Back to school…but is it time for a change?
Most people would regard the financial sector as being heavily regulated. Many senior positions in financial services are overseen by the Financial Conduct Authority (FCA) and, in the banking sector, the Prudential Regulation Authority (PRA), under the Financial Services and Markets Act 2000 (FSMA). There has been much focus in recent years on the FCA’s Senior Managers Regime and Certification Regime, which have now been rolled out across the industry. If an individual who is subject to the regulatory regime falls foul of it, disciplinary proceedings will follow. Similarly, authorised firms are subject to supervision and potential enforcement action under FSMA.
Members of the public might reasonably expect that the same level of scrutiny would attach to professionals describing themselves as accountants. However, there is no statutory protection of the title ‘accountant’ in the finance sector, unlike the title ‘Solicitor’ in England and Wales. Usually when a title is protected by statute the relevant regulator has the power to prosecute someone who uses the title when they are not entitled to. This is in contrast to some EU countries that protect the title accountant.
In order to describe themselves as a ‘Chartered Accountant’, an accountant should have passed a number of professional examinations, and obtained membership of the Institute of Chartered accountants of England and Wales (ICAEW). This regulatory body is not set up under any statutory regime, but is a membership organisation, where accountants enter into a contract to be subject to its rules and bye-laws. A breach of the rules or bye-laws can lead to disciplinary action. The benefit of membership is that an accountant or firm can be described as ‘Chartered’ (if certain criteria are met), which is an internationally recognised designation and is said to be a hallmark for quality and professionalism in accounting.
Consumers are therefore often advised to look to instruct an accountant or a practice described as a Chartered Accountant, as the designation imports a degree of professionalism and expertise. However, there is no statutory protection over the title Chartered Accountant either. In light of that, there are some businesses and individuals out there who do use that designation when they are neither members of a professional body and/or do not meet the criteria to be able to do so. Some do so deliberately; others do so unwittingly.
The ICAEW aims to restrict the designation of Chartered Accountant to only those who are members and meet certain criteria. Given that becoming a member of ICAEW involves a rigorous examination and application process, one can understand the desire to restrict the use of Chartered Accountant to a select few who are deserving of that coveted title.
Bye-law 55 of the ICAEW’s Principal Bye-laws contains a prohibition on members and firms using the initials FCA, ACA or describing themselves as Chartered Accountants unless permitted by regulation. The ICAEW has a set of regulations to determine when a firm may describe itself as Chartered Accountant in its Use of the ‘Chartered Accountants’ Description Regulations. Those regulations set out specific requirements for sole practitioners, partnerships, LLPs and body corporates, all of which must be engaging in public practice [the meaning of which is the subject of a forthcoming article]. Where the eligibility requirements are not met, a firm or individual member may seek permission to use the description from ICAEW which allows for some flexibility in the regime.
The ICAEW, however, only has regulatory remit against those who are members. If someone who is not a member used the Chartered Accountant designation in relation to themself or their firm, then there is very little the ICAEW can do to stop that. If the title were protected then it is likely a governing statute would give a regulatory body powers such that someone using the title incorrectly could be prosecuted for illegal practice. In the absence of those powers, the ICAEW may issue a ‘cease and desist’ letter or publish a press release on its website to clarify to the public that the individual(s) is/are not members that meet the eligibility requirements to use that title. Neither of these options has the backing of a specific statutory provision, or any simple and speedy way to force the perpetrator to stop describing themselves as Chartered Accountants.
We have come across many members seeking advice who have unknowingly fallen foul of the ICAEW’s regime. If a member unwittingly breaches the regulations by reason of using the designation incorrectly then that may then become a disciplinary matter under the ICAEW’s bye-laws. Bye-law 4.1c for members and 5.1c for firms explicitly provide that a member is liable to disciplinary action for any breach of the regulations. If those disciplinary proceedings are well founded then that could lead to a sanction being imposed against the member, including a financial penalty and an award for costs being made against them.
If a member is concerned or receives a letter from the ICAEW on this issue they should take early advice as to how best to respond. If the member has not yet received a letter from ICAEW but has breached the regulations they may be required to self-report to the ICAEW, so they are best advised to consider those obligations as well.
Sian Jones is an Associate in the Regulatory team. She specialises in defending professionals across a number of different sectors. In the finance sector she advises accountants on regulatory matters such as reporting obligations and defends them in regulatory proceedings brought by the FRC, CIPFA, ICAEW and ACCA. Sian also advises professionals such as lawyers, doctors, surveyors and talking therapists.
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