DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS

Transcription

1 DISCIPLINARY COMMITTEE OF THE ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANTS REASONS FOR DECISION In the matter of: Mr Barry John Sexton Heard on: 18 and 19 March 2015 Location: Committee: Legal adviser: Persons present and capacity: Observers: Chartered Institute of Arbitrators, 12 Bloomsbury Square, London, WC1A 2LP Mrs Judith Way (Chairman), Ms Noreen Whelan (Accountant) and Ms Lorna Jacobs (Lay) Mr Andrew Granville Stafford Mr Barry Sexton, Ms Deborah Baljit (ACCA Case Presenter), Mrs Bernice Ash (Committee Officer) and Mr Richard Lorkin (Committee Officer) None PRELIMINARY APPLICATIONS 1. The Disciplinary Committee of ACCA ( the Committee ) convened to consider a report concerning Mr Barry Sexton. Mr Sexton was admitted to membership of ACCA in 1992 and became a Fellow in The Committee had before it a bundle of papers (pages 1 to 266), two additional bundles (pages 267 to 277 and 278 to 279) and a bundle of service papers (pages 1 to 20). The Committee also received an on table bundle (pages 280 to 281). 3. Mr Sexton appeared and was not represented. 4. At the outset of the hearing Ms Baljit on behalf of ACCA made two applications. The first was to amend allegation one which, as set out in the notice of hearing, reads: Allegation 1(a) Pursuant to bye-law 8(a)(i), Mr Sexton is guilty of misconduct by reason of any or all of the following, contrary to Sections and of the Code of Ethics and Conduct:

2 (i) between 7 January 2011 and 4 March 2011 he withdrew approximately 30, from the HSBC client account of B J Sexton & Co without authorisation. (ii) between 22 March 2011 and 15 April 2011 he withdrew approximately 14, from the Natwest client account of B J Sexton & Co without authorisation. or Allegation 1(b) Pursuant to bye-law 8(a)(iii), Mr Sexton is liable to disciplinary action by reason of any or all of the following, contrary to Sections and of the Code of Ethics and Conduct: (i) between 7 January 2011 and 4 March 2011 he withdrew approximately 30, from the HSBC client account of B J Sexton & Co without authorisation. (ii) between 22 March 2011 and 15 April 2011 he withdrew approximately 14, from the Natwest client account of B J Sexton & Co without authorisation. 5. The amendment Ms Baljit sought was to delete from allegation one the word authorisation each time it appears and substitute instead the words obtaining agreement from Mr M in 1(a)(i) and 1(b)(i), and the words obtaining agreement from Mr T in 1(a)(ii) and 1(b)(ii). The reason for the application was so that the allegation would more accurately reflect the provisions of section of the Code of Ethics and Conduct ( the Code ) then in force. Ms Baljit submitted that the amendment did not require any new or different evidence to be relied upon. Mr Sexton did not oppose the application. 6. The Committee bore in mind that it has power under regulation 9(5) of the Chartered Certified Accountants Complaints and Disciplinary Regulations 2015 ( the Disciplinary Regulations ) to amend the allegations but should not do so if the amendment would cause prejudice to the member. 7. The rules are clear in that an amendment can only be made if, in the words of regulation 9(5), the relevant person is not prejudiced in the conduct of his defence.

3 Given the advanced stage these proceedings have reached and the way in which the amendment would appear to change the sense of the allegation, the Committee could not find there would be no prejudice to Mr Sexton. The Committee bore strongly in mind that Mr Sexton did not object to the amendment; however, the rules make it clear that it is for the Committee to determine the question of prejudice. Accordingly, because the Committee considers that, in the circumstances that have arisen, a relevant person (Mr Sexton) would be prejudiced by this amendment, it refused Ms Baljit s application. 8. The second application was in relation to allegation two which reads: Allegation 2 (a) Pursuant to Bye-law 8(a)(i) Mr Sexton is guilty of misconduct by making false statements in any or all of the communications as set out in schedule one. Schedule one: Allegation 2 (a) (a) In an dated 15 April 2011 to Mr M Allegation 2(a) (b) In a telephone conversation with Mrs Claire Day on 6 May 2011 Allegation 2(a) (c) Allegation 2(a) (d) Allegation 2(a) (e) Allegation 2(a) (f) In a telephone conversation with Mrs Claire Day on 18 May 2011 In an dated 20 May 2011 to Mrs Claire Day In an dated 23 May 2011 to Mrs Claire Day In a telephone conversation with Mrs Claire Day on 24 May 2011 Allegation 2 (b) The conduct of Mr Sexton as set out in Allegation 2 (a) above was; (a) Dishonest. (b) Contrary to the Fundamental Principle of Integrity.

