The revised code came into effect in early 2020. It responded to FRC recommendations that the changes should be made to ensure the code differentiates “excellence in stewardship” and to promote transparency on the subject.
The review will take place in 2023 to allow for two years of reporting under the code in its revised form.
It will assess “whether the code creates a market for effective management and the need for further regulation in this area”, according to a government response to a consultation on strengthening auditing, reporting and governance published on May 31st.
This could undermine the profession, lead to a lowering of standards and result in regulations covering an ill-defined range of activities that would be difficult to monitor and enforce effectively.
In March, it was announced that 18 pension companies had signed up to the UK Stewardship Code, including the Pension Protection Fund, the Wales Pension Partnership and Barnett Waddingham.
The government has also set out the regime to replace the FRC with a “stronger” and “tougher” regulator.
The arrival of the Audit, Reporting and Governance Authority marks an important step for the audit sector.
The FRC has come under pressure over audit quality and perceived regulatory failures, including from the Local Authority Pension Fund Forum. He was also criticized following the collapse of construction company Carillion in 2018.
A regulator with a new look
Arga will be empowered to take action against anyone who breaches actuarial technical standards when performing actuarial work in the public interest, including for large pension plans.
The government has said its intention is to refine the UK’s audit and corporate governance framework and review the rules following the UK’s exit from the EU.
Large private companies will enter the regulatory regime, as well as listed companies.
Big companies will need to be more transparent about their profits and losses and provide more information to investors and the public about what they have done to prevent fraud.
Unlisted companies with more than 750 employees and more than £750 million in annual turnover will fall within the scope of Arga.
Meanwhile, directors of the biggest companies who breach their legal obligations or lie about the state of their company’s finances will face penalties.
Regulatory arbitrage potential
Like the FRC, Arga will oversee the actuarial profession. However, some concerns remain over the detail of the government’s proposals, which commentators say could have unintended consequences.
Matt Saker, president-elect of the Institute and Faculty of Actuaries, said these unintended consequences could lead to regulatory arbitrage.
He noted that it would be essential to clearly and carefully define the scope of Arga’s regulations, emphasizing activities in the public interest, and indicating how the rules will be monitored and enforced. consistent and proportionate.
In addition, he said risks remained around certain rules applying to IFoA members but not to non-members, who undertake the same work.
Eighteen new pension companies join the UK Stewardship Code
Wales Pension Partnership, the Pension Protection Fund and Barnett Waddingham are among 18 new pension companies that have successfully signed the UK Stewardship Code.
“We believe this could undermine the profession, lead to lower standards and result in regulation covering an ill-defined range of activities that would be difficult to monitor and effectively enforce,” Saker said.
“Actuaries are essential to the proper functioning of the financial system,” he continued.
“The work they do every day in the public interest ensures that people receive the pensions to which they are entitled, that insurance products are accurately priced for customers and that companies have sufficient capital to pay claims. of their customers.”