Government announces a wide-ranging review of the FRC
15 May 2018
In setting the terms of reference for an independent “root and branch” review of the Financial Reporting Council (FRC), the Government explained that the FRC’s remit has developed considerably since it was initially established. In addition, since its last review in 2011/12, there have been changes in the expectations placed on regulators and how they operate as well as changes to the regulatory environment in which they exist.
The review has two overarching objectives:
- To put the FRC in a position to stand as a beacon for the best in governance, transparency and independence; strengthening its position and reputation and
- To ensure that the FRC’s structures, culture and processes; oversight, accountability, and powers; and its impact, resources, and capacity are fit for the future.
In order to achieve these objectives, the review will focus on the following key areas:
- Governance - Whether current governance arrangements, and their transparency, are suitable given the FRC’s status as a public body and the increasing span of its functions (including in relation to large private companies) and expectations on companies.
- Independence - Whether the FRC is sufficiently independent from both the Government and the entities it regulates. This will also include a review of the independence in its funding arrangements.
- Avoidance of conflicts of interest – Whether the practices, structure, culture and functioning of the FRC’s activities and operations are safeguarded against conflicts of interest, or a perception that there may be a conflict of interest.
- Oversight and accountability – Whether the FRC’s accountability to Parliament and the Government, stakeholders and the public are appropriate.
- Powers - Whether the current legal bases for FRC activities are adequate and whether any extension of its powers is necessary, advisable or otherwise recommended.
- Impact – What changes would best enable the FRC to be seen as a world class regulator able to take effective action to detect and act on breaches, deter inadequacy and wrong-doing and incentivise compliance.
- Resources and capacity – Whether the FRC has sufficient resource, skills, experience, and capacity to deliver its responsibilities.
The review is due for completion by the end of 2018 and will be headed by Sir John Kingman, Chairman of Legal & General plc. It will include engagement with significant stakeholder groups including those involved in preparing financial accounts, the users of those accounts and those affected by other aspects of the FRC’s work.
Further details can be found on the gov.uk website.
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