DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS. ACCA s Offices, 29 Lincoln s Inn Fields, London, WC2A 3EE

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1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr David Peter Lowe Heard on: 21 August 2015 Location: ACCA s Offices, 29 Lincoln s Inn Fields, London, WC2A 3EE Committee: Mr John Wilson (Chairman, Accountant), Mr Joseph Comyn (Lay) and Ms Lynne Jones (Lay) Legal Adviser: Mr Andrew Granville Stafford Persons present and capacity: Ms Kayleigh Long (ACCA Case Presenter) Ms Hanna Swist (Acting Committee Officer) and Ms Jill Baldwin (Committee Officer) PRELIMINARY 1. The Disciplinary Committee of ACCA ( the Committee ) met to consider a report against Mr David Lowe. The Committee had before a bundle of papers (pages 1 to 225), an additional tabled document (page 226) and a bundle of service papers (pages 1 to 10). PROCEEDING IN ABSENCE 2. The notice of hearing was sent to Mr Lowe at his registered address on 12 June Mr Lowe acknowledged receipt of the service bundle by letter date 18 August In that letter he said that he would not be attending the hearing for reasons related to the effect the stress of the hearing would have on him. He also wrote I hereby declare my acceptance that the Hearing be heard in my absence. 1

2 3. The Committee was satisfied that the requirements of regulations 9(1) and 21(1) of the Chartered Certified Accountants Complaints and Disciplinary Regulations 2015 ( the Disciplinary Regulations ) as to service had been complied with. The Committee went on consider whether to proceed in the absence of Mr Lowe. The Committee bore in mind that the discretion to do so must be exercised with the utmost care and caution. 4. The Committee took into account the fact that Mr Lowe asserted in his letter of 18 August 2015 that his health may be adversely affected by attending the hearing. However, the details he had given relating to his health were scant and were not supported by any medical evidence. In addition Mr Lowe accepted that the Committee was likely to proceed in his absence and expressed the hope that matters would be finalised as soon as possible. 5. Mr Lowe had been offered the opportunity by an sent on 3 August 2015 to take part in the hearing by telephone. He had not specifically responded to that , although he had said in his letter of 18 August 2015 that he would be happy to answer any questions the Committee had. At the request of the Committee, the Committee Officer telephoned Mr Lowe at the number given on his letterhead to ask if he wished to take part in the hearing by telephone. The Committee Officer tried the telephone number on several occasions but it was constantly engaged. 6. The Committee decided in all the circumstances it was appropriate to proceed in Mr Lowe s absence. Mr Lowe had not applied for an adjournment and there was no reason to think that he would attend the hearing on a future occasion if it was adjourned. He had been offered the opportunity by on 3 August 2015 of taking part in the hearing by telephone but had not availed himself of it. His letter of 18 August 2015 was in the Committee's view effectively a request to proceed in his absence. In the Committee's view it was both in Mr Lowe s interests and the public interest to do so. ALLEGATIONS AND BRIEF BACKGROUND 7. The allegations against Mr Lowe are as follows: Allegation 1 2

3 Pursuant to byelaw 8(a)(i), David Lowe is guilty of misconduct in that from 18 March 2014 for a period of five years he is disqualified from holding the position of director of a company or acting as an insolvency practitioner. Allegation 2 (a) Pursuant to bye-law 8(a)(i) it is alleged that David Lowe is guilty of misconduct in respect of any or all of the following: (i) Between 2003 and 2012 he carried out public practice, without authorisation, contrary to Global Practising Regulation 3(1)(a) (ii) In 2003 and 2004 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Practising Regulation 3(2) of Annex to the Global Practising Regulations (iii) In 2005 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2) (iv) Between 2006 and 2012 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2)(a) (v) Between 2006 and 2012 he was the principal of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2)(b) or (b) Pursuant to bye-law 8(a)(iii) David Lowe is liable to disciplinary action by reason of any or all of the following: (i) Between 2003 and 2012 he carried out public practice, without authorisation, contrary to Global Practising Regulation 3(1)(a) (ii) In 2003 and 2004 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Practising Regulation 3(2) of Annex to the Global Practising Regulations 3

4 (iii) In 2005 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2) (iv) Between 2006 and 2012 he was a director of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2)(a) (v) Between 2006 and 2012 he was the principal of DPL Business Services Limited, a firm in which public practice was carried on, without authorisation, contrary to Global Practising Regulation 3(2)(b) 8. Mr Lowe is a Fellow of ACCA and was admitted to membership in He has never held a practising certificate. Between 1995 and 2003 he was a sole practitioner. In 2003 he incorporated DPL Business Services Ltd ( DPL Ltd ) and became a director of the company. He and his wife were its only shareholders. DPL Ltd provided bookkeeping and other financial and accounting services. From 2004 to 2010 its turnover ranged from 18,829 to 88,404 per annum. 9. DPL Ltd got in to financial difficulties and on 21 March 2012 was placed in Creditors Voluntary Liquidation. The company had an excess of liabilities over assets in the sum of 242,463. Its principal creditor was HMRC. 10. On 24 February 2014 Mr Lowe entered in to a disqualification undertaking pursuant to section 1A of the Company Directors Disqualification Act The undertaking disqualifies Mr Lowe for a period of five years from 18 March 2014 from being a director of a company or acting as an insolvency practitioner. 11. In the schedule to the undertaking Mr Lowe admitted that he had caused DPL Ltd to trade to the detriment of its creditors, in particular HMRC. 12. Mr Lowe wrote to ACCA on 7 March 2014 informing it of his disqualification. During the ensuing investigation it became apparent that Mr Lowe may have been engaging in work amounting to public practice. 13. Regulation 3 of the Global Practising Regulations ( GPR ) as applicable at the relevant times prohibits a member of ACCA carrying out public practice 4

