ICAEW’s regulatory sanctions reform: what the proposals mean for members

The ICAEW’s programme of sanctions reform continues. Following the introduction of the new Disciplinary Sanctions Guidance (DSG) in January 2026, the ICAEW Regulation & Conduct Board has now launched a consultation on Measures and Sanctions Guidance (MSG) for regulatory committees. ICAEW members and firms operating in regulated areas, including audit, practice assurance, investment business and legal services, should take time to consider the proposals and respond to the consultation.

Background: a programme of reform

Until January 2026, ICAEW’s approach to sanctions for both disciplinary and regulatory matters was contained within a single Guidance on Sanctions. In 2023, the then ICAEW Regulatory Board approved a full review of that guidance, with the aim of separating it into distinct documents for regulatory and disciplinary committees.

The first phase of that work, the revised DSG, was consulted upon in 2025 and took effect from 1 January 2026. As we noted in our earlier blog on those changes, the DSG introduced a number of significant developments, including dishonesty as a standalone category, new provisions on sexual misconduct and discrimination, higher financial penalties, and a strengthened approach to non-cooperation with investigations.

The current consultation represents the second phase of that review, turning its attention to the guidance applicable to ICAEW’s regulatory committees.

What is the consultation about?

The proposed MSG would replace the relevant regulatory sections of the existing Guidance on Sanctions with four separate, committee-specific guidance documents covering the:

• Audit Registration Committee (ARC);
• Practice Assurance Committee;
• Investment Business Committee; and
• Legal Services Committee.

It is worth noting that the Insolvency Licensing Committee is excluded from this review. Insolvency practitioners remain subject to the Insolvency Common Sanctions Guidance, which is agreed with the Insolvency Service and applied consistently across the recognised professional bodies.

The consultation is open from 5 October to 6 November 2026, giving stakeholders just over a month to respond.

What are the key proposed changes?

The new MSG does not tear up the existing framework, but it does introduce a number of meaningful changes that members and firms should understand.

1. Committee-specific guidance

Perhaps the most significant structural change is the move away from a single document towards four separate guidance documents, each tailored to the relevant regulatory committee and the area it oversees. This reflects the fact that the regulatory frameworks within which these committees operate differ considerably. Each document will use the terminology, regulatory requirements, measures and sanctions relevant to its particular regulated area.

2. Clearer distinction between regulatory measures and regulatory penalties

The existing guidance has not always drawn a sufficiently clear line between regulatory measures, such as conditions, restrictions, undertakings, suspension or withdrawal of registration, and regulatory penalties imposed in response to a specific breach. The proposed MSG addresses this. Regulatory measures are framed as tools to address ongoing regulatory risk, protect clients or the public, and secure future compliance. Regulatory penalties are the response to a proven breach. Depending on the circumstances, a committee may impose one or more regulatory measures alongside a penalty. Not every measure is available to every committee; the relevant guidance specifies the powers available to each committee.

3. Updated indicative sanctions tables

The indicative sanctions tables have been reviewed and updated to identify the regulatory breaches relevant to each committee and to provide clearer starting points for the regulatory penalties applicable to those breaches. As with the DSG, the starting point is not a tariff, it is the point from which a committee begins its deliberations, before considering the full facts and any aggravating or mitigating factors.

4. A consistent approach to seriousness

The proposed MSG adopts the same three-tier framework, very serious, serious and less serious, that was introduced through the DSG. The underlying definitions were consulted upon as part of the DSG review and are not being reconsidered as part of this consultation. The MSG applies those overarching principles within the regulatory context, adapting the indicators where necessary to reflect the nature of particular regulatory breaches and the risks they present.

5. Clearer aggravating and mitigating factors

The revised guidance gives committees a clearer steer on when to move away from an indicative starting point. General aggravating and mitigating factors are retained where they apply across the regulatory framework, but the guidance also identifies factors specific to particular types of breach.

6. Additional committee-specific guidance

Where the regulatory context, powers or risks of a particular committee require it, additional guidance has been included. The ARC and the Legal Services Committee operate within very different frameworks, and bespoke guidance is essential to ensure the MSG is genuinely useful in practice.

ARC guidance – a closer look

The ARC is responsible for considering and determining applications for ICAEW audit registration and any regulatory action required as a result of monitoring visits. It operates within a wider regulatory oversight framework and is subject to oversight by the Financial Reporting Council. For registered auditors and firms, the proposed MSG Guidance for the ARC deserves particular attention.

The proposed guidance sets out clearly the full hierarchy of regulatory measures available to the ARC, from conditions, restrictions and undertakings through to suspension and, at the most serious end, withdrawal of registration, alongside clearer guidance on when each is appropriate and what the ARC must consider before imposing the most significant interventions.

Stronger starting points for certain conduct have been introduced, for example a failure to cooperate following a monitoring visit was previously dealt with by a severe reprimand or reprimand, whereas the starting point is now a referral to the Conduct Department and/or withdrawal of registration.

The guidance requires the ARC to have regard to the statutory factors set out in the Statutory Auditors and Third Country Auditors Regulations 2016 (SATCAR) when determining financial penalties. These require sanctions to be effective, proportionate and dissuasive, and include specific factors such as the firm’s financial strength and annual turnover, any financial benefit obtained or losses avoided, and the gravity and duration of the breach. For larger firms, the ARC has express discretion to set penalties by reference to overall firm income, ensuring that outcomes carry real deterrent weight.

The ARC guidance also provides clearer direction on referrals to ICAEW’s Conduct Department. Where the seriousness of the breaches, the extent of actual or potential harm, or the need to maintain public confidence means that regulatory action alone would be an insufficient response, the ARC is expected to refer the matter to the Conduct Department.  The guidance is clear that the prospect of a longer process should not deter the ARC from referring matters to the Conduct Department where the public interest requires it.

What does this mean for ICAEW members?

For members and firms operating in regulated areas, the proposed changes carry a number of practical implications.  Greater clarity on the distinction between measures and penalties should make it easier to understand what a regulatory committee is seeking to achieve, and to engage constructively with that process.

The updated indicative sanctions tables and clearer starting points should bring greater predictability to outcomes. In addition, the adoption of the very serious, serious and less serious framework across both the disciplinary and regulatory guidance creates a more coherent and consistent approach to sanctions across ICAEW’s regulatory and disciplinary functions.  ICAEW members facing regulatory intervention should therefore find it easier to assess the likely range of outcomes.

For registered auditors specifically, the explicit incorporation of the SATCAR statutory factors and the references to the Financial Reporting Council oversight framework are a reminder that audit regulation operates with a heightened level of scrutiny.

As with the DSG, the broader message from ICAEW is clear: the regulatory framework is being strengthened, and the expectation of high standards, both in terms of technical compliance and professional conduct, is not diminishing. For firms and individuals subject to ICAEW regulation, proactive engagement with the regulator remains the best form of risk management.

Timescales and next steps

These proposals are significant and could affect a large number of regulated firms and members. ICAEW members are strongly encouraged to review the proposals carefully and submit their views before the MSG is finalised. Comments must be submitted by 6 November 2026.

While there is currently no planned effective date for the new guidance, we are unlikely to see a final version until 2027. In the meantime, the existing Guidance on Sanctions will continue to apply to ICAEW members appearing before regulatory committees.

At Kingsley Napley, we advise accountants, auditors and firms on regulatory and disciplinary proceedings and regulatory compliance. If you would like to discuss a regulatory issue, please get in touch for a confidential consultation.