Revised operating procedures
FRRP Revised Operating Procedures
ACCA submission to CCAB
Generally, as the document is concerned with communicating to the public how the FRRP operates, it is thought that it could achieve this more successfully, for example by using plainer language and diagrams.
There is frequent reference to 'the Companies Act'. The section references provided throughout the document are to the Companies Act 1985. We do not see the reason that the document does not carry references to the Companies Act 2006 throughout.
It would be useful to have an appendix to the document defining terms which might otherwise cause confusion. For example, it is believed that 'Chairman' refers to the Chairman of FRRP, unless the word is linked to another entity (eg 'Chairman of the entity'). Terms such as 'entity' 'group' and 'case' might also be clarified in this appendix.
Paragraphs 13 and 44 both refer to reports being reviewed as an initial stage in the Procedures. The document could include more detail concerning the process whereby the Panel chooses which entities' reports to consider. In addition to considering complaints, is the selection process completely random, or are there some guiding principles? For example, does the Panel respond to the media; and does it operate (via its staff) a structured and well-understood risk based methodology?
Are issuers aware of the circumstances and criteria that may trigger a review of an entity's report?
Part 1
The Preamble establishes that 'the panel may, where it deems necessary and appropriate, depart from any provision of these Operating Procedures'. In line with the principles of transparency and accountability, any departure should be disclosed to the interested parties, together with the reason for the departure. This requirement to disclose should be incorporated into these Operating Procedures.
Part 2
There appears to be no provision for FRRP to refer cases (or aspects of cases) to other regulatory bodies without an application to court (paragraph 38), for example where a complaint has been received in respect of an entity over which the Panel would not normally choose to exercise its authority.
Paragraph 16 is vague when it states that the Panel does not 'normally' disclose how a matter came to its attention. The exceptional circumstances under which disclosure might come about should be explained. It goes on to state that the identity of the complainant is not revealed. This appears inflexible and is probably unrealistic. In many situations, it is likely that the identity of the complainant can be deduced from the nature of the enquiries made. Therefore, confidentiality needs to be discussed in more detail.
There is a word missing in paragraph 21. It should read '... the Group informs the entity as soon as possible ...'.
Paragraph 29 states that 'normally', where a Group has been established, Panel representation at meetings comprises all members of the Group. It also states that the Panel 'normally' encourages the entity to ensure that its auditors attend meetings. What are the circumstances under which each of these two things would not occur?
Paragraph 30, states that technical meetings provide an opportunity to 'progress a case'. For clarity, it would be preferable to use the words 'progress an enquiry'.
Paragraph 34 states:
3'Whether or not a Group has been formed, the Panel may send a copy of the letter closing a case to the senior partner or Chairman of the entity's auditors.'
Here also, the words 'closing an enquiry' would be clearer than 'closing a case'. Presumably, where a Group has not been formed, there is no case to close. Would the entity even have been aware of the initial consideration of a report? In addition, the use of the word 'may' is inadequate here, as there should be an undertaking by the Panel to advise the auditors (who will, on occasions, have a strained relationship with the entity).
In paragraph 36, the use of the word 'may' appears vague. Under what circumstances would the group not write an appropriate letter to the Chairman of the entity? The use of the word 'may' also appears inconsistent with the statement that the letter 'will' include certain details.
For clarity, paragraph 39, on third parties, should appear earlier in the operating procedures – between the sections on 'Meetings' and 'Voluntary revision'.
Part 4
Paragraph 48 appears to include a typing error where it refers to the persons and purposes 'set out in under' Section 245G of the Companies Act.
This part also refers to the 'Inland Revenue' and the Memorandum of Understanding with them. The Memorandum of Understanding is, in fact, with HM Revenue and Customs.