IWD: We need to talk about Non-Disclosure Agreements
A significant number of the reports emanating from the financial, legal and business sectors, have centred on the internal management (or mismanagement) of these complaints: dealing swiftly and effectively with #metoo-type complaints has become a business imperative.
Whilst there have been no high profile regulatory findings against accountancy firms for inadequately dealing with #metoo-type complaints, media attention has nevertheless been focused on one the ‘Big Four’ following criticism of how it dealt with a complaint of sexual touching made by a junior employee against a senior member of staff.
With all the noise created by the #metoo movement, accountants might have expected their regulators (ACCA, ICAEW) to step into the debate and guide firms on the answers to the key regulatory questions raised. Unlike the Solicitors Regulation Authority ( SRA), who has issued guidance to solicitors on the use of NDAs and has just closed its recent consultation on how and when to report concerns, the accountancy regulators have not issued any specific guidance on when or how firms should report allegations of sexual misconduct or on what should they be doing to protect staff, prevent future occurrences or regulatory (or other) liability.
If the approach of the SRA is a barometer of how public opinion often affects (regulatory) policy, we can expect to see the ACCA and the ICAEW grappling with these sorts of issues soon.
The starting point for all accountancy firms must be a publicised and enforced, zero tolerance approach to all types of sexual harassment. Respect and honesty are values that no firm can afford to let slide. Cultural change then comes from the top down: senior management must espouse, embody and embed the firm’s zero-tolerance policy to sexual harassment. Staff need to be given the confidence that anti-harassment policies and procedures will be implemented robustly, reasonably and respectfully. Firms should consider revising the policies they have in place describing and outlawing sexual harassment as well as the policy that sets out how complaints will be dealt with. The policy should clearly articulate the reporting channels available to staff members.
Staff should be sensitively trained to deal with unwanted attention. Companies must make clear to clients, suppliers and visitors (for example, through signage or notices) that harassment is unacceptable. Ernst & Young and KPMG have both reiterated their policies following accusations relating to the actions of their senior partners.
When a complaint is made, consideration should be given to the commissioning of an independent investigation (but this should not delay any report). Presenting the regulator with an impartial report following a thorough and rigorous investigation can go a long way to reassure that no risk remains and that any systemic issues have been dealt with. The firm must record all instances of alleged harassment, the decisions it has made and any action it has taken.
Finally and crucially, both from a compliance and reputation perspective, consideration must be given to reporting the complaint to the relevant accountancy regulator(s). The requirement to report is slightly different depending on which of the two primary regulators requires notification, although failure to report, or reporting late may lead to disciplinary action regardless of which regulator is in charge.
ICAEW members (not non-members, who have the option) must report any facts or matters indicating that a member and/or firm or provisional member may have become liable to disciplinary action if it is in the public interest to so report. An act which is capable of discrediting (their word not mine) the member, the institute or the profession triggers this obligation. Mere suspicion is not enough but absolute proof of the event is not necessary either.
In summary form, ACCA members are required to report, inter alia, material breaches of the regulations or codes of practice. This would include a certificate holder or any of its partners, members, directors or controllers being the subject of an investigation in respect of their conduct.
If a disciplinary investigation has been commissioned (by HR for example), it is tempting to think that the conclusions of an internal investigation might be useful to the regulator in determining what has happened and the appropriate regulatory action needed. Whilst this (sensible) approach is becoming accepted practice in the legal industry, there has been no endorsement of it by the regulators here. On the contrary, the ICAEW guidance states that “the reporting member does not have to conduct any investigation or to take a decision as to whether a member or provisional members has been guilty of misconduct. What they are required to report are facts or matters indicating that a member or provisional member may have become liable to disciplinary action”.
If firms are to do everything they can to stamp out unwanted sexualised behaviour, they need clear guidance from their regulator on what they need to report and when. A stick with no carrot will not do.
This blog was first published as an article by Accountancy Daily 19/10/18.
If you have any questions about the issues raised in this blog, please contact a member of our team in confidence.
Our unrivalled experience in dealing with the highest profile and most sensitive cases involving sexual allegations in the workplace enables us to provide expert advice and support to both individuals and companies when they need it most.
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