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Consultation on proposed changes to ICAEW’s disciplinary framework

ICAEW consultation and response to and supporting document for ICAEW consultation

Published: 19 Jan 2022 Update History

This consultation is now closed. The ICAEW Regulatory Board (IRB) wishes to consult on the changes it proposes to make to ICAEW’s disciplinary framework during 2022.

The documents which are the subject of this public consultation are the product of a two-year project overseen by the IRB with the following objectives:

  1. To update and simplify the current disciplinary scheme to make it more accessible and understandable to all users.
  2. To separate the obligations and duties of all ICAEW members, affiliates, students and firms from the provisions which set out the processes to be followed.
  3. To make improvements to aspects of the current process to ensure that the disciplinary process works more efficiently and effectively, and continues to operate in the public interest. 

This consultation is being carried out in stages:

Stage 1 focuses on proposed changes to ICAEW’s disciplinary framework, i.e. changes to the Disciplinary Bye-laws (DBLs) and introduction of the Investigation and Disciplinary Regulations (IDRs).

This stage of the consultation is now closed.

Stage 2 focuses on consequential changes that need to be made because of the reduction in the number of DBLs. This will ensure that new arrangements are made for the determination of cases referred to the Fitness Committee (to be renamed the Fitness to Practise Committee) whether there are concerns about the physical/mental health of respondents, the determination of appeals of decisions of regulatory committees and decisions taken by the Fitness Committee (to be renamed the Fitness to Practise Committee) in relation to readmission/re-registration applications and provisional membership applications which are referred to the Fitness to Practise Committee by the ICAEW Education and Training Board.

Subsequent consequential changes will also be required to other ICAEW complaints, disciplinary and fitness processes and regulations. These changes are minor e.g., the updated name of a committee.

This stage of the consultation is now closed.

About this project

The IRB set up a dedicated sub-group with a majority of lay members to supervise the re-drafting work carried out by senior lawyers in the ICAEW Professional Standards Department. The sub-group has also formed preliminary views on potential process changes which have then been discussed and endorsed at subsequent IRB meetings. The sub-group has met eight times and its recommendations have been considered at seven IRB meetings along with regular progress updates.

How will the current disciplinary scheme be impacted?

While the project has involved a re-write of several existing provisions to make them clearer and more accessible than their current formal/legalistic wording, the IRB determined that there was no reason to make any substantive alterations to the main cornerstones of the current disciplinary scheme:

  • Most complaints will still be considered initially on the papers by the Investigation Committee (to be re-named the Conduct Committee).
  • All safeguards to protect the public interest will remain in place. This includes;
    • the rights of complainants to challenge at the Conduct Committee, the rejection of complaints on assessment; and
    • the rights of complainants to insist that the Committee considers complaints after the completion of an investigation where the case manager concludes there is insufficient evidence.
  • The Conduct Committee will still be able to offer consent orders to members/firms to dispose of complaints in appropriate cases.
  • The Conduct Committee will still be obliged to refer more serious complaints to the Disciplinary Committee for hearing by a disciplinary tribunal.
  • Members/firms will still be able to opt for a disciplinary tribunal hearing rather than accept a consent order and will still be able to apply for permission to appeal a finding and/or an order of the disciplinary tribunal on one or more specified grounds.
  • The Conduct Committee will still continue to have a parity of lay and chartered accountant members with a lay Chair, and disciplinary tribunals, fitness panels (to be renamed fitness to practise panels) and appeal panels will continue to have a lay majority.

Indeed, since the start of the IRB’s oversight role in 2016, the IRB has already made important improvements to the current disciplinary scheme including:

  • the introduction of a process to determine the fitness of members, affiliates and students to participate in disciplinary proceedings;
  • a new fixed penalty scheme for faster outcomes in minor non-compliance matters;
  • a new fast-track process for complaints based on serious criminal convictions; and
  • a process to allow settlements to be agreed between a referral of complaints by the Investigation Committee and a disciplinary tribunal hearing.

The changes now being proposed to the structure of the disciplinary framework will allow the IRB to be much more agile in the future. This will ensure ICAEW’s disciplinary procedures keep up with changes in the fast-moving regulatory environment.

They will also allow the IRB to respond quickly to any issues raised by the chairs of all of ICAEW’s disciplinary and regulatory committees regarding the fairness and effectiveness of our processes, and to ensure that the public interest is protected. This is because the IRB will have the authority to change any of the new regulations which are the subject of this consultation without further internal governance process and subject only to obtaining the approval of ICAEW’s oversight regulators.

Changes to the structure of the disciplinary framework (Stage 1 of this consultation)

ICAEW’s Disciplinary Bye-laws (DBLs) have historically set out not just the duties and obligations of ICAEW members, firms, affiliates, students and other persons who are subject to the DBLs, but also the detail of all of the processes which must be followed from the receipt of a complaint through to a final determination of liability by a disciplinary tribunal or an appeal panel.

