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UK to review 'role and powers' of corporate governance regulator


A comprehensive review of the "governance, impact and powers" of the Financial Reporting Council (FRC), the UK's regulator of auditors, accountants and actuaries and guardian of the UK Corporate Governance Code, has been announced by the government.

The review, which is due to be completed by the end of the year, will consider the oversight, accountability and independence of the FRC, and whether the current legal basis of its role and powers is sufficient. It will also consider whether there is a case for extending the FRC's powers.

A public consultation asking for views on the FRC's role will also form part of the review.

The review will be led by Sir John Kingman, who will convene an advisory board to support him in his duties. Kingman is the chair of Legal & General and a former Treasury civil servant.

Business secretary Greg Clark said that the review would ensure that the FRC was "fit for the future".

"The UK has a strong reputation as a dependable place to do business but this needs to be continuously updated and it's important to ensure all of our regulators continue to drive high standards," he said.

Corporate governance expert Martin Webster of Pinsent Masons, the law firm behind Out-Law.com, said that the review panel was likely to consider extending the FRC's enforcement powers against directors; something which the regulator itself called for in its response to the government's Green Paper on corporate governance reform last year. Currently, the FRC can only take action for financial reporting breaches and associated issues of integrity against company directors who are also accountants or actuaries.

The FRC has also argued that auditors should have oversight of more elements of company reporting than they do at present, he said.

The terms of reference of the review include the suitability of the FRC's current governance arrangements given its status as a public body and the increasing expectations on companies, including those anticipated from the proposed changes to the UK Corporate Governance Code. It will also consider whether the FRC is sufficiently independent of government and the companies, auditors and individuals that it regulates, including as a result of its funding arrangements; and whether there are sufficient safeguards in place to guard against conflicts of interest.

The review will also consider whether the current arrangements by which the FRC is held accountable to stakeholders, the government and members of the public are suitable, including specifically with regard to freedom of information laws. It will also consider whether the FRC has sufficient resources, skills, experience and capacity to deliver its responsibilities, including whether its current funding arrangements are adequate and desirable.

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