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Excluded practitioner goes off the grid during ICAEW investigation

A sole practitioner’s continuous failure to respond to a Quality Assurance Department (QAD) visit resulted in exclusion from the ICAEW.

29th May 2020
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As reported in May’s ICAEW’s disciplinary report, Nicholas Smeed’s decision not to engage with the QAD visit not only cost him his professional membership, but he must also bear the full costs of the tribunal of £5,488 and a financial penalty of £5,000.

The trouble started for the sole practitioner of Carl Associates when he failed to submit the pre-QAD visit questionnaire. A subsequent onsite visit discovered that he had not carried out an AML risk assessment as part of the client due diligence procedures, nor had he fulfilled periodic reviews of the firm’s compliance with AML regulations.

But as the reminders kept coming, Smeed did not budge and did nothing to rectify the two areas of action. With Smeed keeping quiet on the matter, the issue was referred to the ICAEW’s PAC in June 2017. The Practice Assurance Committee (PAC) set Smeed until 5 January 2018 to respond.

It wasn’t until 25 January 2018 that the Essex-based practitioner provided information via email, but by that point, the PAC had already met and referred the case to the Professional Conduct Committee (PCD). The PAC instructed Smeed to pay for a follow-up QAD visit.

Falls off the grid

The tardy practitioner didn’t see eye-to-eye with this follow-up visit on 31 May 2018 and felt his emails adequately resolved the issue. The meeting ended up being put on hold. Smeed was told that the visit could not be cancelled since he had not yet demonstrated compliance.

From that point, Smeed went to ground and did not respond to any communications from the Institute. Requests from the PAC for Smeed to provide AML and CDD information were ignored in June and again in September, while efforts to contact him by letter and phone call worked to no avail.

Another QAD visit was arranged at Carl Associates in December 2018, but the reviewer abandoned the visit after being left outside the closed door without an answer from the sole practitioner.

The tribunal viewed Smeed’s failure to respond as “willful and deliberate” and “was symptomatic of his attitude toward his own professional body”.

Taking into account Smeed’s failure to engage with the Institute, the tribunal felt that the only sanction available to them was exclusion.

Chris Cope, solicitor/ director of ANCS Ltd, comments:

Here is a clear case of a sole practitioner no longer wishing to remain a chartered accountant. No problem with that. But why incur a liability of over £10,000 in doing so? Once the enquiry has started, resignation is not an option. The ICAEW can and will refuse to accept a member’s resignation. Best, therefore, to cooperate and once the QAD is satisfied, then resign.

With regard to the outstanding £10,488, the Institute will pursue payment and take legal proceedings. Once judgement is obtained (which will include interest and costs), full enforcement measures will be taken.

I do find it difficult to understand the reason why disciplinary tribunals decide to impose a fine in addition to excluding the individual from membership. Is not this a double punishment? Magistrates would never impose a prison sentence and a fine as well.

* * *

In other news, a Greatham-based accountant who claimed for reinvestment relief when the client was not eligible has accepted a consent order of £10,000 and a severe reprimand.

Catherine Steadman faced three complaints that she made the claim on 2015-16 self assessment tax returns in respect of two clients. The Investigation Committee decided that she knew or should have known the clients were ineligible.

In the third complaint, the Investigation Committee flagged another blunder where Steadman omitted capital gains from the tax return which was the same tax return in which she had made the reinvestment error.

In accepting the consent order, Steadman comes away with a hefty fine and severe reprimand but avoids going to a disciplinary tribunal.

Chris Cope, solicitor/ director of ANCS Ltd, comments:

A great pity that Ms Steadman did not approach me for advice. By accepting the consent order, Ms Steadman has admitted liability. Both clients will be informed of the decision and can use the consent order in a negligence claim. But did Ms Steadman obtain the approval of her insurers before accepting the consent order? I doubt it. Insurers could avoid liability on both claims on the basis of a material failure to disclose.

What Ms Steadman should have done was to have rejected the consent order and taken the case to the Disciplinary Committee. Her insurers would almost certainly have underwritten the legal costs of representation at the disciplinary hearing.

The message is simple. NEVER accept a consent order without first discussing the matter with your insurers. If they agree that you can accept the consent order, ensure that your insurers confirm their advice in writing.

If you are presently subject to a complaint, you can call the Accountants National Complaint Services Limited for advice (01769 581581) or visit their website here

Replies (2)

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By sammerchant
02nd Jun 2020 11:04

I agree with Chris Cope: to exclude the member and also fine him is a little bit like bayoneting the wounded on the battlefield. It is both heartless and excessive.

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By johnt27
03rd Jun 2020 10:43

"I do find it difficult to understand the reason why disciplinary tribunals decide to impose a fine in addition to excluding the individual from membership. Is not this a double punishment? Magistrates would never impose a prison sentence and a fine as well."

Really? When typically excluded accountants just carry on trading, just without their chartered status, the comparison with the machinations of a magistrates court are way off. It seems only reasonable IMHO.

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