The DBLs have been supplemented over time by the creation of regulations by the Investigation, Disciplinary and Appeal Committees setting the process to be followed by those committees in carrying out their functions. These regulations are governed by those committees. In 2017, these regulations were supplemented by the Fitness Committee Regulations (to be renamed the Fitness to Practise Regulations).

The first stage of the project concluded that the current 49 DBLs should be reduced to 16 Core DBLs to set out only the duties and obligations of members, firms, affiliates and students and the powers provided to persons and bodies to exercise over them. The recommendation by the IRB to create the 16 Core DBLs was approved by ICAEW Council and members in March and June 2021.

The second stage of the project was the creation of new comprehensive and comprehensible regulations setting out the whole of the disciplinary process from the receipt of a complaint until its final disposal. These regulations – the Investigation & Disciplinary Regulations are separate from the Core DBLs. They bring together all of the process provisions within the current DBLs and merge these with the individual regulations of each of ICAEW’s disciplinary committees.

Consequential changes to other processes where the final determination is made by the appeal committee (Stage 2 of this consultation)

The final part of the project focused on what needed to be put in place for other processes which would be impacted by the reduction in the number of DBLs and the folding of the Appeal Committee Regulations into the new Investigation & Disciplinary Regulations. This has prompted the enhancement of the existing Fitness Regulations, the creation of a new standalone appeal process for regulatory appeals and changes to the existing regulations relating to readmission, re-registration and provisional membership applications which require to be considered by the Fitness Committee (to be renamed the Fitness to Practise Committee). This has meant the creation of a five-part Regulations Handbook where the Investigation & Disciplinary Regulations will be the first part followed by:

  • Regulations Handbook Part 2: Fitness to Practise Regulations
    This document merges the current Fitness Regulations with the process provisions contained within the current DBLs which are not proposed to be retained in the Core DBLs.
  • Regulations Handbook Part 3: Regulatory Review & Appeal Regulations
    This is a new document setting out all of the process for appeals against decisions of ICAEW regulatory committees. It merges the current Review Committee Regulations and those elements of the current DBLs and the Appeal Committee Regulations which relate to regulatory appeals.
  • Regulations Handbook Part 4: Readmission and Re-registration Application and Appeal Regulations
    This document merges the provisions relating to readmission and re-registration in the current Fitness Committee Regulations (Admission to Provisional Membership, Readmission and Re-registration), setting out the process for initial consideration by the Fitness to Practise Committee with the provisions in the current DBLs and in the Appeal Committee Regulations which relate to appeals of such matters. This puts all process provisions relating to initial review and appeal in one document.
  • Regulations Handbook Part 5: Fitness to Practise Committee: Provisional Membership Application and Appeal Regulations
    This document merges the provisions relating to the Fitness to Practise Committee’s initial review of applications for provisional membership referred to it by the ICAEW Education & Training Board. It will now include an appeal process against any decision taken by the Fitness Committee (to be renamed the Fitness to Practise Committee) to make this process more consistent with the process for the consideration of readmission and re-registration.

This final part of the project has allowed the IRB to streamline the processes and to put all provisions relating to each process in one document which will make it much easier to use.

Consultation - Stage 1: Changes to disciplinary processes in the new Core DBLs and Investigation and Disciplinary Regulations

While the making of substantive changes to processes was not part of the original objectives of the project, the IRB decided to make a number of amendments to existing processes to ensure ICAEW’s remain in line with similar processes at other equivalent professional regulatory bodies. The commentary below sets out the principal process changes which the IRB is proposing to make to aspects of the current investigation and disciplinary processes:

Changes to terminology

There are a number of changes proposed to the names of persons and bodies involved in the disciplinary process, including:

  • The Investigation Committee to be re-named as the Conduct Committee.
  • The Professional Conduct Department to be re-named the Conduct Department.
  • The introduction of terms such as ‘conduct matter’ which describes a matter being investigated, ‘allegations’ which are those matters reported by the Conduct Department to the Conduct Committee and ‘formal allegations’ describing those allegations which are referred by the Conduct Committee to the Disciplinary Committee.

The IRB considers that greater clarity and accuracy in the labelling of key functions and committees is in the public interest as it will make the process more comprehensible and accessible.

Duty to report misconduct

The IRB is proposing to make changes in the Core DBLs to the wording of the current DBL which sets out the duty of members to report potential disciplinary matters to the Conduct Department. The current DBL provides that such reports should only be made where it is ‘in the public interest to do so’ and the IRB is concerned that this subjective test has led to inconsistency in the reporting of potential disciplinary matters to the Conduct Department.