4 9. Ms Baljit submitted that ACCA should be permitted to rely on all the alleged false statements set out in schedule one, on the basis that after 6 May 2011 Mr Sexton was a suspended member of ACCA and thus subject to the full powers in the byelaws to discipline members. The relevant provisions of bye-law 11, as then in force, are as follows: 11 (b) A former member... shall continue to be liable to disciplinary action after his... ceasing to be a member... in respect of any matters which occurred whilst he was actually a member It was therefore clear that if Mr Sexton was a former member as opposed to a member at the time of the incidents in question, they cannot be relied upon as exposing him to disciplinary action. 11. The relevant background is as follows. On 8 March 2011 Mr Sexton was made bankrupt. Regulation 13 of the Membership Regulations, as then in force, requires a member who is made bankrupt to notify the Admissions and Licensing Committee within one month of the bankruptcy event. The consequences of not doing so are, in the words of regulation 13(1), that he will automatically cease to be a member... on the expiry of one month from the date of the bankruptcy event. 12. It is not in dispute that Mr Sexton failed to give the requisite notice. 13. On 6 May 2011 ACCA sent a letter stating not that his membership had ceased on the above grounds but that it had been suspended as a result of failing to declare your bankruptcy within one month timeframe. The letter wrongly refers to regulation 12(1) of the Membership Regulations though, as Ms Baljit accepted, it clearly should be a reference to regulation 13(1). The letter goes on to tell Mr Sexton what he must do if he wished to be restored to the membership register. 14. Ms Baljit contended that, in light of this letter, Mr Sexton s status after 6 May 2011 was as a suspended member. She also relied on a print-out from ACCA s database which gives his status as at today s date as being suspended. She contended that a suspended member is nonetheless a member and therefore the restrictions in byelaw 11(b) do not apply. 15. Mr Sexton did not oppose Ms Baljit s application nor did he disagree with her interpretation of his status. Nonetheless, the Committee cannot accept that Ms Baljit is correct. She accepted that there is no definition in the bye-laws or the relevant

5 regulations of suspended member. She also accepted that the letter of 6 May 2011 should have told Mr Sexton that his membership had automatically ceased. The fact that the letter did not state this cannot change the position under the rules. 16. Thus the Committee determined that in accordance with Membership Regulation 13, Mr Sexton automatically ceased to be a member of ACCA one month after the 8 March 2011, namely 8 April Therefore, pursuant to bye-law 11(b), he could not be liable to disciplinary action for anything that happened after 8 April In light of that decision, Ms Baljit offered no evidence on allegation two, given that all the incidents relied on in support of that allegation post-date 8 April Accordingly this allegation was withdrawn. Ms Baljit also applied to amend allegation 1(a)(ii) and 1(b)(ii) to change the date from 15 April 2011 to 8 April 2011, and also to reduce the sum allegedly withdrawn from 30, to 4, Mr Sexton did not object to these amendments and, given that they were clearly to his benefit, the Committee agreed to make them. ALLEGATIONS AND BRIEF BACKGROUND 18. As amended, Mr Sexton faces the following allegations: Allegation 1(a) Pursuant to bye-law 8(a)(i), Mr Sexton is guilty of misconduct by reason of any or all of the following, contrary to Sections and of the Code of Ethics and Conduct: (i) between 7 January 2011 and 4 March 2011 he withdrew approximately 30, from the HSBC client account of B J Sexton & Co without authorisation. (ii) between 22 March 2011 and 8 April 2011 he withdrew approximately 4, from the Natwest client account of B J Sexton & Co without authorisation. or

6 Allegation 1(b) Pursuant to bye-law 8(a)(iii), Mr Sexton is liable to disciplinary action by reason of any or all of the following, contrary to Sections and of the Code of Ethics and Conduct: (i) between 7 January 2011 and 4 March 2011 he withdrew approximately 30, from the HSBC client account of B J Sexton & Co without authorisation. (ii) between 22 March 2011 and 8 April 2011 he withdrew approximately 4, from the Natwest client account of B J Sexton & Co without authorisation. Allegation 3(a) Pursuant to Bye-law 8(a)(i) Mr Sexton is guilty of misconduct by reason of his accepting of instructions without issuing a letter of engagement in respect of i) Mr M ii) Mr T contrary to section 3.18 (5) of the Code of Ethics and Conduct (as applicable in 2010). or Allegation 3 (b) Pursuant to bye-law 8(a)(iii) Mr Sexton is liable to disciplinary action by reason of his accepting of instructions in respect of i) Mr M ii) Mr T without issuing a letter of engagement contrary to section 3.18 (5) of the Code of Ethics and Conduct (as applicable in 2010). 19. The background to these allegations is as follows.

