UK Fined PwC £15m over London Capital & Finance Audit
The UK Financial Conduct Authority (FCA) imposed a 15 million-pound-sterling fine on PricewaterhouseCoopers for not reporting suspected fraudulent activities at London Capital & Finance plc.
The regulator said despite facing “significant issues” during its audit of the mini-bonds issuer in 2016, with a senior individual acting aggressively towards auditors and providing them with inaccurate and misleading information, PwC did not report it to FCA and ultimately convinced itself that their accounts were correct.
London Capital & Finance collapsed in 2019 over unfair marketing of its mini-bonds.
“The FCA has fined PricewaterhouseCoopers LLP (PwC) for failing to report to the regulator their belief that London Capital & Finance plc might be involved in fraudulent activity. This is the first time the FCA has fined an audit firm”.
PwC encountered significant issues throughout their 2016 audit of LCF. A senior individual at LCF acted aggressively towards auditors, and the firm provided PwC with inaccurate and misleading information.
PwC found the audit very complex, and it took considerably longer to complete than anticipated. LCF’s actions, and PwC’s own work on the audit, led PwC to suspect that LCF might be involved in fraudulent activity.
PwC was duty bound to report those suspicions to the FCA as soon as possible, but they failed to do so. The audit company eventually satisfied itself that LCF’s 2016 accounts were accurate.
“Whether or not its suspicions remained, it still had an obligation to report its previous concerns to the FCA”, the regulator said in the statement.
LCF went into administration in January 2019 after the FCA ordered the firm to withdraw misleading promotional material for the sale of mini-bonds. Thousands of investors were misled because they were not given the full picture of the risks of the product. The Serious Fraud Office has an open criminal investigation into the failure of LCF.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA, said: ‘Auditors have a central role to play in keeping our markets clean. They have privileged access to information and they are required by law to report suspicions of fraud to the FCA.
‘There were a number of red flags that led PwC to suspect fraud. They should have acted on them immediately. Their failure to do so deprived the FCA of potentially vital information.’ #UK Fined PwC £15m over London Capital & Finance Audit Supreme Court Grants Local Governments Financial Autonomy
