Accountants can be disciplined by their regulatory bodies and Tuckers Solicitors have experience in making representations on their behalf.
Accountants are vulnerable to investigation in respect of their own actions and the activities of their clients, and they cannot claim professional privilege if required to disclose material.
Our lawyers are available 24 hours a day, 365 days a year, providing immediate, first class legal advice, representation and assistance during disciplinary proceedings. Please contact the Regulatory Department on 0808 169 5980 or email email@example.com
Accountancy Regulatory Investigations & Discipline: Defending Against Allegations of Professional Misconduct
The level of trust chartered certified accountants and accountancy firms hold in society demands that their conduct meets high professional standards and preserves the integrity of their profession. While, on the whole, these tend to be met, misunderstandings or errors in judgement can and do lead to allegations of professional misconduct being made against them.
Whether a complaint is made by a client, another accountant or a regulator, there can be serious reputational and financial consequences if it leads to an investigation and disciplinary action. In these circumstances, both individual accountants and firms who want to defend their professional reputations and mitigate the severity of any adverse results must be fully informed of their options and prepared to take swift action.
In this article, we take a look at how chartered accountants can defend against allegations of misconduct before a regulator to minimise the likelihood of attracting severe sanctions. We also examine some of the issues concerning the professional discipline of accountants, such as whether or not to accept a consent order and how some professional indemnity insurance policies will cover the legal costs of disciplinary proceedings. First, we offer some context by providing a brief overview of the investigative and disciplinary process followed by most accountancy regulators.
Accountancy Regulators & Disciplinary Proceedings: An Overview
There are numerous accountancy bodies that hold regulatory powers enabling them to oversee and monitor the professional development and conduct of their individual and firm members. The reason for this is an absence of a legal requirement that accountants be members of one particular professional association.
Some of the most prestigious accountancy bodies include the international Association of Chartered Certified Accountants (ACCA), the Institute of Accountants in England and Wales (ICAEW), the Chartered Institute of Management Accountants (CIMA), the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Association of Accounting Technicians (AAT). Many of these bodies are themselves subject to oversight by the independent Financial Reporting Council (FRC), which is responsible for, amongst other things, considering cases that raise public interest considerations.
While each regulator has its own system of bye-laws, regulations and procedures for dealing with complaints and disciplinary matters, the process is broadly similar. When a complaint concerning an accountant or accountancy firm is properly made, the accountant’s professional regulator will review it to determine a suitable resolution. This requires an assessment of evidence provided by the complainant. The regulator should inform their member of the complaint made against them and give them a chance to respond.
If disciplinary action isn’t deemed appropriate, there is likely to be an attempt to conciliate matters via a method of alternative dispute resolution (ADR). If the matter raised suggests a serious departure from professional standards, the accountancy professional may be offered a consent order. Acceptance of a consent order is similar to acceptance of a caution under the criminal law, which is to formally admit guilt, accept sanctions, such as a fine, and suffer the reputational damage that can be caused as a result. In return, the complaint will be disposed of, foregoing the need to go through the investigative and disciplinary process.
If the complaint isn’t deemed unfounded, dealt with via alternative dispute resolution or a consent order isn’t offered or accepted, there will be an investigation. The purpose behind a regulator’s investigation is to assess whether the complaint should be dismissed or whether there’s a prima facie case of misconduct warranting disciplinary action. Only potentially serious matters will therefore be subject to an investigation.
Investigations are both adversarial and inquisitorial in nature: the regulator will require information and evidence from both the complainant and the member under investigation in order to carry out its assessment. Although the length of an investigation depends on the complexity of the case, members will be expected to co-operate throughout and respond to information requests within tight time limits. Members will also have the opportunity to make written representations in response to a complaint, again within a tight deadline that usually spans only 14 days.
If the member submits sufficient evidence, presented thoroughly and convincingly, that counters the complaint, the case is likely to be closed. However, if there is a prima facie case against a member, there are usually two possible outcomes: disciplinary measures may be imposed, such as a fine, and the case may rest on the member’s file, capable of being taken into account if disciplinary proceedings against them are commenced in the future; or, if it is considered to be in the public interest, a referral may be made to a committee or tribunal that has the power to take more punitive disciplinary measures, such as larger fines, publicity, unlimited costs orders and exclusion of membership.
