The ICAEW Regulatory Board (IRB) acts independently to ensure ICAEW’s regulatory and disciplinary work promotes and maintains the highest professional standards. Philip Nicol-Gent stepped into the role of Lay Chair in January this year, although he is no stranger to the workings of the board, as a founder member who has served as its Vice-Chair since 2017. As well as a thorough understanding of the role and functioning of the board, he also has a wealth and breadth of experience in the regulatory sphere – and a keen eye for staying at the forefront of change.
A barrister by profession, Nicol-Gent has more than 20 years’ experience in the regulatory field, including more than 10 years’ experience of frontline regulation including as Regulatory Director and later as General Counsel for the Guernsey Financial Services Commission.
Although the regulatory role of ICAEW is absolutely central to what ICAEW does, Nicol-Gent acknowledges it hasn’t always been well vocalised. “Twenty years ago, regulation was viewed at best as a box-ticking exercise and at worst a necessary evil, but good regulation and good corporate governance should be at the heart of every business. Regulation is about the three Rs – risk, reward, but crucially, reputation. And the reputation of the profession is central to the profession continuing. Because without your reputation as a professional, what are you?”
The publication of IRB’s latest regulatory and conduct annual report – the first with Nicol-Gent as Chair – sets out to reinforce that positive view of the role of regulation, with less of a focus on hauling practitioners over the coals when things go wrong, and more about supporting firms’ good performance. “At the end of the day regulation will always be about enforcement to ensure the performance is there. But that’s the last step of regulation.”
The nature of regulation dictates that, despite being a small minority, failures are very much in the public domain. Successes, meanwhile, remain very much private. “What the public don’t see is all of the work that goes into trying to improve professional standards, such as all of the resources produced by the ICAEW Professional Standards Department, including its innovative educational drama films, and the impact this is having on the overall performance of firms.”
Nicol-Gent isn’t in the job to boost his popularity and criticism from all quarters is par for the course. It pays to be thick skinned, he admits. “If you’re getting as many complaints from members and firms about being too harsh as you are from complainants about not being harsh enough, you’re probably getting the balance just right,” he says.
The report shows that the number of new complaints has continued to fall in 2021 from its pre-pandemic peak in 2019, and the Professional Conduct Department’s processes have become more efficient as a result of process changes. At the same time there has been progress on audit quality in particular – the continuation of a trend that has seen fewer audit files requiring significant improvements.
But complacent Nicol-Gent is not, and under his chairmanship, he anticipates a change of tack to better communicate the broad role and value of the IRB. “I want the board to be seen and understood. And I want to talk about what we do, particularly in terms of regulation that is in the public interest.”
The IRB’s regulatory and conduct annual report is a case in point, with this year’s publicly-available 27-page report marking a distinct step up from the three-page letter sent to the ICAEW Council in 2016. This isn’t about going through the motions. Instead, transparency and usefulness of information to an ever-broader range of stakeholders is key.
“We want to move ourselves towards being a voice for good regulation in the professional services sector,” Philip Nicol-Gent says. “Professional services regulation has changed significantly in the last 20 to 25 years. If you look at the tone of the recent government consultations on audit and insolvency, independence is key.”
Nicol-Gent points to the IRB’s responses to crucial government consultations – the BEIS White Paper on corporate governance and audit reform, and the Insolvency Service’s consultation on the future of insolvency regulation – as key achievements of the past year.
“We did these responses independently as the IRB, separate to ICAEW as a membership body,” he stresses, “because the consultations focused on key matters of regulation, and it was important that the IRB’s perspective was understood. It was also a further step towards developing the board’s voice, as the barrage of regulatory change continues apace. A review of the UK’s AML regulatory and supervisory regime is also under way. “The amount of government activity and consultation in this space has been quite unprecedented and that’s making us look deep and hard at how we operate.
One of Nicol-Gent’s personal goals as Chair is to do more to promote leadership in all its forms, but especially leadership within the firms that ICAEW regulates as a cornerstone of their public interest role. Firms’ leaders need to remind themselves and their staff of what it means to be a professional, and the fact that the public interest always comes first, he says.
“Just because something is lawful doesn’t mean that it is necessarily right and that’s something for firms to reflect on. It’s not for me to tell firms what their business strategy should be, however, from time to time it’s important to reflect on the type of firm they want to be and the clients they are happy to act for. This leadership should extend to their staff to remind them of their professional responsibility and to empower them, in particular the more junior members, to be able to speak up."
Looking to the year ahead, a project to reform ICAEW’s disciplinary framework, looks set to come to fruition with a new framework due to launch between October 2022 and January 2023, depending on the timing of Privy Council approval. Nicol-Gent is confident the end result will successfully strike a balance between the need to be both proportionate but also effective.
In the meantime, Nicol-Gent is planning a road trip – not as respite from the IRB but to help spread its message across England and Wales with visits to the District Societies in the Northern Powerhouses, taking the opportunity to meet and hear from chartered accountants practising outside London.
It’s also a great opportunity to sit down with some of the regional chambers of commerce, some of the largest consumers of accountancy services. “You can’t operate in a vacuum,” Nicol-Gent says, “and unless you know and understand what’s going on on both sides, you can’t really regulate it.”
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