Personal conduct in the accountancy profession: an area of focus for regulators

• United Kingdom

• Employment law
• Financial services disputes and investigations
• Financial services

30-07-2021

The personal conduct of members of professional bodies has increasingly become an area of focus for their regulators, including behaviour such as bullying, harassment, discrimination and victimisation. The ICAEW has stated there is a growing number of these types of misconduct cases linked to the use of social media and other online communications, and there are concerns that this has been exacerbated by the move to remote working.

Guidance on this type of misconduct has been issued by accountancy bodies including the ICAEW and most recently the CCAB. Firms need to bear in mind the importance of dealing appropriately with misconduct, as well as the need to report it in order for accountancy regulators to consider whether enforcement action is warranted.

ICAEW guidance puts the spotlight on personal behaviour

In 2020, the ICAEW published guidance on the duty of its members to report misconduct, effective from October 2020. Under Disciplinary Bye-laws 9.1 and 9.2, ICAEW members have a positive duty to report misconduct by individual members or firms where there is a reasonable belief that there has been, or may be, misconduct, and reporting is in the public interest (i.e. concerning conduct which, if unreported, could adversely affect the reputation of the accountancy profession). The guidance includes examples of misconduct including inappropriate use of social media, abusive behaviour and sexual misconduct and makes it clear that the regulator will, if it considers it appropriate, examine conduct in personal life as well as professional.

The spotlight on misconduct stemming from personal activities is a focus for other regulators such as the FCA and the SRA. Under the senior managers regime for example, the FCA considers “non-financial misconduct” (which it has defined widely) to be relevant to the assessment of a person’s fitness to perform a regulated role, and may give rise to enforcement action.

Recent activity in this area by these two regulators includes the FCA’s Final Notices prohibiting three individuals who had all been convicted of significant criminal offences including child pornography, voyeurism and sexual assault from working in financial services, and the SRA’s unsuccessful case against Ryan Beckwith.

New CCAB guidance on the boundaries between personal and professional life

The Consultative Committee of Accountancy Bodies (CCAB) represents a group of professional bodies of chartered accountants including the ICAEW, ACCA, CIPFA and ICAS who collaborate with CCAB on matters affecting the profession.

Following on from the ICAEW guidance on reporting misconduct, CCAB has published guidance on the “Boundaries of personal and professional life in ethics”. CCAB intends its member bodies to use this guidance as a reference point when developing or reviewing their own guidance.

The guidance, published on 13 July 2021, sets out a set of core high level principles that CCAB bodies would apply when assessing whether a member has acted in a manner, in their non-professional life, that could discredit the profession and/or breach the relevant body’s Codes of Ethics, Bye-laws and regulations.

The CCAB’s guidance sets out four factors it considers of relevance when assessing a member’s conduct:

1. 1.    Is the behaviour illegal?

Members must comply with applicable laws and regulations, and the conviction of a criminal offence could indicate a breach of this requirement.

1. 2.    Does the conduct bear on the member’s qualities as a professional accountant?

This could be in relation to a member’s own financial affairs, for example if there are serious errors in their personal tax returns. Members of CCAB bodies are held to a higher standard than a layman in relation to the core attributes of a professional accountant.

1. 3.    Is the member using their professional qualification as an identifier?

For example, where a member sends offensive or abusive communications and in doing so identifies themselves as a member of a CCAB body.

1. 4.    Is the misbehaviour serious, and, even though the member is not identifying their professional qualification, could the member’s behaviour be viewed as conduct that might discredit the profession?

CCAB considers that behaviour that could bring discredit to the profession may include circumstances that are work or workplace related in some way, or that are entirely in the member’s personal life but concerns behaviour so poor that it could result in discredit to the profession.

This might include seriously threatening or offensive language or behaviour that causes distress to a client, a fellow employee or member of the public outside of the workplace, and/or comments posted on social media that are offensive, discriminatory or threatening such that it calls into question the member’s professional judgment and fitness to be a professional.

These principles are purposely high level, and each accountancy body may provide more detailed guidance on specific facts and circumstances should it wish. Best practice and disciplinary guidance will also be left to each individual professional body to determine.

Beckwith v Solicitors Regulation Authority

The case of Beckwith v Solicitors Regulation Authority suggests that the courts may not take the same approach as regulators in relation to conduct that takes places outside of the workplace.

Though concerning the SRA rather than an accountancy regulator, it provides important guidance for other conduct regulators and their members. 

Ryan Beckwith, a former City law firm partner, was involved in a sexual encounter with a junior member of his team for whom he was supervising partner. Beckwith was fined £35,000 and ordered to pay £200,000 in costs after the SRA concluded his actions breached Principles 2 (the obligation to act with integrity) and 6 (the requirement to behave in a way that maintains public trust in solicitors and the provision of legal services).

However, the High Court overturned the ruling. The High Court found that there could be “no hard and fast rule” either that SRA regulation may never be directed to a regulated person’s private life, or that any aspect of their private life is liable to scrutiny. However, regulatory scrutiny is only justified when the conduct engages standards of behaviour which are set out in or necessarily implicit in the relevant regulatory standards (Principles 2 and 6 in Beckwith). The court also gave this warning “Regulators will do well to recognise that it is all too easy to be dogmatic without knowing it; popular outcry is not proof that a particular set of events gives rise to any matter falling within a regulator’s remit.”

Comment

Following the decision in Beckwith, it is clear that regulators are continuing to focus on members’ conduct in their personal lives.

Though the FRC has not put out its own guidance on this topic, the FRC requires the six largest accountancy firms to report to it on a quarterly basis on the level of non-financial conduct complaints made, and how they are dealt with. These firms must also notify the FRC of any incidents that pose a significant threat to the reputation of the firm, including matters relating to non-financial conduct. It will be interesting to see if the FRC issue guidance on this topic or take any action in response to the information it is receiving from firms in this area.

Whilst there will likely be straightforward cases, such as the FCA’s decisions to sanction personal conduct involving serious criminal offences, other cases will be less clear-cut. With the High Court and regulators seemingly taking a differing view on the kind of personal conduct that may warrant sanction, we may see more challenges to regulator disciplinary action in the future.