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The FCA has fined PwC £15m after it failed to alert the regulator of its belief that London Capital and Finance (LCF) was engaging in fraudulent activity.It comes as the audit regulator said that PwC encountered “significant issues” throughout its 2016 audit of LCF. It said that LCF’s actions, and PwC’s own work on the audit, led PwC to suspect that LCF might be involved in fraudulent activity and PwC was “duty bound” to report those suspicions to the FCA as soon as possible, but they failed to do so.
According to the regulator, PwC “eventually satisfied itself” that LCF’s 2016 accounts were accurate, but “whether or not its suspicions remained, it still had an obligation to report its previous concerns to the FCA”.
LCF fell 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 about 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.”
A spokesman for PwC told Sky News: “We have reached a settlement with the FCA to resolve an unintentional reporting breach.”
Accountancy Today has contacted PwC for comment.
