Our team is regularly instructed by accountancy firms to handle the response to sensitive and complex investigations by the FRC, ICAEW and other authorities. Regulatory enforcement teams are particularly attentive to any aspects of an investigation that appear to them to have the potential to raise concerns about an individual's professional integrity.
In this two-part series we look at how the recent decision in Beckwith v- Solicitors Regulation Authority  EWHC 3231 (Admin), which has considered the parameters to the regulation of professional conduct, may have applications outside the sphere of the solicitors' profession.
In this instalment we consider the difference between integrity and honesty in the professional regulatory sphere.
Many readers will be aware that the High Court’s decision in Beckwith -v- Solicitors Regulation Authority  EWHC 3231 (Admin) has recently overturned a finding of professional misconduct by the Solicitors Disciplinary Tribunal (“SDT”) made against Ryan Beckwith, a former partner at a large law firm, relating to his sexual conduct towards a junior female lawyer following a night of heavy drinking. The Court quashed the fine imposed by the SDT and set aside the associated costs order.
This outcome stems not from a reassessment of facts but of fundamental principles: the High Court has held that the SDT was wrong to conclude that his behaviour breached the SRA’s Principles (as then applicable). Clearly the decision is significant for the SDT and the SRA – but it also carries wider significance for professionals generally because of the light that it may shed on the exercising of a regulator’s jurisdiction over its professional body of members.
Accountants are of course subject to different professional standards from those applicable to solicitors. Nevertheless, the issues raised by the Beckwith decision are relevant for accountancy professionals given the increasingly pro-active approach taken by the regulators following several high-profile corporate collapses, as well as the increased level of fines and use of targeted sanctions, such as placing certain offices under “special monitoring”.
This short series of articles examines what implications the Beckwith decision has for accountancy professionals. In particular, we will look at: (i) defining the concept of ‘integrity’, and (ii) the extent to which professional regulation encompasses the actions of accountancy professionals in their personal lives.
The concept of integrity
Although professionals such as accountants are required to act with integrity, it is a quality that has eluded a precise legal definition in case-law and is only described generally in professional standards. Integrity is often explained by reference to clear-cut hypothetical illustrations of conduct lacking in integrity, such as a failure to “own up” to a mistake, many of which involve or overlap with issues of honesty and do not much assist in other applications of integrity. As such, integrity is a nebulous concept that does not necessarily offer an easily usable yardstick for professionals and regulators when contemplating whether a course of conduct would involve, or has involved, a lack of integrity.
The leading authority on professional integrity is another case involving solicitors: Wingate -v- SRA  EWCA Civ 366, in which Lord Justice Jackson distinguished between honesty, “a basic moral quality which is expected of all members of society … The legal concept of dishonesty is grounded upon the shared values of our multi-cultural society. Because dishonesty is grounded upon basic shared values, there is no undue difficulty in identifying what is or is not dishonest”, and integrity, which is “a useful shorthand to express the higher standards which society expects from professional persons and which the professions expect from their own members”.
Rather than attempting to provide an all-purpose meaning of 'integrity', the Court of Appeal in Wingate nevertheless established three key principles of integrity:
- in the context of the regulation of a profession there is an association between integrity and adherence to the ethical standards of the profession;
- here is an expectation that professionals may be held to a higher standard than those that would apply to those outside the profession; but
- regulatory obligation to act with integrity does not require professional people to be “paragons of virtue”.
The Court’s recent decision in Beckwith has applied Wingate and reinforced that “there is an association between the notion of having integrity and adherence to the ethical standards of the profession”. Therefore, the test of whether a professional has adhered to the moral and ethical principles of his or her profession must “be applied within the context of the relevant statutory framework … to the extent that there are applicable ethical standards they must be found in or derived from those rules … The requirement to act with integrity must comprise identifiable standards.”
How does this apply to accountancy professionals?
The Court's decision in Beckwith serves to reinforce the earlier decision in Wingate, making clear that questions of integrity will be assessed primarily with reference to the framework of professional standards (in particular, ethical standards) and bye-laws applicable to the professional in question. This should assist in resolving doubt as to questions of integrity, and makes clear that integrity is not confined to making true statements but extends to issues of confidentiality and conflict, for example. Only recently the FRC Disciplinary Tribunal in the Autonomy Corporation plc case found that a failure to correct a client's misleading statement to the Financial Review Reporting Panel denoted a lack of integrity.
The Court’s analysis in Beckwith suggests that the assessment of whether a professional has acted with integrity will vary between professions according to the differing regulatory codes applicable and any statutory frameworks which underpin them. In the Beckwith case specifically, the Court’s reasoning had regard to the statutory scheme created by the Solicitors Act 1974, from which both the SRA and its enforcement powers ultimately derive.
Nevertheless, the analytical approach followed in Beckwith will plainly be a point of reference for decisions in other professions than solicitors, even if the conclusion reached is that those professions stand in a different position in some respects, due to the specific content of their professional codes.
The Court’s comments in Beckwith is a reminder that the higher standards expected of professionals extend to their deeds as well as their words. The Court specifically emphasised that “the duty to act with integrity applies not only to what professional persons say, but also to what they do. It is possible to give many illustrations of what constitutes acting without integrity. For example, … (v) Allowing the firm to become involved in … transactions which bear the hallmarks [of] … fraud.” In that context we note, for example, the ICAEW’s news bulletin dated 12 November 2020 which warned members to be wary of fraud in relation to the UK government’s recent COVID-support schemes. Media coverage has highlighted that significant fraud is suspected in relation to claims made under these schemes, and there is clearly potential for such fraud to ‘drag in’ unwitting accountants who may later face allegations of a lack of integrity.
The SRA has recently announced that it does not intend to appeal the High Court’s decision, which touches on a number of important topics for the regulation of professionals.
In its 2019 Annual Enforcement Review, the FRC made clear it will take a robust stance against possible integrity issues in its enforcement activities, stating that "where suspicions of dishonesty or a lack of integrity arise, they are thoroughly investigated and where proven, we will seek severe sanctions."
In our next instalment we will discuss whether, and to what extent, the Court decision in relation to the SRA's ability to take action in respect of a solicitor's personal life is a judgment that bears upon regulators of the UK accountancy profession.