ENF 17.3 The FSA's power to disqualify auditors and actuaries

Under section 345 of the Act (Disqualification), if it appears to the FSA that an auditor or actuary to whom section 342 of the Act applies has failed to comply with a duty imposed on him under the Act, it may disqualify him from acting as an auditor or actuary for any firm or any class of firm. Section 342 of the Act applies to those auditors and actuaries referred to in ENF 17.1.1 G (1) and (2).1

The duties imposed on the auditors and actuaries of firms under the Act are:

1. (1)

   the duties imposed by rules made under section 340(3) of the Act (Appointment) contained in SUP 3 (Auditors) and SUP 4 (Actuaries) and, in the case of firms which are ICVCs, contained in COLL 4 (Investor relations), COLL 7 (Suspension of dealings and termination of authorised funds), CIS 10 (Report and accounts) and CIS 14 (Termination of authorised funds); 2

2. (2)

   the duties under sections 342(6) (Information given by auditor or actuary to the FSA) and 343(6) (Information given by auditor or actuary to the FSA: persons with close links) of the Act to communicate to the FSA any matter prescribed in The Financial Services and Markets Act 2000 (Communications by Auditors) Regulations 2001 (SI 2001/2587) and The Financial Services and Markets Act 2000 (Communications by Actuaries) Regulations 2003 (SI 2003/1294);1

3. (3)

   a duty to notify the FSA (under section 344(2) of the Act (Duty of auditor or actuary resigning etc to give notice)), if:

   1. (a)

      they are removed from office by a firm;

   2. (b)

      they resign before the expiry of their term of office with a firm; or

   3. (c)

      they are not re-appointed by a firm;

4. (4)

   a duty under section 344(3), on ceasing to be an auditor or an actuary of a firm, to notify the FSA without delay:

   1. (a)

      of any matter connected with their ceasing to be an auditor or actuary for that firm which they think ought to be drawn to the FSA's attention; or

   2. (b)

      that there is no such matter; and

5. (5)

   the duties imposed on auditors of ICVCs in the OEIC Regulations 2000.

Under section 249 of the Act (Disqualification of auditor for breach of trust scheme rules) if it appears to the FSA that an auditor has failed to comply with the duties imposed on him by trust scheme rules it may disqualify him from being the auditor for any AUT or ICVC. These duties are set out in COLL 4 (Investor relations), COLL 7 (Suspension of dealings and termination of authorised funds), CIS 10 (Report and accounts), and CIS 14 (Termination of authorised funds). 2

The FSA's powers to disqualify auditors and actuaries under section 345 and auditors under section 249 of the Act are separate powers. However, the procedures for exercising the powers in each case are the same and are set out in section 345:

1. (1)

   if the FSA proposes to disqualify an auditor or actuary, it must give him a warning notice (section 345(2): see DEC 2.2 (Warning notice procedure));

2. (2)

   if the FSA decides to disqualify an auditor or actuary, it must give him a decision notice (section 345(3): see DEC 2.3 (Decision notice procedure));

3. (3)

   an auditor or actuary who has been disqualified by the FSA may refer the matter to the Tribunal (section 345(5): see DEC 5.1 (The Tribunal)); and

4. (4)

   the FSA may remove any disqualification if it is satisfied that the disqualified auditor or actuary will, in future, comply with the duty in question.