The Local Authority Pension Fund Forum (LAPFF) has branded the Financial Reporting Council (FRC) unworkable and has called for it to be broken up, it has emerged.
In its submission to The Kingman Review of the FRC, an independent review into the suitability of the council, LAPFF said that there has been a “serious flaw” in the policy making process and urged the council to be overseen by parliament so it can uphold the public interest.
The government consultation, which ran from the 6 June until the 6 August 2018, sought to access the FRC’s role and purpose, effectiveness, ability to prevent corporate failure, relationship with the government and its governance and leadership.
In its submission, LAPFF said that is sees “at least three incompatible functions being run by the same body”, including standards, enforcement and the ‘comply or explain’ governance code.
It said: “The current position is a legacy of the FRC setting itself the objective of being a ‘market-led’ body and carving out a niche for itself as if it were such a private sector body, whilst in law and reality it was always a public body. Second, standard setting should be separate from enforcement.
“That is a basic principle of the justice system generally, with the separation of powers. There needs to be the possibility of constructive tension between the two functions which, for example, gives scope for criticism of standards by the enforcer in such a way that the system can correct the relevant failure.”
The LAPFF said that the FRC should be replaced by alternative bodies on a statutory basis in order to avoid current and past mistakes.