which was published today for consultation: see here (pdf).