Significant extensions to the duty to self-report misconduct – the new ICAEW guidance

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Significant extensions to the duty to self-report misconduct – the new ICAEW guidance

Published 17 diciembre 2020

As all accountants are aware, their regulator, the Institute for Chartered Accountants of England and Wales (“ICAEW”), imposes a duty on its members to report misconduct. Since 1991, Disciplinary Bye-Law (“DBL”) 9.1 has required members and member firms to report “any such facts or matters of which [they are] aware” around conduct which is liable to disciplinary action (including self-reporting their own misconduct), where it is in the “public interest” to do so. 

Effective from 1 October 2020, the ICAEW has issued new guidance on reporting, including self-reporting, misconduct. The guidance represents a significant widening of the instances requiring reporting from the previous 1993 guidance. It now includes a duty to report instances of social media misuse.

We first set out the key features of the duty to report under the new guidance, and then comment on the extent to which they include significant changes to the 1993 guidance.

Key features

  1. The underlying reason to report is that it is in the “public interest” – namely, where not to do so “could adversely affect the reputation of ICAEW and / or the profession of accountancy.” Where this end is not served, no report need be made. Minor faults of members, especially where they cannot be supported by evidence, are generally not reportable. 
  2. “Criminal offences” by members must be reported, including but no longer limited to fraud and offences incurring a custodial sentence. Any criminal charge, caution or conviction is reportable to the ICAEW with the exception of “minor motoring offences”, (presumably because there is little public interest in reporting).
  3. In addition, members must report “acts of default” (whether or not they result in criminal investigation). These include anything “likely to bring discredit on the member, the profession of accountancy or ICAEW and anything falling significantly short of the standards reasonably expected of the member / firm.” This includes sexual impropriety, and financial ill-discipline.
  4. Members must also report “professional incompetence” - where standards of practice have fallen significantly short of those expected of the member or firm in question. Acts of negligence would have to be serious to qualify. 
  5. The duty to report includes a duty to self-report.
  6. Members must alert their heads of staff to misconduct “as soon as [they] are aware of any matters that suggest that [the member], or another member / firm, may be liable to disciplinary action under the DBLs.”

Significant changes

A change to the ICAEW’s definition of “public interest” represents a significant extension of the duty. The previous guidance sought only to guard against misconduct which “could adversely affect the good name of the profession.” The addition of a reference to the ICAEW’s reputation should be seen as significant. An unusual and even a controversial addition; members should now be mindful of the requirement to report anything that might injure their regulator’s standing. How that is policed will be very interesting in these days of increasing public scrutiny of regulators.

The ICAEW now expects all instances of criminality to be reported (where there is a public interest in doing so). The 1993 guidance referred only to offences of dishonesty, fraud, and certain offences incurring a custodial sentence, so this adjustment is notable.

The new guidance recognises the modern phenomenon of an ever-increasing blurring of the lines between our work and private lives, and cites “inappropriate use of social media / electronic communications” as an example of a reportable act. Members, and their firms, need to be aware that transgressions involving the posting of offensive or discriminatory material on personal online accounts may now be a reportable offence, and could result in disciplinary proceedings by their professional body. While the guidance makes clear that engaging in (non-offensive) heated online debates is not worthy of reprimand, members would be well-advised to err on the side of caution.

Honesty about members’ own failings has always been required, but the new guidance brings with it a reward for timely self-reporting. The guidance reads: “If your report results in disciplinary proceedings being brought against you, the fact that you have made a self-report will count in your favour.” Further, Carrie Langridge, ICAEW’s General, Compliance and Tax Investigations Senior Manager, has gone on record to say that due credit will be given in disciplinary proceedings for admissions.

Making reports “a matter of urgency” is no longer strictly necessary under the new guidance, but members should act as soon as they become aware of a fault. Firms may now make the reasonable first step of conducting an internal investigation before notifying the ICAEW of any alleged wrongdoing. This change places greater value on self-investigation.

Reports should be made to the ICAEW’s Professional Conduct Department (“PCD”) using a form which can be found here. Most reports will come from a firms’ Conduct Partner or ICAEW Representative, but other members are not discouraged from making their own.

Authors

Richard Highley

Richard Highley

London - Walbrook

+44 (0)20 7894 6470

Jamie Tomlinson

Jamie Tomlinson

London - Walbrook

+44(0)20 7894 6014

Julian Bubb Humfryes

Julian Bubb Humfryes

London - Walbrook

+44(0)20 7894 6137

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