5 or being a director or principal of a firm where public practice is carried out without holding a practising certificate. 14. Regulation 4(1) of the GPR, as applicable since 2004, defines public practice as including: signing or producing any accounts or report or certificate or tax return concerning any person's financial affairs, whether an individual sole-trader, an unincorporated body or a firm, in circumstances where reliance is likely to be placed on such accounts or report or certificate or tax return by any other person (the "third party"), or doing any other thing which may lead the third party to believe that the accounts or report or certificate or tax return concerning the financial affairs of such a person have been prepared, approved or reviewed by the practitioner 15. Mr Lowe was asked by ACCA to provide a breakdown of DPL Ltd s fee income. He gave the following percentages, which he said had remained relatively static over the years: Bookkeeping 55% Payroll 10% VAT 5% Company Secretarial 5% Final Accounts 15% Taxation 10% 16. ACCA s case is that Final Accounts and Taxation fall within the definition of public practice, and therefore 25% of DPL Ltd s business amounted to public practice. 17. In his responses to ACCA s enquiries during the course of the investigation, Mr Lowe has stated as follows: I have reviewed the work carried out over the period in question and can confirm that much of the work was within the confines of bookkeeping... I did prepare Self Assessment returns, VAT returns 5

6 and prepared accounts for our other clients... I have never signed any accounts or certificates in a professional capacity. From the beginning I was confident that I was within the rules as stated for public practice, admitted as defined in the 1995 rule book. However, during the course of this enquiry I have since realised I have strayed into territory that would come under the banner of public practice. (Letter, 19 June 2014) I would confirm that I have prepared Self-Assessment Returns for [sic] information either provided by the client or else as determined from the Report and Accounts I had prepared for the client or even a combination of both sources of information. I would then prepare an Income Tax Computation, with where applicable Capital Allowance Computations. Additionally, if other sources of income were achieved for example Income from Property I would produce calculating schedules and submit these together the evidence in support of those schedules. (Letter, 29 June 2014) In order to be totally clear 15% of our income would relate to the completion and submission of Financial Statements in the manner of Profit & Loss Account, Balance Sheet and Relevant Notes and if applicable a Directors Report. Again to emphasise our position NO AUDIT REPORT HAS EVER BEEN PROVIDED by us. Furthermore, NO FINANCIAL STATEMENTS HAVE EVER BEEN SIGNED by us. If of course the client were not a limited company we would have submitted either sole trader or partnership accounts, whichever was appropriate. (ibid) For the avoidance of doubt. I have submitted Income Tax, Corporation Tax and Capital Gains Tax computations, all with relevant supporting schedules and those supporting schedules also supported by prime entry information (ibid) As regards the background laid out on the Report, it is my position that I brought all of the matters which are the subject of the Report to ACCA's attention and voluntarily... As part of the detailed research and considering my future role, it became apparent to me that I may require a practising certificate as a member of ACCA for what I planned to do going forward. And, in fact, I may have already 6

7 needed one more recently... It was, in fact, the practising certificate issue that first prompted me to make contact with the ACCA, not the disqualification undertaking per se, when I sought advice by telephone on the need for a practising certificate... As I have conceded, when I first started out in practice I was clear I did not need a Practising Certificate. It may be the case that I may not have kept up to date with revisions to the Rules issued by ACCA. (Letter, 1 September 2014) DECISION ON ALLEGATIONS AND REASONS 18. The Committee considered the documents before it, the submissions of Ms Long on behalf of ACCA and the advice of the Legal Adviser. It took in to account the contents of Mr Lowe s letters and s to ACCA contained in the bundle. The Committee bore in mind that the burden of proving an allegation rests on ACCA and the standard to be applied is proof on the balance of probabilities. 19. The Committee first considered allegation 1. It was not in dispute that Mr Lowe has been disqualified from holding the position of a company director. Indeed, it was accepted by ACCA that Mr Lowe had volunteered the fact of his disqualification to ACCA. Therefore the issue on allegation 1 was whether this amounted to misconduct. 20. The Committee were in no doubt that an accountant being disqualified from acting as a director for a period of five years would be regarded as deplorable by fellow members of the profession. The public are entitled to expect that accountants meet certain standards and being disqualified from acting as company director is inconsistent with those standards. Therefore the Committee found that Mr Lowe s disqualification amounts to misconduct and accordingly found allegation 1 proved. 21. The Committee went on to consider allegation 2(a). Mr Lowe admitted that he has, through the vehicle of his company DPL Ltd, carried out work which includes preparing final accounts and tax returns. The Committee considered whether this amounted to public practice as defined in Global Practising Regulation 4(1)(b). The definition makes it clear that producing accounts or tax returns amounts to public practice where reliance is likely to be placed on them by third parties. 7