The IRB proposes, therefore, to amend the duty in new Core DBL 6.1 to remove the subjective test and make it an obligation to self-report, or report another ICAEW member, affiliate, student or firm, where events have taken place which indicate a possible liability to disciplinary action.  For consistency, and to reflect the fact that, in practice, reports are often made by firms rather than by members, it is also proposed to extend the duty to all individuals and firms who are subject to the DBLs, not just ICAEW members.

The IRB considers that it is important that all potential instances of misconduct are reported to the Conduct Department to ensure that the public is protected from chartered accountants who do not adhere to the highest professional standards.

Change of role for the Conduct Department

The current DBLs provide that, when a matter is referred by the Investigation Committee to the Disciplinary Committee, the Investigation Committee becomes the complainant or the prosecuting body at a subsequent disciplinary tribunal. It is proposed in the future that the prosecuting body before a disciplinary tribunal or an appeal panel will be the Conduct Department, save where the Conduct Committee determines to refer an allegation to the Disciplinary Committee for a hearing against the recommendation of the Conduct Department. In those circumstances, it is proposed that the Conduct Committee shall remain the prosecuting body before the disciplinary tribunal and any appeal panel.

The IRB considers that this change will remove confusion which currently exists in the changing role of the Investigation Committee within the disciplinary process.

The clarification of liability test to be used by the Conduct Committee

The current test for the Investigation Committee to determine whether a consent order should be offered, or a complaint referred to the Disciplinary Committee, is whether there is ‘prima facie’ case of liability to disciplinary action. The IRB proposes to replace this test in Core DBL 5.1 with a requirement for the Conduct Committee to determine whether there is ‘a realistic prospect, if the allegations were referred to a tribunal for hearing, the allegation or allegations would be found proved’. The IRB notes that this is a similar test to those used by other comparable bodies for the initial determination.

The IRB considers that this change will make this key threshold test clearer and much more comprehensible to all users, including complainants which the IRB considers to be in the public interest.

New orders which can be made by disciplinary tribunals

The IRB is proposing to increase the variety of orders which can be made by disciplinary tribunals including the powers to impose orders for members and affiliates to undertake specific training or for firms to put in place specific training for their principals and employees.

The IRB considers these important to its role as an improvement regulator and to protect the public from receiving inadequate or poor service.

Expansion of availability of interim orders

The current DBLs only provide for interim orders to be made where an ICAEW member, student or other individual has been charged with an indictable offence, excluded from another professional body or where there is evidence that they have abandoned their practice.

The IRB is proposing to introduce a broader test which will allow the Conduct Department to apply for an interim order where it has received a complaint and it considers that there is ‘risk of significant harm’ to the public if interim measures are not put in place. The IRB is also proposing revisions to the procedure for review and appeal of interim orders.

The IRB considers these changes to be necessary to ensure that the public is adequately protected wherever there is a risk of significant harm.

Lie on file process

The IRB is proposing to introduce a ‘lie on file’ process to allow the efficient disposal of complaints in the future where a member is subject to a series of allegations being reported and is excluded before all the allegations have moved through the disciplinary process. 

The IRB is also proposing that the Conduct Department should be able to apply in those circumstances for the remaining allegations to ‘lie on file’ unless the Conduct Committee, disciplinary tribunal or appeal panel (due to consider the allegations) believes they should still be heard in full. 

The IRB is concerned to ensure that the resources within the Conduct Department are directed towards shortening the time between a complaint being made and the ultimate outcome and believes that the discontinuance of proceedings in circumstances where an exclusion order has already been made will help the Conduct Department better achieve that objective.

Changes to the Reviewer of Complaints process

The IRB is proposing to make some amendments to the current Reviewer of Complaints process. The Reviewer process was originally incorporated into the current DBLs at a time when the Investigation Committee comprised of a majority of chartered accountant members and was seen as an appropriate safeguard to ensure the public interest was protected by allowing complainants to request a full review of the investigation and the decision by an external legal assessor. The IRB notes that, since the constitution of the Investigation Committee was changed in 2015 to ensure a parity of lay and chartered accountant members with a lay Chair, there have been no issues raised by any Reviewer about the reliability of the decisions taken by the Investigation Committee. 

The IRB is proposing that this additional review focuses specifically on:

  • whether the Conduct Department case manager has followed up one or more lines of enquiry which are likely to have produced further relevant information and/or evidence;
  • whether all relevant documents obtained during an investigation were provided to the Conduct Committee at the time it made its decision; and/or
  • whether there has been a failure by the Conduct Department and/or the Conduct Committee to follow the procedure specified in the regulations for investigating complaints and considering allegations.

If there has been a failure in relation to one or more of these limbs, the Conduct Committee will require the Head of Investigation to carry out further work and/or deliver a supplemental conduct report to the Committee before a final decision is made.