Where disciplinary proceedings are commenced, the allegations may be made public prior to the hearing. The hearing itself, during which members are entitled to legal representation, is also likely to be held in public. There are various possible outcomes, from no further action being taken to a hefty fine up to £50,000, an order to pay the regulator’s legal costs and exclusion from membership. If the member wishes to appeal the decision, they must request permission within a set deadline. If permission is denied or the appeal is unsuccessful, the outcome, findings and name of the member will usually be published.
As can be seen from the above, matters can quickly escalate if suitable action isn’t taken early on. Below we look at some of the ways specialist solicitors can assist accountants to defend against allegations of professional misconduct. We then examine the issue of consent orders and some of the factors that need to be weighed when making the decision whether to accept or refuse one of these disciplinary measures.
Defending Against Allegations of Accountancy Misconduct
An accountancy professional’s failure to fully and accurately represent themselves in regulatory and disciplinary matters can lead to substantial fines and irreparable harm to their professional practice. The best way of preserving professional integrity and reputation, and avoiding unnecessary damage, is to thoroughly and robustly defend against the allegation of misconduct as soon as it is evident that a complaint will or has been made to a regulator. This involves fully engaging with the issue as soon as possible and ensuring sufficient preparation is made to either have the complaint dismissed or limit the financial and professional consequences should a complaint be upheld.
The professional regulation and discipline of accountants is a complex and specialised area. This is partly due to the various different systems operated by different regulators, as well as the intricate and technical matters complaints about accountancy tend to raise. Add the emotional element, both of accountants themselves (whose professional reputation and livelihood may be at risk) and those of potential complainants (if they feel their financial issues have been improperly dealt with), and it soon becomes apparent why objective and effective legal advice and assistance from an experienced solicitor can assist with the resolution of a disciplinary matter.
Amongst many other things, a specialist regulatory and disciplinary defence solicitor experienced in representing clients before their accountancy regulator, be it ACCA, ICAEW or another professional accountancy body, will offer reassurance that the matter is being properly handled and dealt with in a way that seeks to protect their accountant clients’ interests. Putting their knowledge and experience to best use throughout the process, they will:
- Conduct a detailed and thorough critical analysis of the complaint, advise on the best course of action and make written or oral representations to the regulator clearly setting out their client’s version of events. This first stage can be crucial for accountants. By responding timeously and comprehensively to a regulator’s request for information and comment, it is possible to challenge the cogency of the complaint and stop the matter from proceeding further through the disciplinary process. If disciplinary proceedings appear inevitable, they will design a strategy aimed at mitigating the consequences;
- Carry out their own investigations, either in preparation for or in parallel to the regulator’s investigation. Specialist regulatory and disciplinary defence solicitors have resources at their disposal that will assist them to carry out an efficient yet detailed examination of the case against their clients. Amongst other things, they will compile testimonials speaking to their clients’ integrity and good-standing, and will engage with experts where necessary. Their experience dealing with accountancy bodies will also enable effective exchanges of relevant information;
- Build a strong case, paying scrupulous attention to detail. Using their knowledge of the regulator’s regulations and bye-laws, meticulously applied to their clients’ individual circumstances, a solicitor will robustly put forward their clients’ case. They will also be able to identify any reasonable excuses, mitigating circumstances and demonstrate their clients’ insight into misconduct that can assist with the resolution of the complaint;
- Use their advocacy experience to provide effective legal representation before regulatory, disciplinary and appeal committees. They will use their experience of representing clients in both disciplinary and court proceedings, as well as their ability to swiftly navigate regulatory and disciplinary rules and procedures, to ensure their clients’ rights are being respected and protected;
- Seek to protect their clients’ professional reputation and mitigate the severity of sanctions. In some cases, it may be possible to allay the risk of publicity by challenging whether the public interest will be served by the regulator publishing details of the complaint. Thorough legal representation can also assist to mitigate sanctions, such as the level of fines and severity of a professional reprimand, if an adverse finding is made.
As can be seen from the above, there are many ways a specialist solicitor can assist accountants to defend against allegations of professional misconduct. They offer dedicated legal advice and assistance, tailored to an accountant’s specific circumstances, which can make all the difference to the outcome of regulatory and disciplinary proceedings. But what if there is an opportunity for an accountant to forego the need to go through the disciplinary process? Consent orders present this very opportunity, however, whether or not an accountant should accept a consent order will depend on their particular circumstances.
