Independent Review of the Financial Reporting Council
The Independent Review of the Financial Reporting Council issued a Call for Evidence in June 2018. On 6 August, the IFoA submitted its response to the consultation.
You can read our response.
What is the Independent Review of the Financial Reporting Council and why is it taking place?
In April 2018, the Government announced its intention to conduct an independent review of the FRC. This followed a number of high profile corporate collapses, notably Carillion, which subsequently led to a joint inquiry by the Work and Pensions and the Business, Energy and Industrial Strategy Select Committees:
The Government is therefore undertaking this review to assess the effectiveness of the FRC’s governance, impact and powers, to ensure it is fit for the future.
Find the Review’s Terms of Reference here
Who is Sir John Kingman?
Sir John Kingman was appointed by the Secretary of State for Business, Energy and Industrial Strategy to lead the Review. As a consequence, it is sometimes referred to as the Kingman Review.
Sir John is a former senior civil servant who was Second Permanent Secretary to HM Treasury until 2016. He is currently the Chairman of Legal & General.
He is supported by a small secretariat team and an Advisory Group.
What is the Financial Reporting Council (FRC)?
The FRC is a UK Non Departmental Public Body that has regulatory roles in relation to auditors, accountants and actuaries in the UK, and is responsible for the UK’s corporate governance code.
Since 2005, the FRC has had specific responsibilities in relation to the regulation of actuaries carrying out work within UK geographic scope (more details below).
Why is the Review important to the IFoA?
Whilst the call for evidence predominantly focuses on how the FRC regulates audit and accountancy, the Review also asks whether the existing arrangement for the regulation of actuaries in the UK (put in place following a review in 2005 (the Morris Review)) is still fit for purpose.
What are the current regulatory arrangements for IFoA members?
Since the 2005 Morris Review, the FRC has, by agreement with the IFoA set out in a Memorandum of Understanding, been responsible for three functions relating to the regulation of actuaries in the UK:
- Independent oversight of IFoA regulation in the UK (including the IFoA qualifications system);
- Setting of Technical Actuarial Standards (TASs) in relation to UK actuarial work (the IFoA is responsible for all ethical/conduct standards, including the Actuaries’ Code); and
- Disciplinary enforcement in relation to cases involving IFoA members that potentially give rise to “important issues affecting the public interest in the UK” (the IFoA deals with other disciplinary cases through its Disciplinary Scheme).
The IFoA is responsible for all other aspects of the regulation of its members, including all non-UK work/members, CPD requirements and Practising Certificates, as well as the regulation of the different qualification standards and admissions. The IFoA also retains responsibility for enforcing the TASs in relation to members carrying out UK work.
What changes would we like to see as a result of the Review?
The IFoA believes that the model of professional self-regulation subject to effective independent oversight remains the most appropriate arrangement for the regulation of actuaries in the UK.
However, our response highlights some specific aspects of the arrangements where there may be an opportunity to make changes to improve effectiveness as well as to reflect developments in the actuarial profession since the time of the Morris review.
In particular, the IFoA considers that the current arrangements could be sensibly improved by:
- clearer distinction between regulatory/qualification (IFoA) and independent oversight (FRC) roles; and
- simplified arrangements in relation to the setting of professional standards.
One area where we see no need for change is a suggestion in the consultation for the FRC to receive statutory powers in relation to actuarial regulation.
We believe that there no evidence to suggest that the current arrangements are not serving to protect the public interest and the introduction of a system of statutory regulation, where there is not an identifiable need to do so, seems disproportionate.
How was the IFoA’s response developed?
The IFoA established a Steering Group comprised of senior volunteers and the IFoA Executive. The Group worked together throughout the consultation period to inform our response, which was then reviewed and signed off by the Regulation Board, the Policy and Public Affairs Board (PPAB) and Council.
Which other professions are affected by the Review?
The Financial Reporting Council also oversees the professional bodies for accountants and auditors in the UK and has particular regulatory roles in relation to audit and accountancy, therefore those professions are also in scope of the Review.
What happens next?
The call for evidence closed on 6 August 2018. The Review Secretariat will now consider the evidence it receives and will produce a final report for Government on its findings towards the end of 2018. The Government will then consider the report and will consult on any necessary recommendations or changes in 2019.
In the interim, members of the IFoA Steering Group will continue to engage with the FRC Secretariat Team.
For more information regarding the Review, please visit the review website.
For more information regarding the IFoA’s response, please contact the IFoA Regulation team.
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