Deloitte fined £14m over conflict of interestMonday 09 September 2013 11.36
Accountancy firm Deloitte has been fined a record £14 million for failing to manage conflicts of interest in its advice to collapsed British carmaker MG Rover Group.
The Financial Reporting Council, which brought the case against Deloitte, said an independent tribunal also backed the watchdog's call for a severe reprimand of the firm.
Deloitte repeated previous statement that it disagrees with the tribunal's main conclusions.
The FRC has been given stronger sanctioning powers after being criticised for being too lenient in the past on accountants.
"The sanctions imposed are in line with the FRC's aim to ensure penalties are proportionate and have the necessary deterrent effect to prevent misconduct and bolster public and market confidence," FRC's executive director for conduct, Paul George, said in a statement.
The previous record fine was £1.4 million for PricewaterhouseCoopers in 2012 after it wrongly said JPMorgan Chase bank was keeping customer money ringfenced from its own.
The fine was below what the FRC wanted.
In July the tribunal found that all 13 allegations the FRC had brought against Deloitte were proven. FRC had asked for a fine of between £15 and 20 million.
The tribunal also agreed to a fine of £250,000 for Maghsoud Einollahi, a partner with Deloitte at the time. He has also been banned from the profession for three years.
The carmaker was put into administration in 2005 with debts of £1.4 billion and the loss of 6,000 jobs. Four of its directors, the "Phoenix Four" had set up Phoenix to buy the loss-making carmaker for a token £10 five years earlier.
Deloitte and Einollahi had acted as corporate finance advisers to firms involved with MG Rover and the Phoenix Four, including giving tax advice while Deloitte audited MG Rover.
The accountancy firm, one of the world's "Big Four", reiterated comments it made in July that the ruling could restrict the advice accountants can give firms.
"Over the coming weeks, we will continue our discussions with relevant stakeholders and professional bodies about the potentially wide ranging impact on the profession and wider business community of the tribunal findings," Deloitte said.
The fine will go to the UK Consultative Committee of Accounting Bodies, an umbrella group for several professional bodies, which pays the costs of FRC disciplinary cases.