7 20. B J Sexton and Co Ltd ( the Company ) was incorporated in 2003 and until the end of January 2011 Mr Sexton provided accountancy services through this company. The Company got into financial difficulties and was wound up on 15 April After the Company ceased trading Mr Sexton operated as B J Sexton and Co ( the Firm ). 21. In or around September 2010 he accepted instructions to act on behalf of two companies, BC Ltd and FC Ltd. The instructions involved recovery of construction industry scheme ( CIS ) payments from HMRC. Both paid a retainer of Section 3.18(5) of the Code of Ethics and Conduct ( the Code ), as then in force, required an accountant to send a letter of engagement to his client before any work was undertaken or, if that was not possible, as soon as practicable thereafter. The letter must set out, amongst other things, the work to be performed and the fees payable. 23. Mr Sexton accepted in a telephone conversation with Mrs Claire Day of ACCA on 6 May 2011 that he did not provide either of these clients with a letter of engagement. He confirmed this in a letter dated 20 May 2011 in which he wrote: Although there is no engagement letter I have formal written instructions to act. An engagement letter is not obligatory in none audit matters but obviously best practice. 24. ACCA s case is that it was obligatory to provide an engagement letter to each of these clients and that the failure to do so amounts to misconduct (allegation 3(a)) or alternatively a breach of the regulations (allegation 3(b)). 25. Sections and of the Code, as then in force, govern withdrawals from client accounts (c) allows an accountant to withdraw money from a client bank account provided it is for payment of fees properly required for work properly carried out. Section reads: Monies shall not be withdrawn from a client bank account for or towards payment of fees or commissions payable under paragraph above unless: (a) the client has been notified in writing that monies held or received on the client s behalf will be applied against those fees or commissions, and the client has not disagreed; and (b) a principal of the firm has expressly authorised the withdrawal; and

8 (c) either: (i) 30 days have elapsed since the date of delivery to the client of the notification; or (ii) the precise amount to be withdrawn has been agreed with the client in writing or has been finally determined by a court or arbitrator. 26. On 7 January 2011 Mr Sexton received a CIS repayment from HMRC in the sum of 30, in respect of the claim made on behalf of BC Ltd. This money was deposited in the Company client account. Mr Sexton did not, however, inform BC Ltd that he had received this money from the Revenue until 1 April 2011 (see paragraph 29 below). 27. A series of withdrawals were made from the client account between receipt of this payment and 4 March 2011, by which time the amount remaining in the account was It is therefore alleged that Mr Sexton withdrew approximately 30, of BC Ltd s money from his Company s client account without BC Ltd s authorisation and that this amounts to misconduct (Allegation 1(a)(i)). 28. As stated earlier, on 8 March 2011 Mr Sexton was made bankrupt. Mr Sexton opened a new client account with Natwest Bank in the Firm s name and on 22 March 2011 a deposit of 23, was made to that account. This represented a repayment made by the Revenue in respect of the CIS claim made on behalf of FC Ltd. It is alleged that between the date of this deposit and 8 April 2011 Mr Sexton withdrew approximately 4, from this account without FC Ltd s authorisation and accordingly amounts to misconduct (Allegation 1(a)(ii)). 29. On 1 April 2011 Mr Sexton sent BC Ltd a letter accompanied by a cheque to BC Ltd for 13, This represented the difference between the amount received from HMRC and the amount he was deducting in respect of costs ( 17,462.73). 30. On 1 April 2011 Mr Sexton sent FC Ltd a letter and a cheque made out to FC Ltd for 8, This represented the difference between the amount received from HMRC and the amount he was deducting in respect of costs ( 14,542.42). 31. Mr M on behalf of BC Ltd and Mr T on behalf of FC Ltd complained that the fees which Mr Sexton had retained were excessive. A meeting took place on 13 April 2014 in County Cork at which Mr Sexton was represented by an Irish accountant. Mr M and Mr T stated that the representative agreed at this meeting that Mr Sexton would