8 22. In the Committee's view it was apparent that accounts produced for business purposes and tax returns are likely to be relied on by third parties. Clearly a tax return will be relied upon by HMRC. Business accounts generally form the basis of a tax return, and therefore are also likely to be relied upon. Indeed, one of the reasons clients use the services of an accountant to prepare accounts and tax returns is because of their status. It is all but inevitable therefore that the engagement of an accountant to prepare documents of this nature is done in the anticipation that third parties may rely on them. The Committee further noted that Mr Lowe has, in his letters to ACCA, accepted that what he did strayed in to the area of public practice. Therefore the Committee finds that the work Mr Lowe did in preparing final accounts and tax returns amounted to public practice. 23. It was clear from the evidence that Mr Lowe was a director of DPL Ltd for the period from its incorporation in 2003 until its liquidation in It was also clear that he was the driving force behind the business as well as a 50% shareholder and therefore clearly a principal in the business. It followed therefore that sub-paragraphs (i) to (v) of allegation 2(a) were made out. 24. The Committee went on to consider whether those matters collectively or individually amounted to misconduct. The Committee bore in mind that these activities had gone on for an extensive period and formed a significant part of DPL Ltd s turnover. The consequence of carrying on public practice without a practising certificate is that Mr Lowe s work went unregulated and unsupervised by his professional body. The very reason for requiring members of ACCA to have practising certificates is to avoid the potential danger to the public which is a consequence of unregulated practice. The Committee was in no doubt that Mr Lowe s actions as set out in allegation 2(a)(i) to (v) inclusive amounted to misconduct. 25. Therefore the Committee found allegation 2(a) proved. 26. Allegation 2(b) is an alternative to allegation 2(a) and therefore there was no need for the Committee to consider it. SANCTION AND REASONS 27. In light of its findings on the allegations, the Committee considered what, if any, sanction was appropriate and proportionate. It took into account the 8

9 submissions of Ms Long and ACCA s Guidance for Disciplinary Sanctions ( GDS ). The Committee bore in mind that the purpose of sanctions was not punitive but to protect the public, maintain confidence in the profession and declare and uphold proper standards of conduct and behaviour. 28. The Committee decided it was not appropriate to make no order given the nature of the misconduct. It therefore considered the available sanctions in ascending order of severity. 29. Having found that Mr Lowe s disqualification from holding the office of a director would be regarded as deplorable by the profession, the Committee decided that neither an admonishment nor a reprimand would be appropriate. The issue for the Committee's consideration was whether this misconduct was fundamentally incompatible with continued membership of ACCA. 30. The Committee decided that it was. Given that Mr Lowe had been declared unfit to be a company director, it was in the Committee's view inconsistent that he should remain a member of a professional accountancy body. The Committee accepted that Mr Lowe had co-operated with ACCA's investigation and had brought the matter to ACCA s attention. Nonetheless, this misconduct was so serious that nothing less than an order excluding Mr Lowe from membership would be appropriate and proportionate in this case. 31. The Committee further determined that exclusion would be the appropriate sanction in this case for carrying on public practice without authorisation. As already noted, the failure to obtain a practising certificate means that practice goes unregulated with consequent dangers to the public. The breaches in this case were not minor; they were both significant and prolonged. 32. The Committee noted that GDS indicates that both carrying out public practice without a practising certificate and being disqualified from acting as a director are regarded as very serious disciplinary offences. The Committee agreed with that categorisation. 33. Therefore the Committee made an order under Regulation 12(1)(a) of the Disciplinary Regulations excluding Mr Lowe from membership of ACCA. The Committee did not, however, consider it was necessary to make an order 9

10 extending the period after which Mr Lowe may apply for re-admission beyond the normal minimum of 12 months. COSTS AND REASONS 34. ACCA applied for costs in the sum of 3,607. The Committee had no information about Mr Lowe s means. It considered this sum was reasonable in amount and that it was appropriate sum for Mr Lowe to pay in light of its findings on the allegations. 35. The Committee therefore ordered Mr Lowe to pay ACCA's costs in the sum of 3,607. EFFECTIVE DATE OF ORDER 36. The order will come in to effect from the date of expiry of the appeal period, namely after 21 days from service of this written statement of the Committee s reasons for its decision, unless Mr Lowe gives notice of appeal in accordance with the Appeal Regulations prior to that. PUBLICITY 37. ACCA s regulations require ACCA to publish the Committee s findings and orders by way of a news release naming the relevant person as soon as practicable. The Committee has discretion as to which publications the news release should be sent and discretion in exceptional circumstances to direct that the relevant person is not named. There were no exceptional circumstances in this case. The Committee ordered that a news release be issued to ACCA s website and to the local press referring to Mr Lowe by name. John Wilson Chairman 21 August