FT publishes Audit Reform Letter signed by ShareSoc and UKSA

The FT has published our letter about “Letter: Investors are let down by the decision to dilute boardroom rules” see https://www.ft.com/content/ff6af1c7-6cb9-4fd8-9be0-43c11bcf89bb

The letter we wrote was as follows:

Sir

Many investors will be disappointed to read the article headed “Backlash spurs dilution of audit reform” (Report, November 9). The reforms are supposed to restore trust in governance and audit. Sir John Kingman’s review emphasised that the best way to do this was to focus on “the interests of consumers of financial information, not producers”. So why is the government being so swayed by the latter?

In submissions to the government, CFA UK, the Corporate Reporting Users’ Forum and representatives of retail investors all backed a form of UK “Sarbanes-Oxley”, the 2002 US federal law that established sweeping auditing and financial regulations for public companies.

This lays down requirements for an effective system of internal controls, signed off by the company’s leaders whose assessment is subject to external audit. The government’s impact assessment cited evidence that the US regime had resulted in more accurate financial information, more conservative accounting practices and a decrease in fraud.

The cost — £2.3bn spread over 10 years — sounds high but is less than a tenth of a per cent of the £2.6tn market value of the FTSE All-Share. The annual ongoing cost would be less than 0.004 per cent of the £5tn-plus enterprise value of the index. Debt holders also have a keen interest in accurate financial information.

The solution left to investors is to press boards to commission external audit as part of the audit and assurance policy. It is to be hoped that a directors’ statement on the effectiveness of internal controls will be mandatory so as to make their responsibility for accurate financial information explicit and actionable.

We support the government’s interest in fostering a healthy business environment and that is what the proposed reforms aim to do. So why water down measures that would reduce the risk of fraud and misstatements? As usual, however, the UK seems likely to fall back on the corporate governance code, which the good follow and the bad neglect.

Will Goodhart, Chief Executive, CFA UK

Jane Fuller, Fellow, CFA UK

Jeremy Stuber Chair, CRUF

Charles Henderson Chair, UK Shareholders’ Association

Cliff Weight Director, ShareSoc

ShareSoc have made our views very clear in the various responses to consultations from Government, BEIS, FRC, FCA, etc.

I shall be writing to my MP, Crispin Blunt, asking him to forward our letter to the Chancellor and the Secretary of State for Business and ensure they are aware of our views. (I have a rule not to write to my MP more than twice a year, but feel this is of sufficient importance to write to him; and when I see him at our local Conservative Association annual dinner later this month, I shall be able to discuss this with him in person.)

I shall also ask a question at AGMs and company meetings that I attend along the lines of:

Do the Company and its Directors support the audit reform proposals that are intended to restore trust in governance and audit? The appears to have been some lobby against these proposals which are in the best interests of shareholders and from which good companies have no reason to fear. Can you reassure your shareholders that you have not been part to any such lobbying?

Cliff Weight, Director, ShareSoc

Post Date: November 13, 2021

Cliff Weight says:

15th November 2021 at 9:25 pm

Here is a template letter you can use to write to your MP if they are in the Labour Party. In the next comment is a template for a Conservative MP.

Dear MP name,

I write to you as a constituent and a member of not-for-profit organisation, ShareSoc, the UK Individual Shareholders Society.

ShareSoc represents the interests of ordinary people who want to invest their savings in the stock market.

In the wake of a series of accounting scandals, including the collapse of contracting firm Carillion, the government launched a series of consultations aimed at reforming corporate governance and the audit industry with a view to improving standards. ShareSoc supported these initiatives and responded positively to the consultations.

We now read that the government appears to be backtracking and watering down the proposals, presumably as a result of lobbying by vested interests. We have co-signed a letter responding to this, which has been published in the Financial Times. See FT publishes Audit Reform Letter signed by ShareSoc and UKSA – ShareSoc.

