LONDON (Reuters) – Britain’s Financial Reporting Council has fined three audit firms including PWC and EY about 9.5 million pounds ($12 million) in aggregate for failures in their handling of London Capital & Finance (LCF), which collapsed in 2019 and left investors facing more than 237 million pounds in losses.
The watchdog said on Tuesday that it had fined PWC 4.9 million pounds and had imposed a penalty of 4.4 million pounds on rival firm EY for falling below expected standards while overseeing LCF’s accounts in 2016 and 2017.
A third, smaller firm, Oliver Clive & Co, received a 42,000 pound fine for an earlier audit of LCF in 2015.
All of the auditors cooperated with the FRC’s investigation, the watchdog said, adding that none of the individuals or companies involved were found to have acted dishonestly or recklessly.
A spokesperson for PwC said the firm has made “significant” changes to its audit methodology, policies and guidance in the eight years since the failures, with the efforts recognised by regulators in recent FRC inspection and supervision reports.
A spokesperson for EY said the delivery of high-quality audits remained its “absolute priority” and it was investing in technology and processes to drive continuous improvement.
Oliver Clive & Co did not immediately respond to a request for comment.
UK taxpayers have paid about 120 million pounds to compensate investors in LCF, which sold complex bonds to thousands of retail investors before lending the proceeds to commercial clients.
The company was regulated by the Financial Conduct Authority prior to its demise.
“These breaches are made considerably more serious by the fact that all of the auditors knew they were auditing an expanding business which was engaged in selling unregulated financial products to retail investors, and that potential investors might place reliance on the clean audit opinions,” Jamie Symington, the FRC’s Deputy Executive Counsel, said of all three audits.
($1 = 0.7978 pounds)
(Reporting By Sinead Cruise; editing by David Evans and David Goodman)
