UK: FRC seeks statutory oversight over directors through new code of conduct

The Financial Reporting Council today published a letter from its chief executive to the Parliamentary Business, Energy and Industrial Strategy Committee, explaining how its recommendations on governance reform - expressed to the Committee as part of its corporate governance inquiry - could be implemented: see here (pdf). In the letter the FRC states its view that a code of conduct for directors, sitting alongside the codified duties in the Companies Act 2006, should be developed and that this code should cover ethical standards. The FRC should have, it is argued in the letter, responsibility for this code and statutory oversight over directors subject to the code. Enforcement might, it is suggested, take place through existing legislation on the disqualification of directors.

If implemented these proposals would represent a major expansion of the remit and work of the FRC. Moreover, enforcement by legal process is very different from the underpinning ethos of the UK Corporate Governance Code which relies on market enforcement (i.e., shareholders) through the concept of comply or explain.

USA: PCAOB imposes its largest ever civil penalty

The Public Company Accounting Oversight Board has imposed its largest ever civil penalty ($8 million). The penalty was imposed on Deloitte Touch Tohmatsu Auditores Independentes, based in Brazil, in respect of charges for issuing materially false audit reports and attempting to cover up audit violations by altering documents. Further information is available here.

Ireland: the central register of beneficial ownership

The European Union (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 were commenced last month: see here (pdf). The Regulations implement the requirement in Article 30(1) of the Fourth Anti-Money Laundering Directive (Directive (EU) 2015/849) for corporate and other legal entities to hold adequate, accurate and current information on their beneficial ownership. Further information is available on the Companies Registration Office website.

UK: IFRS and UK company law

The chairman of the House of Lords Economic Affairs Committee, Lord Hollick, has written to the chief executive of the Financial Reporting Council seeking answers to four questions concerning (a) the potential conflict between International Financial Reporting Standards and UK company law; and (b) the concept of prudence: see here (pdf). The letter comes not long after Local Authority Pension Found Forum wrote to FTSE350 chairmen (here, pdf), reiterating its belief that the FRC's position (here, pdf) should be disregarded if directors were to discharge their duties lawfully in preparing accounts and making lawful distributions.

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.