I would be most grateful if you could draw this matter to the attention of your colleague, Pat McFadden, Shadow Economic Secretary to the Treasury and encourage him to raise questions in the House about this government backsliding and lowering of standards.

If Pat or his team would like further information about this, please do not hesitate to put them in touch with me and I will be delighted to furnish further details about the consultations I am referring to.

Kind regards,

add your name and address (your MP won’t respond if you do not include your postal address as they need this info to check you are a constituent and they only respond to constituents.)

15th November 2021 at 9:30 pm

Here is a template letter you can use to write to your MP if they are in the Conservative Party

I write to you as a constituent[, a member of the Conservative Party] and a member of not-for-profit organisation, ShareSoc, the UK Individual Shareholders Society.

I would be most grateful if you could draw this matter to the attention of your colleagues, the Chancellor and the Secretary of State for Business, and question each about backsliding and lowering of standards.

If Rishi, Kwasi or their teams would like further information about this, please do not hesitate to put them in touch with ShareSoc who will be delighted to furnish further details about the consultations I am referring to.

[I look forward to seeing you at our Reigate and Banstead Conservative Association Dinner on 25 November.][or some similar nice ending]

With warm regards,

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Meeting Type/Venue:	Meetings are in-person in a pub near to Waterloo station in London.
Meeting Frequency/Timing:	Meetings are bi-monthly on a Monday from 10:45am to 4:30pm. Members are expected to also pay for their own lunch which secures the group free use of a private room in the pub. The cost is expected to be £35-40 per person, per meeting, in addition to your SIGnet membership fee.

Group description:	SIGnet Taunton is a new group with around 10 keen members at present, with a range of investment styles and experience. We welcome new members.
Meeting Type/Venue:	In person meetings at a golf club near to the centre of Taunton.
Meeting Frequency/Timing:	We meet on the first Monday of every month at a golf club near to the centre of Taunton, 11am until 3pm with a lunch break.

Group description:	An online group for those who are new to investing, or have only been investing for a few years. Including topics such as: – What is a share or a bond, why and how to buy them. – Comparing funds, unit trusts, Investment trusts and exchange traded funds. – Portfolio management and diversification. – ISAs, pensions, SIPPS and how to save tax. – How terms such as PE ratio and dividend yield are used to value a share. – How to use technical analysis or charting.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Monday of the month at 7:00pm.

Group description:	An online group for those who already have some experience in investing. Covering topics such as finding companies to invest in, financial statements and ratios, valuation / margin of safety, analysis of companies and investment trusts and exchange traded funds.
Meeting Type/Venue:	Online using Zoom.
Meeting Frequency/Timing:	Meetings are usually held on the last Wednesday of the month at 7:00pm.

Group description:	The Equity Income Group welcomes investors of all levels of experience, from beginners to advanced. The focus of meetings is on dividend paying Investment Trusts, though there is also discussion around individual shares.
Meeting Type/Venue:	Meetings are held online.
Meeting Frequency/Timing:	Meetings are held every 6 weeks on a weekday between 7 and 8:30pm.

FT publishes Audit Reform Letter signed by ShareSoc and UKSA

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Meeting Type/Venue:	In person at a friendly pub close to Piccadilly Circus
Meeting Frequency/Timing:	Monthly during the evening on the first Wednesday of the month.

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Meeting Type/Venue:	Online via Zoom
Meeting Frequency/Timing:	The first Tuesday of every month from 7 to 9pm

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Meeting Type/Venue:	We aim to meet on the last Tuesday of each month in a private room at a pub in Playhatch. Start time 7pm with members encouraged to meet up around 6pm for a bite to eat / drink before hand, if their diaries allow.
Meeting Frequency/Timing:	7pm on the last Tuesday of the month. Meetings likely to last about two hours but with informal ‘overspill’ before / after.

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Meeting Type/Venue:	Regular Zoom meetings interspersed with occasional face to face meetings and social activities in the North West.
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