FRC wants to investigate the conduct of ex-employees in connection with financial irregularities at RSA Ireland in 2012

The Financial Reporting Council (FRC) is planning to investigate the conduct of certain individual FRC members, previously employed by RSA, in connection with financial irregularities at RSA Ireland.

The FRC said its probe would cover the year ended 31 December 2012 as well as “relevant periods” prior to 2012.

The investigation could lead to a disciplinary tribunal or sanctions for the FRC members involved.

RSA revealed at the end of 2013 that it had discovered problems in the claims and accounting functions at RSA Ireland.

An RSA spokesperson said: “We note today’s announcement that the Financial Reporting Council (FRC) intends to investigate matters in connection with financial irregularities at RSA Insurance Ireland Limited, as a result of the identification of historic issues within the claims and accounting functions announced at the end of 2013.

“This is not an investigation into RSA. The FRC’s remit is over members and member firms of accountants, auditors and actuaries. We understand that the investigation will therefore cover members of these professions who were employed by RSA at the time.

 “RSA Group will of course assist with these enquiries if requested to do so.”

The FRC is the independent, investigative and disciplinary body for accountants and actuaries.

FRC disciplinary investigations are usually started in two ways.

The professional bodies can refer cases to the FRC or the FRC may decide of its own accord to investigate a matter.

The conduct committee will then consider each case identified or referred to it and decide whether or not the criteria for an investigation are met.

Investigations are conducted by the executive counsel and the professional discipline team within the conduct division.

If they take a decision to start disciplinary proceedings, the executive counsel will deliver a complaint to the conduct committee. The conduct committee will then instruct the convener to appoint a disciplinary tribunal.

The five stages of the disciplinary process are:

  • Decision to investigate
  • Investigation
  • Decision whether to bring disciplinary proceedings against Member Firm or Member and, if so decided, referral to Disciplinary Tribunal
  • Tribunal hearing
  • Determination and imposition of sanction and/or costs order

The problems discovered within RSA Ireland’s claims and accounting eventually led to a £244m pre-tax loss at the insurer and prompted a turnaround plan, which included a £775m rights issue and sale of three non-core unites.

The issue also prompted the departure of then group chief executive Simon Lee.

Ex-Ireland chief executive Philip Smith left RSA in November 2013 amid the investigation into the insurer’s accounting practices.

Last month Smith was awarded €1.25m (£898,000) by the Irish Employment Appeals Tribunal (EAT), in an unfair dismissal case against RSA.

Smith claimed he had been made a scapegoat following the investigation by RSA.

The insurer has vowed to appeal the decision of the EAT.

RSA is also seeking redress through the courts for the €1.25m compensation awarded to Smith by the tribunal.

Topics