Two fingers to the regulator

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Imagine a hypothetical situation; the Bank of England fines and reprimands the chief executive of Barclays Bank, the head of its northern England division and one other executive over an extensive fraud by a client eight years ago. Imagine then that Barclays turns round and issues a statement condemning the Bank of England's actions as "totally unjust." Moreover Barclays declares it has complete condfidence in the executives and will proceed to ignore entirely the Bank of England's actions.

Something similar happened yesterday. The Joint Disciplinary Scheme, an independent regulator for accountants, does not have the Bank of England's stature and authority. Even so, fining and reprimanding the managing partner of Touche Ross over his role in the Barlow Clowes scandal is pretty seismic stuff. The JDS also fined and reprimanded the head of Touche's northern region and another partner who has since left.

The grey-suited bean-counters have responded in equally robust fashion. Far from acknowledging the JDS's actions, or even suspending the partners, Touche publicly blasted the JDS for "a complete lack of balance" and said its criticisms were unwarranted. Privately, senior Touche figures go even further, saying that the JDS has gone looking for scapegoats, with its own partners singled out amongst hundreds of other solicitors, intermediaries and merchant bankers who were similarily embroiled in Peter Clowes' schemes. As this week's Department of Trade and Industry report concedes, moreover, Clowes was a skilled manipulator and repeatedly lied to his professional advisers.

It is perhaps symptomatic of the low regard in which the JDS is held that Touche is not even bothering to appeal. The excuse is that this would be a costly and lengthy process which would merely prolong the stress the partners have suffered in the eight years since Barlow Clowes' collapse. Ummm.

Even accepting that this is true, the episode raises some important questions about the accountability and regulation of accountants. Either the JDS is right, in which case Touche's audit clients have cause for very real concern about both the named individuals and the firm, or the JDS has got it wrong, in which case it has no right to act as the profession's judicial authority. Either way, Touche's two-fingers-up response makes it an incredible authority.

The Barlow Clowes fines are the last to be imposed under the old "Star Chamber" method of inquisition that the JDS has traditionally used. In 1991 the scheme was reformed in favour of a system that allows subjects to see the evidence, present their own case and cross-examine witnesses. The profession believes it an altogether fairer approach. Others might reasonably think that the profession's system of self-regulation has been further diluted in favour of the practitioner.