The U.K.'s Financial Reporting Council needs replacing with an independent statutory regulator; requires a new mandate and clarity of mission; and needs new leadership and powers, a new report states.
An Independent Review of the Financial Reporting Council, published Tuesday, makes a number of recommendations to the U.K. government regarding the council. The FRC sets governance and reporting standards for companies, and regulates auditors, accountants and actuaries in the U.K.
Led by Sir John Kingman, the review considered the FRC's strengths, weaknesses and constraints.
Among the 83 recommendations is a call to replace as soon as possible the FRC with an independent regulator to be called the Audit, Reporting and Governance Authority. The new regulator should be accountable to Parliament and needs a new board, which should be public appointments.
The new regulator should also "promote brevity and comprehensibility in accounts and annual reports, to engage meaningfully with investors and asset owners about their information needs, and to ensure the proportionality and value of reports," said a report of the review.
"The regulator should have an overarching duty to promote the interests of consumers of financial information, not producers. It should also have a duty to promote competition; a duty to promote innovation; and a duty to apply proportionality to all its work," added the report.
Regarding the regulator's work on corporate reporting, the review recommends the current "limited scope" of the FRC should be extended to cover a company's entire annual report.
"It should be given stronger powers to require documents and other relevant information in order to conduct that review work," said the report.
The government also should work with the new regulator and the Financial Conduct Authority to consider whether there is a case for "strengthening qualitative regulation around a wider range of investor information than is covered by the FRC's existing corporate reporting work, to ensure that disciplines to drive up the quality of companies' disclosures in the U.K. are at least as demanding as best practice internationally," added the report.
Mr. Kingman was asked in April by the U.K. government to lead a "root-and-branch" review of the FRC as part of its commitment to strengthen the country's business environment.