Disciplinary Measures: Accountancy Consent Orders
When an accountant is alleged to have breached the rules of their professional accountancy body, they may be offered a consent order in order to dispose of the complaint without proceeding through the investigation and disciplinary process. A consent order is a formal disciplinary measure whereby the accountant accepts all the allegations made against them, admits guilt and agrees sanctions and costs. The sanctions available are wide-ranging, from fines to a severe reprimand, although they do not extend to exclusion from membership.
A consent order will only be offered if it seems that there is a real prospect of a reasonable tribunal finding the allegations proved and if the allegations are unlikely to result in exclusion from membership. Whether or not a consent order will be offered is decided by the regulator’s investigating officer on paper, in order to avoid the need for parties to attend a hearing.
If a consent order is offered, the accountant will have an opportunity to make written representations that will directly impact its proposed terms. It is therefore important for all written correspondence to fully address the allegations and clearly present the accountant’s case, with a view to mitigating potential sanctions. Whether the final draft will be accepted is ultimately a decision made by the regulator. Once a consent order is accepted by both the regulator and their member, it cannot be appealed. It is deemed a disciplinary finding and will therefore remain on the accountant’s record and be made public. Further, as part of a consent order agreement, the accountant will be expected to pay the costs, albeit on a limited scale.
Due to these serious implications, an accountant offered a consent order must carefully consider whether it is in their best interests to accept it. Factors that need to weighed when reaching this decision include the risk of attracting a more severe penalty and greater costs if the matter is pursued through disciplinary proceedings. However, it should also be kept in mind that consent orders are an admission of liability, and they do not, therefore, remove the risk of financial and reputational damage. Further, the stress and time involved in challenging an allegation of misconduct should be balanced against the long-term effects a consent order can have professional reputation and practice.
If the complaint in unfounded, it is unlikely to be in the accountant’s favour to accept a consent order. While the cost of going through disciplinary proceedings is often cited as a reason to accept a consent order and not challenge a complaint, it can be just as costly, if not more so, to not defend against an unfounded allegation. The consequences of an admission of professional misconduct that isn’t factually accurate will not only adversely affect reputation, it could also be costly, both in terms of a fine and an increase in insurance premiums. More generally, the costs of defending professional integrity shouldn’t be a barrier to justice. Fortunately, many accountants may be able to cover the costs involved under the terms of their professional insurance policy.
Funding Legal Representation: Insurance
All accountancy professionals are required to have professional indemnity insurance. Policies are increasingly providing cover for reasonably incurred legal expenses when defending against allegations of misconduct before a regulator, especially if there is a chance a civil claim may follow. When an insurer agrees that the terms of the policy covers these legal fees, as well as the legal costs payable to the regulator, they are likely to recommend a panel solicitor. An insurer’s panel solicitor may lack the specialist knowledge of accountancy regulation and discipline that is required to effectively deal with the issue. They may also be concerned with protecting the insurer’s, rather than their client’s, interests. Fortunately, we have the fundamental freedom to choose our legal representation, whatever matter we face.
With so much professionally and financially at stake when facing an allegation of misconduct, concerns about the cost of legal representation shouldn’t prevent accountants from instructing an expert solicitor who will work tirelessly to protect their clients’ interests. Specialist professional defence solicitor Richard Egan regularly negotiates with insurers to agree terms covering legal representation in accountancy regulatory and disciplinary proceedings. He has vast experience dealing with professional insurance providers and knows the charging rates they will find palatable should you instruct him.
The Connection Between Criminal Conduct & Disciplinary Action
Accountancy professionals may also find themselves the subject of regulatory and disciplinary proceedings if an allegation of misconduct is made against them in criminal or civil proceedings. For example, accepting a caution, being convicted of a criminal offence, disqualification as a director or a finding of professional negligence are all matters that are likely to have professional regulatory and disciplinary repercussions. Conversely, a complaint made to an accountancy body may itself reveal a potential criminal matter that the regulator will report to the prosecuting authorities. In these circumstances, it is vital to get legal advice and representation as soon as possible to mitigate the consequences.
Defence Lawyers for Accountants
At Tuckers, our highly respected solicitors have vast experience defending accountants against allegations of professional misconduct or criminal behaviour that call into question their ability to meet expected standards. We take a thorough, technical and robust approach, aimed at getting the best possible result for our accountancy clients. Whether you’re an individual or a firm, if you’re looking for expert legal assistance concerning a regulatory or disciplinary matter, please get in touch at the earliest opportunity, either via e-mail at firstname.lastname@example.org or call Richard Egan on 0771 112 9918.