(Finance) – The Financial Conduct Authority (FCA), the British counterpart of CONSOB, has PricewaterhouseCoopers (PwC) fined £15m for failing to report to the regulator its belief that London Capital & Finance (LCF) may be involved in fraudulent activity. This is the first time the FCA has fined an audit firm.
It is explained that PwC found significant issues during its 2016 audit of LCF. An LCF executive acted aggressively toward the auditors, and the company provided PwC with inaccurate and misleading information. PwC found the audit to be very complex and took much longer than expected to complete. LCF’s actions and PwC’s work on the audit led PwC to suspect that LCF may be involved in fraudulent activity. “PwC was required to report such suspicions to FCA as soon as possible, but it did not do so,” it said in a statement.
PwC was ultimately satisfied that LCF’s 2016 accounts were accurate. Regardless of whether its suspicions persisted or not, he still had the obligation to report his previous concerns at the FCA.
LCF entered administration in January 2019 after the FCA ordered the company to withdraw misleading promotional material for the sale of mini-bonds. Thousands of investors were deceived because they had not been given the full picture of the product’s risks. The Serious Fraud Office has an open criminal investigation into LCF’s failure.
“THE auditors have a central role to play in keeping our markets clean. They have privileged access to information and are required by law to report suspected fraud to the FCA,” said Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA. “There were a number of warning signs that led PwC to suspect fraud. They should have acted immediately. Their failure to do so deprived the FCA of potentially vital information.”