If a regulated firm or insolvency practitioner (IP) finds they can’t comply with one or more of the requirements under the regulations applicable to their area of work, a dispensation allows them to continue to provide the relevant regulated service while they take the necessary steps to remedy the issue.
“Provision for a dispensation is included within the various regulations,” explains Helena. “And this allows a grace period to correct non-compliance, but you need to notify us, disclose information to us, and focus on correcting it within specified timeframes.
“To make the process clearer and more efficient, we’ve put together a dedicated web page outlining the process and introduced a new online application form,” she adds. “We want to help firms and individuals who find themselves in situations where they’re inadvertently in breach of the regulations to understand they can apply for a dispensation, so they don’t end up in a position where it’s too late.”
“It's designed to be used in emergency or unplanned scenarios where something happens and as a result the firm or individual is inadvertently non-compliant,” stresses Elaine. “It's not automatic or guaranteed but it is available if you find yourself in that unfortunate situation.”
When can a firm request a dispensation?
A regulated firm may apply for a dispensation when it can no longer comply with one or more of the requirements of the:
- Audit Regulations
- Local Audit Regulations
- DPB (Investment Business) Handbook
- Legal Services Regulations
- Licensed Practice Handbook
An IP may apply for a dispensation when they cannot comply with one or more of the Insolvency Licensing Regulations.
“There is a different process if the firm becomes ineligible to use the description Chartered Accountants,” says Helena. “And there is no dispensation available for anti-money laundering (AML) non-compliance.” You can find further information about these areas on the web page explaining when and how to apply for dispensations.
What are some typical situations where a firm would request a dispensation?
“Most of our regulations include eligibility requirements that firms or individuals must meet to provide a regulated service,” says Helena. “And generally, a dispensation is used for situations where you can no longer meet one of those requirements and inadvertently become ineligible to carry out regulated activity.”
A common scenario may be a partnership where one of the partners has passed away, which would render the firm ineligible for some of the regulated areas. Other examples might be where someone's had to resign immediately for family reasons or someone's stopped being a member of a professional body, which means they need affiliate status but can't resolve that immediately.
“Clearly, firms couldn't have planned for these situations,” explains Elaine. “But this process means we can say to firms: ‘You can continue to offer for example, audit services, for a specific amount of time. But in that period, you need to resolve the issue to become eligible again.’”
Dispensations are only appropriate in unexpected eligibility scenarios; they are not suitable for use during planned restructuring, mergers and acquisitions. “We know there’s a lot of movement in the market at the moment,” emphasises Helena. “And our restructuring helpsheet makes it clear we expect firms planning to change their structure to contact us in advance. A dispensation shouldn't be used in those circumstances.”
How does a firm or IP apply for a dispensation?
You need to notify ICAEW as soon as possible after the situation arises when you can no longer comply with the relevant regulations or handbook. For audit, local audit and legal services firms, the notification should be made within 10 business days of the situation arising.
- The relevant compliance principal for the regulated area where a dispensation is being sought needs to submit the application via the new online form.
In all cases – for any regulated area – we would expect the firm, once it realises it is ineligible, to stop any regulated work or work under that registration or licence until they've got the dispensation.
“When you’ve applied for the dispensation, it goes to a case manager for assessment,” she explains. “The case manager has delegated powers to issue the dispensation, but there are also some circumstances where it might go to a committee to consider the dispensation.
“On the form, we ask firms to set out the steps they intend to take to remedy the non-compliance,” she says. “But if you’re unsure, we can also advise you on what you need to do to comply; we’re here to help you.”
If you need further information, please email Regulatory Support for general enquiries: regulatorysupport@icaew.com
How long is a dispensation valid for?
For audit, the dispensation period for eligibility non-compliance is set by the Companies Act and it is a strict 90 days from the date the firm became ineligible, not the date it made the application. “If you don't manage to remedy the situation within that time, we will then take steps to start the process of deregistration,” says Elaine.
No dispensation can be issued where the firm has ceased to meet one or more of the eligibility requirements of Audit Regulations 2.02 or 2.03 for more than 90 days.
The 90 days from the start of the non-compliance also applies in most other areas, and it can't be extended for most areas, so if you’re in breach, you need to correct it within that timeframe. The web page contains more details about timeframes in each regulated area.
If the firm or IP has not resolved the issue or non-compliance by the date the dispensation ends, and where the dispensation cannot be extended, ICAEW will start the process of deregistration or withdrawal of licence.
Where can firms find out more about dispensations?
“Our new guidance and application form pulls together all the necessary information about what to do if you’re advertently in breach and need to ask for a dispensation,” explains Elaine. “If you unfortunately find yourself in this situation, whatever regulated area you work in, you can now go to one place to contact us, explain the issue and start to regularise it.”
“Compliance principals should regularly be checking their firms are complying with all applicable regulations," stresses Helena. "And whenever there is a change within a firm – whether it's a change in people, structure, shares or voting rights – they need to be thinking about whether those changes impact the firm's eligibility for all its registrations or licences.”