A leading critic of the UK Financial Reporting Council (FRC) has called for the audit and corporate governance watchdog to be shut down.
Sharon Bowles, a member of the UK parliament’s upper chamber and former MEP, told IPE: “The FRC is fatally flawed in the way it was set up and has been operating, and distance needs to be put between that culture and the future regulator.
“This is most likely to be effective if the FRC is wound up and a comprehensive, fully accountable companies regulator set up that is not based on trade association relationships and which follows fully all the principles of public life.”
Her intervention in the debate over the future of the FRC came as the UK Department for Business, Energy and Industrial Strategy (BEIS) invited the public to submit evidence to its inquiry over the regulator’s future.
Bowles’ comments added to growing support for a major shake-up at the watchdog. In March, the Local Authority Pension Fund Forum said the FRC should be wound up.
Sir John Kingman, who is leading the inquiry, said: “The FRC’s work is critical to financial markets, the economy and public confidence. Trust, quality and credibility are the questions at the heart of [the] consultation.
“The review wants to hear the widest possible range of views on how the regulatory system can best deliver for the future.”
Among the areas covered by the inquiry are the FRC’s legal status, its relationship with government and its handling of conflicts of interest.
Interested parties have until 6 August to make their views known.
The FRC has come under fire in recent years over claims that it was too close to the audit profession that it regulates, and that it had failed to take timely action regarding high-profile corporate collapses.
During a parliamentary hearing into the collapse of services group Carillion in January, politicians accused the regulator of being “toothless”, “useless” and “ineffective”.
FRC chief executive Stephen Haddrill argued in the regulator’s defence that it needed greater powers in order to address the perceived shortcomings.
The Kingman inquiry has been taking evidence from interested parties since April, but in its latest call for evidence opened its doors to the wider public for input.
Bowles said she had already met Sir John to give evidence and had urged him during their meeting to take more views into account.
As for the likely outcome of the review, she added: “It is too soon to know how the Kingman review will go but the questions are comprehensive.”
She also warned against shying away from wide-ranging reform of the watchdog.
“When solutions are asked for, there is always the risk of the status quo being preserved because there is no single solution – even if the status quo is by no means given majority support,” Bowles said.
Last month, Sir John unveiled the membership of an 11-member panel of experts and accounting insiders to assist him during the review process.
An FRC spokesperson told IPE: “We welcome this independent review of the FRC’s governance, impact and powers. It is an opportunity to assess our past and our future.
“The board is determined to meet public expectations and support UK business in attracting global investment for the long term.
“We hope interested stakeholders will respond to Sir John Kingman’s call for evidence.”