‘Constructive discussions’

Regulators can be tough and Andy Bell, founder of AJ Bell, a supermarket for investment funds, has learned the hard way. Bell has agreed to become a consultant to the company, instead of shifting from chief executive to non-executive deputy chair. But only after some “constructive discussions” with FCA officials concerned about governance.

Those chats involved messages “about the need for a clear distinction between the executive and non-executive roles in a regulated firm,” according to a statement from the company. It’s not personal, but a governance thing. Though, in the wake of that runaround, chair Baroness Helena Morrissey has decided to step down. Bell gets to nominate a non-exec to represent his interests as a shareholder. Sounds messy, but there you go.

This time it’s personal

Watchdogs have issued their final report detailing the gory details of how KPMG staffers managed to engage in “misconduct” when working on the audits of Regenersis and Carillion, the construction business that went bust so spectacularly in 2018. By way of recap, in July, regulators at the Financial Reporting Council fined the auditor £14.4m over misleading officials while they were undertaking regulatory inspection work. They also fined and barred several staff from membership of their professional body. Firm and staff were found guilty of creating and giving “false and/or misleading” documents and statements to inspectors.

The case is well known, but there is a piece of timely advice in the report for all auditors tempted to go astray: “A moment’s thought should have led them all to realise that their misconduct could lead to personal losses on their part far, far greater than the admission of deficiencies in their work or in its documenting.” That’s one for the ages.

G7 governance warning

A small governance spat has broken out between the G7 and Ukraine over the treatment of executives at GTSOU, Ukraine’s gas network provider, and Ukrenergo, the national electricity network operator. On Twitter, the G7’s German presidency warns the Ukrainian government not to meddle in leadership selection and stick to OECD governance standards, because they will “increase investor confidence, stop corruption and speed reconstruction post war”. Even in the midst of war, governance remains a topic to be debated.

California pipe dream?

Loyal readers will know that the US Securities and Exchange Commission (SEC), America’s financial watchdog, has been working on a package of mandatory climate risk reporting measures for Wall Street companies. Well, California had been hoping to go it alone with new disclosure rules but, in a sign of the febrile political atmosphere in the US, the efforts have gone “belly up”.

The reforms would have had all US companies that take more than $1bn in revenues, and trade in California, reporting on their greenhouse gas emissions. But there was much opposition. Scott Wiener, the state senate member who sponsored the bill, says he will bring it back. But some observers are a little circumspect on his chances of getting it through. “Whether it will face the same fate,” writes Cydney Posner of law firm Cooley, “—presumably with the SEC’s climate disclosure rules already in place—remains to be seen.” We’ll keep watch.