9 reduce his fees to 3,100 for each company. However Mr Sexton disputes that any such deal was made. 32. On 27 May 2011 Mr Sexton issued claims in the county court against both clients. Both counterclaimed against him in respect of the money he had held for his fees. On 21 August 2014 the actions were settled by agreement on the basis that Mr Sexton would pay each client the sum of 8,000 plus interest and costs. As at 4 September 2014 Mr Sexton had paid 2,500 to each client and the agreement was that he would pay the balance by instalments, starting at 300 a month and rising to 500 a month. 33. In a letter to ACCA dated 8 June 2011 Mr Sexton said that although he removed sums from client account he held enough in cash at home to protect the client funds from being tied up in the insolvency process. He stated that the bank accounts with HSBC were just about to be frozen prior to the bankruptcy and therefore the funds were withdrawn and held in cash 34. In a further letter to ACCA dated 25 November 2014, in response to notification of this hearing, Mr Sexton said he admitted all allegations against him. He also said: I recognize that this is not how client s monies should be handled and it is a matter of deep regret. I apologised to the clients at a meeting with their solicitor in July 2013 and undertook to do whatever I can to correct the situation. My judgement was flawed throughout this period due to the insolvency and the breakdown of my marriage... I have been in practice since 1992 and there have been no complaints filed against me by clients. DECISIONS ON ALLEGATION 35. Mr Sexton admitted allegation 1(a) in its entirety and allegation 3(a). In light of that Ms Baljit withdrew the alternative allegations 1(b) and 3(b). In accordance with regulation 11(3)(a) of the Disciplinary Regulations the Committee found allegations 1(a) and 3(a) proved.

10 SANCTIONS AND REASONS 36. The Committee considered what sanction, if any, to impose taking into account the documentary evidence contained in the bundle, the submissions of Ms Baljit on behalf of ACCA and Mr Sexton s submissions on his own behalf, ACCA s Guidance for Disciplinary Sanctions and the principle of proportionality. 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. 37. Given that Mr Sexton is a former member, the Committee considered the sanctions that can be imposed on former members as set out in Regulation 12 of the Disciplinary Regulations. It considered all options in ascending order of severity. It decided it was not appropriate to make no order given the very serious nature of the misconduct that Mr Sexton has admitted. 38. This case involves serious breaches of the rules concerning holding client money. These rules, which are in place for the protection of clients, were deliberately circumvented by Mr Sexton. The Committee notes that some of the withdrawals in question were made after he had been made bankrupt. Financial harm to his clients has resulted. 39. Although Mr Sexton has made full admissions to the matters alleged against him, the Committee was of the view that he has actually shown very limited insight into the harm he has caused. The Committee did however take into account the fact that there are no previous disciplinary findings recorded against Mr Sexton and there is some evidence that he has taken corrective steps to make good the loss to his clients. The Committee also bears in mind that Mr Sexton has not been a member of ACCA for a period approaching four years. 40. The Committee considered whether it would be appropriate to admonish or to reprimand Mr Sexton, but considered these would be inappropriate given that this misconduct could not possibly be described as being of a minor nature and further most of the factors which would indicate those sanctions to be appropriate are not present.

11 41. If Mr Sexton were still a member of ACCA the Committee is in no doubt it would have excluded him from membership as his misconduct is a very serious departure from relevant professional standards, had an adverse impact on clients and was an abuse of trust over a period of time. It brings discredit to him, ACCA and the profession as a whole. As a former member, the Committee has decided the proportionate sanction in all the circumstances is for Mr Sexton to be severely reprimanded for his misconduct which is not of a minor nature. In addition an order will be made referring any application by him for readmission to ACCA to the Admissions and Licensing Committee. 42. Therefore the sanctions imposed on Mr Sexton are (a) severe reprimand; (b) an order that any application for readmission to membership of ACCA will be referred to the Admissions and Licensing Committee. COSTS AND REASONS 43. Ms Baljit sought an order for payment of costs in the sum of 4, She said this figure took into account the fact that allegation two had been withdrawn. Mr Sexton did not oppose in principle the making of an order for costs but said that he did not have the means to pay. 44. The Committee considered the submissions made and the Statement of Financial Position completed by Mr Sexton. It decided that the sum sought by Ms Baljit was in all the circumstances reasonable, bearing in mind that as a result of Mr Sexton s misconduct ACCA has had to expend sums investigating this matter. 45. Therefore the order in respect of costs is that Mr Sexton shall pay costs to ACCA in the sum of 4, EFFECTIVE DATE OF ORDER 46. The order will come into 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 Sexton gives notice of appeal in accordance with the Appeal Regulations prior to that.

12 PUBLICITY 47. 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 and nor did Mr Sexton suggest that there were any. The Committee ordered that a news release be issued to ACCA s website and to the local press referring to Mr Sexton by name. Mrs Judith Way Chairman 19 March 2015