The Netherlands Authority for the Financial Markets (AFM) imposed an administrative penalty of €217,810 on Ernst & Young Accountants LLP (EY) on 9 November 2011 because in the period from 1 January 2009 to 15 February 2010 the compliance officer failed to exercise adequate supervision of compliance with the regulations of or pursuant to Sections 13 to 24 of the Audit Firms (Supervision) Act [Wet toezicht accountantsorganisaties, or Wta].
EY thus failed to comply with the first sentence of Section 23 (1) of the Audit Firms (Supervision) Decree [Besluit toezicht accountantsorganisaties, or Bta]. Furthermore, the AFM has established that EY failed to appoint a deputy compliance officer when the former deputy compliance officer was no longer employed at EY. EY thus contravened the second sentence of Section 23 (1).
The AFM’s investigation established the following regarding the execution of the position of compliance officer by EY. We found no indication that the compliance officer had actually carried out all the tasks as established in his annual plan. With regard to discussions between the compliance officer and important departments within EY that took place, there was no indication as to whether, and if so what, follow-up actions were taken by the compliance officer with reference to the matters discussed. There was also no indication that the compliance officer had taken actions as a result of these discussions.
In his annual plan for 2009, the compliance officer did not mention or address any concrete compliance issues or risks. The AFM’s investigation moreover found no indication that the compliance officer had planned or carried out activities in relation to actual risks within EY, divided into categories such as subject, location, individual external auditors, etc.
No deputy compliance officer was appointed at EY during the period from 1 July 2009 to 15 February 2010. Appointment of a deputy compliance officer is important for supervision of the tasks of the compliance officer when there is a danger of a conflict of interests. In addition to his position as compliance officer of EY, this person also acted as an external auditor. For reasons of independence, the compliance officer cannot supervise the work in which he himself is involved, and the deputy compliance officer must take over his duties in this case.
Ernst & Young has indicated that it has taken various measures to address the findings and implement improvements. The compliance officer’s role will thus be more proactive and risk-oriented in future. Furthermore, the procedures for establishing the activities of the compliance officer and the regular discussions have been tightened, the number of employees in the compliance office has been increased, and the procedure for the appointment of the deputy compliance officer has been tightened. We refer in this respect to the transparency report of Ernst & Young for 2012 and 2011. On the basis of the AFM’s findings and the subsequent actions taken by EY, a contribution has been made to improving the operation of the position of compliance officer at EY.
The amount of the penalty is established according to the penalty system stated by the Wta.
The AFM’s decision may be tested in the courts by the interested party or parties.
For questions or complaints, please contact the AFM Financial Markets Contact Point (Meldpunt Financiële Markten) by telephone on 0800-5400 540 (free of charge).
The AFM is committed to promoting fair and transparent financial markets.
As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.