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Welcome to EQUITY ISSUES, a short note on a relevant issue in the private equity and venture capital industry.

If you would like to discuss any of the points we raise below, please contact me or one of our other lawyers.


Claire Cummings

020 7585 1406


FRC Independent Review: Call for Evidence

The Financial Reporting Council (the “FRC”) describes its mission as to “promote transparency and integrity in business”. It does that by regulating accountants, auditors and actuaries, and having responsibility for the UK’s Corporate Governance Code. BEIS has published the Independent Review of the Financial Reporting Council: Call for Evidence. The call for evidence covers: (i) the purpose and function of the FRC; (ii) its impact and effectiveness; (iii) its powers; (iv) legal status and relationship with government; (v) governance and leadership; (vi) funding, resources and staffing; and (vii) its role in reducing the risk of major corporate failure.

The question for the review in this current call for evidence is whether the current regulator, and the current regulatory structure, are as effective as they need to be in current circumstances and for the future. As well as reviewing the FRC, its structure, governance, powers and resourcing, this will include examining:

  1. whether or not the FRC is “chronically passive”, “timid” and requiring culture changes;

  2. whether or not it is too slow, insufficiently proactive, and whether its actions have sufficient deterrent effect; and

  3. whether or not it is too close to or unwilling to sufficiently challenge the “big 4” audit firms

The review seeks to examine the FRC's role and to understand stakeholder views on the FRC's effectiveness including views on:
  1. purpose and function. Whether the existing functions and structure of the FRC, which includes responsibility for the UK Corporate Governance Code and Stewardship Code as well as reviews of financial statements of public and large private companies for Companies Act 2006 compliance, are appropriate. There are also broad questions about the FRC's objectives and the appropriateness of its name;

  2. impact and effectiveness. The strengths and weakness of the FRC in light of its role in audit regulation, accounting and financial reporting, corporate governance and stewardship, investigations, enforcement and compliance, as well as actuarial oversight. In particular, the review seeks views on additional ways the FRC could improve the quality of financial reporting and whether there are wider issues of financial and other reporting that make a stronger regulatory role desirable;

  3. role in reducing the risk of major corporate failure. Whether the FRC addresses the risk of major corporate failures appropriately, responds quickly and effectively to warning signs in accounts or financial reporting or corporate governance concerns, as well as whether the viability statement could be more effective; and

  4. powers and sanctions. Whether there are gaps in the FRC's powers. The review cites calls to extend the FRC's powers regarding oversight and enforcement of non-accountant directors exerting influence over financial statements, as well as concerns that arrangements to enforce statutory directors' duties are insufficient to deter breach. The review also discusses whether the sanctions regime has the right deterrent effect.

In addition, the review raises broad questions on the FRC's statutory footing, the relationship between the FRC and government, as well as the FRC's internal governance and staffing. Responses are requested by 6 August 2018 and can be submitted via email to

This document is for general guidance only. It does not contain definitive advice.


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Tel: + 44 20 7585 1406
Mob: + 44 7734 057 327

Cummings Law
42 Brook Street
London Greater London W1K 5DB
United Kingdom

25 05 2019

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