ADVOCACY: OVERVIEW
reviewed by the Accounting Advocacy SIC 12 in order to apply the same curtailed issuance, but if the defi nition
committee before being sent to the control criteria to all legal entities and to and the principles underlying the
project manager at the IASB. The improve disclosure requirements. guidance are encompassing, we pointed
comments can be viewed on the society’s The society shared the board’s belief out that there should be no need to
website in the advocacy section. that the proposals to introduce control provide such an emphasis about a
as a single criterion for consolidation of particular type of entity in the standard.
GOVERNANCE SURVEY all entities, as well as the clarifi cation of Last, the society noted that the
Corporate governance is in the news. At the control defi nition and related revised standard’s concentration on
a recent society meeting, Bob Jenkins, application guidance, are likely to which structures and instruments should
chairman of the Investment benefi t both users and preparers of be included within it has meant that
Management Association, said: “Surely fi nancial statements by providing more insuffi cient guidance has been provided
it must be a good thing for our industry principles-based and consistent on how consolidation should be
and industry more generally that requirements. This should lead to more achieved practically.
company boards listen to the agents of consistent application of the
their owners. Alas, many will not do so consolidation requirements, which APPROVED PERSONS RESPONSE
unless they believe there will be would benefi t users of fi nancial In late March, CFA UK responded to
consequences if they do not... Let us put statements by providing more the FSA’s consultation paper (CP08/25)
a body on the street when engagement comparable information. Nevertheless, on the Approved Persons Regime,
fails, so that future engagement might as the society has pointed out in welcoming the FSA’s increased focus on
better succeed. Voting directors down is previous responses, there is a tendency the suitability and responsibility of
likely to do more good for governance to demand greater disclosure in all areas. individuals working within the
than all the code revisions in the realm.” The society pointed out that the volume investment profession.
of material already disclosed is We supported the paper’s view that
substantial. It is important for users, appropriate standards of behaviour are
preparers and standard-setters to focus necessary to protect the interests of fi rms
on the quality and potential use of and their customers, and that regulatory
disclosures and not simply to seek oversight can assist in delivering this. As
additional disclosures for their own sake. the paper points out, the FSA’s ability to
The society acknowledged the benefi t hold individuals accountable for
of the consistent application of a carrying out their responsibilities
controlling entity model. However, the provides additional incentives for
society expressed its concern that the honest, prudent and sensible
Bob Jenkins
defi nition of control might, in some management. We believe that adherence
circumstances (control via equity to professional codes and standards such
L&G’s Peter Chambers and Peter instruments; structured entities), require as those expressed by CFA Institute (and
Montagnon, of the Association of judgment in its application that might to which members commit themselves
British Insurers, debated the right lead to variable application. each year) provide signifi cant additional
approach for governance at a society Notwithstanding this concern, we shared incentive and noted that the FSA might
meeting in late May and the society will the IASB’s view that this approach is wish to take into account an individual’s
shortly respond to the review of the preferable to a prescriptive approach professional commitments when
UK’s Combined Code on Corporate (such as that within FIN 46(R)) because reviewing candidates for signifi cant
Governance. To inform our response the publication of ‘bright line’ infl uence functions.
and the debate on May 28th, the society requirements tends to make it easier to However, we expressed concern about
has sought members’ views on structure entities in a way that evades the the FSA’s intention to assess competence
governance and the results of that survey principles implicit in the standard. as a basis for considering sanctions
have been reported on the society’s site. While the society appreciated the against individuals holding signifi cant
IASB’s efforts to address the issue of infl uence functions. Before considering
CONSOLIDATION control of structured entities, we proposals and publishing rules relating
In late March, CFA UK responded to commented that the focus on these to competence (and any consequent
the IASB’s exposure draft on entities within the exposure draft is too actions) the society recommends that
consolidation.The society welcomed the great. Not only has the current crisis the FSA seeks further feedback from
IASB’s interest in revising the control revealed parent company responsibility fi nancial fi rms and professional bodies
defi nition applicable under IAS 27 and for structured entities and severely in the sector.
WWW.CFAUK.ORG PROFESSIONAL INVESTOR 55
54-5554-55 Advocacy.indd 55Advocacy.indd 55 1/6/091/6/09 12:11:5312:11:53Professional Investor Summer 09.57 57 4/6/09 15:41:06
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