The IRB considers that the changes to this process reflect the three areas where additional assurances should be provided to members of the public if they have any concerns about the robustness of the investigation process.

New permission to appeal process

No appeal may currently be made unless it falls within one of the specified grounds of appeal. However, there is no process to determine whether an appeal fits within the grounds until the start of an appeal hearing. 

The IRB is proposing to create a new permission to appeal process whereby the Appeal Committee chair or vice chair will review each appeal on the papers (whether the appeal is made by a member, firm, affiliate or relevant person, or the Conduct Department / Conduct Committee) as soon as possible after a notice of appeal is served to determine whether it falls within the specified grounds of appeal and that there are reasonable prospects of success.

The IRB considers that this change is necessary to protect the public interest by ensuring that the final outcome in disciplinary cases is not delayed from coming into effect by allowing frivolous or unsustainable appeals.

This consultation has now closed.

Consultation - Stage 2: Consequential changes to other processes where the final determination is made by the Appeal Committee

Private/public hearings

All hearings of appeals against decisions made by ICAEW’s regulatory committees are currently held in private unless a successful application is made for a hearing to be held in public. Similarly, all hearings of applications by members or students for readmission or re-registration are currently held in private.

The IRB proposes in the new Regulatory Review & Appeal Regulations and in the new Readmission and Re-registration Application and Appeal Regulations that all hearings of applications for readmission and re-registration and all appeals against the rejection of those applications and all regulatory appeal hearings should be held in public unless there are exceptional circumstances for the hearing to be held in private.

The IRB believes that it is important that hearings relating to readmission and re-registration and appeals of regulatory decisions should be held in public in order (unless there are good reasons to hold the hearings in private) to improve transparency around ICAEW’s processes for scrutinising alleged failures by members and firms in providing regulated services.

Regulatory appeals – publicity of orders

At the moment, if a review panel of the Review Committee determines to uphold an order made by a regulatory committee and the member or firm appeal against that order, nothing is published unless and until that appeal is dismissed.

The IRB proposes in the new Regulatory Review & Appeal Regulations that all orders made by a review panel are published as soon as reasonably practicable following a hearing, indicating where such orders may be subject to an appeal, with only the record of decision withheld until the determination of an appeal. This will make the arrangements for publicity consistent with the process for publishing the orders made by disciplinary tribunals.

The IRB considers this change to provide for earlier potential of an adverse finding in a regulatory matter is necessary to ensure the public has earlier access to information which might impact decisions on the choice of accountant to engage.

Appeal process for referred provisional membership applications

Presently, in the Fitness Committee (Admissions to Provisional Membership, Re-registration and readmission) Regulations, while there is a right of appeal for applicants for readmission and re-registration, there is no right of appeal for an unsuccessful applicant for provisional membership who has been referred to the Fitness Committee (to be renamed the Fitness to Practise Committee).

The IRB considers this to be inconsistent and unfair. It proposes to provide such a right of appeal while putting this process into a separate set of regulations. This will make it easier for students to identify which regulations apply to processes they are asked by ICAEW to follow.

This consultation has now closed.

Inputs to the project so far

The IRB has ensured that the primary users of the disciplinary processes have been consulted including the current Chairs of the Investigation, Disciplinary and Appeal Committees. 

The IRB has also asked that ICAEW’s main oversight regulators be informed and updated on the progress of this project. Some have already provided feedback on the Core DBLs and the Investigation & Disciplinary Regulations which has been incorporated into the current drafts.

Responding to this consultation

In your response to this consultation (for stages 1 and 2), please consider the following three questions.

  1. Do you agree with the proposed structural changes to the ICAEW disciplinary framework outlined in this consultation?
  2. Do you have any specific feedback or concerns regarding the changes in processes outlined in this consultation?
  3. We do not believe the proposed changes will result in a worse outcome or quality of service for anyone due to their background or life circumstances. Please tell us if you think your firm or any of your clients will be adversely impacted by the proposals due to a protected characteristic (such as age, disability or race) or due to your individual practising arrangements?

After each stage of the consultation has closed, we will consider all feedback received and make any resulting changes as appropriate.

We will publish our response to this consultation on icaew.com/regulatoryconsultations later in 2022.

We do not intend to publish individual responses to this consultation.

If you wish to discuss any aspect of this consultation or need advice on how to respond to the consultation, please contact claire.phillips@icaew.com

Timings

Following the consultation, the Core DBLs and draft regulations will be finalised and approval will be sought from the IRB. Approval of the Core DBLs will then be sought from the Privy Council, and our oversight regulators will be requested to approve the new disciplinary framework and fitness to practise regime. Subject to these approvals being granted, the IRB intends to launch the new Core DBLs and the new Regulations Handbook in Summer 2022.