A view of the London skyline shows the City of London financial district, seen from St Paul’s Cathedral in London, Britain February 25, 2017. REUTERS/Neil Hall/File Photo Acquire Licensing Rights
LONDON, Nov 7 (Reuters) – Britain’s financial watchdog will ditch more than half of a planned reform of its governance code for companies and avoid introducing internal controls as rigorous as those faced by U.S. companies for ensuring accurate financial statements.
The Financial Reporting Council (FRC) has faced a backlash in London’s financial centre, where critics argue that toughening up the code would knock the hub’s post-Brexit competitiveness as it vies with New York for listings.
The FRC had already held a public consultation on changes to its Corporate Governance Code, a form of ‘soft law’ that companies apply on a ‘comply or explain’ basis.
The Capital Markets Industry Taskforce, chaired by LSE CEO Julia Hoggett, has described the code as “comply or else”, meaning it has become a straitjacket.
The FRC said on Tuesday that it intended to publish a revised code in January 2024, but there would be significant changes to its 18 original reform proposals, with many ditched.
“The main substantive change we will take forward concerns revisions to our original proposal on internal controls,” the FRC said in a statement.
“This includes allowing more time for its implementation and ensuring the UK approach clearly differentiates from the much more intrusive approach adopted in the US.”
Britain has already refused to introduce a UK version of the tough “Sarbanes-Oxley” (SOX) rules in the United States that require senior U.S. company officials to personally attest to internal controls aimed at ensuring the accuracy of company statements.
Instead, the FRC had sought to introduce a “SOX-lite” regime via the code, though it did not elaborate on Tuesday how its original proposal would be rewritten.
The FRC also said it would not take forward over half of its original proposals for reforming the code, in particular those relating to the role of company audit committees on environmental and social governance, and modifications to existing code provisions around diversity.
Reporting by Huw Jones
Editing by Kirsten Donovan and Mark Potter
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