Professional services

Contact: Robert Morris, Graham Reid
and Davina Given

FRC Annual Enforcement Review

On 25 July 2024, the Financial Reporting Council (FRC) published their Annual Enforcement Review, which provides an overview of their enforcement activity during the year. In the review, the FRC places great focus on their use of proportionality and consistency principles while conducting investigations and enforcement. During the year, the FRC has also concluded several cases, which focus on issues such as professional scepticism, fraud risk approaches and failing to understand the fundamental aspects of audits. The report also includes key performance indicators on case activity.

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FRC publishes discussion paper: opportunities for the future of digital reporting

The FRC have published a discussion paper addressing regulatory changes and the impact of the Economic Crime and Corporate Transparency Act 2023. The discussion seeks input from stakeholders, including preparers of financial reports, software vendors, investors, accountants and regulators. All responses must be submitted by 1 November 2024.

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Professional services

Embracing digital change: new reporting functions for the FRC

In a podcast published on 8 July 2024, the Financial Reporting Council (FRC) announced the restructuring of its existing financial reporting lab into two new functions: the Market Intelligence and Insights function and the digital report and taxonomies team. The former aims to develop deeper insights to support policy development, monitoring, innovation and growth while the latter is designed to shift the focus onto standardised digital reporting. The restructured functions are designed to be tools for the FRC to be a smarter regulator, and to help growth and competitiveness in the UK. The FRC is also working in collaboration with other regulators in the industry to promote clear and consistent reporting and regulation.

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ICAEW outlines upcoming changes to UK audit rules

In light of a range of regulatory developments during the last year, which now need to be reflected in the Audit Regulations, the ICAEW have outlined the changes taking effect from 1 October 2024, and provided a roadmap of changes coming in 2025. In this roadmap, it outlines the changes finalised and approved by the ICAEW regulatory board, why these changes are being made, and also when these changes will happen.

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Entering the codified world – Code of Conduct for directors

The Institute of Directors (IoD) has recently published a consultation paper on a Code of Conduct for directors to assist directors in making better decisions given their increasingly "vital, complex and challenging" roles and responsibilities. The IoD recognises that in recent times we have seen several corporate "scandals and controversies", including the Post Office, Carillion and BHS. The Code is intended to help directors build and maintain the trust of the wider public in their business activities.

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UK Stewardship Code updated

On 22 July 2024, the FRC announced that it will carry out revisions to the UK Stewardship Code after engaging with over 1,500 stakeholders. The new phase of revisions focuses on five priority areas: purpose, principles, proxy advisors, process, and positioning. In addition, the FRC is implementing changes that will reduce the reporting burden for existing signatories, including the removal of some disclosure requirements. These changes will be relevant for the next application window, starting on 31 October 2024. Further engagement with stakeholders and a formal consultation on the Code are planned for the coming months.

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Professional services

Increase to the compensation fund contributions

On 23 July 2024, the Solicitors Regulation Authority (SRA) confirmed that individual contributions to the compensation fund for the upcoming year will increase to £90 from £30, while law firm contributions will increase to £2,220, up from £660. This is the first time in five years that the SRA has increased contributions and it is mostly due to the regulator intervening more frequently to shut down firms. Increased intervention activity by the SRA has resulted in an increase in consumers claims. On the other hand, practising fees are confirmed to remain at the same level.

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New rules around fees from the SRA

The SRA has brought in a cap on the fees which solicitors are able to recover from clients when acting on their behalf in relation to financial mis-selling claims, protecting from excessive charges. These rules are similar to the FCA's, which restrict the amount of fees recoverable by claims management companies (CMCs) from consumers when pursuing financial mis-selling claims on the behalf of consumers.

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SRA launches consultation to update the financial penalty regime

On 28 June 2024, the SRA announced the launch of a consultation to update how the regulator issues financial penalties. The SRA is consulting on introducing new bands for fines for misconduct cases and updates to the calculation process that determines which band the cases fall under. Further updates include the introducing of minimum fines across all bands, clarity over the approach used to evaluate the seriousness of the misconduct, including any harm and impact resulting from it, as well as over the approach for drink driving disciplinary actions. The consultation will close on 20 September 2024.

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Lawyers Covered – July 2024

July's edition of RPC's Lawyers Liability & Regulatory Update highlights the month's key developments affecting lawyers and the professional risks they face. These include:

more than their fair share? Most-complained about conveyancing firms set to foot more of the Ombudsman bill
August start date for new SRA anti-money laundering and sanctions data requirements
SRA consults the legal sector on proposed changes to their fining framework
increasing sophistication of gen-AI assisted deepfake fraud
Hong Kong: Legal Profession makes more use of "Tech".

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