UK Regulator Begins Inquiries Into Manchester City’s Financial Records

The United Kingdom’s Financial Reporting Council (FRC) has begun preliminary inquiries into Manchester City’s financial records following findings that the Premier League club breached financial regulations.

The regulator has taken over the case from the Institute of Chartered Accountants in England and Wales (ICAEW), with the transfer reportedly completed on September 30. According to the BBC, the FRC disclosed the development in a letter to the House of Commons Business, Culture, Energy and Sport Committee on Tuesday.

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However, the council has not opened a formal investigation and is currently examining the matter to determine whether further regulatory action is warranted.

The development follows a ruling by an independent commission that found Manchester City had breached Premier League financial rules relating to the period between the 2009/2010 and 2017/2018 seasons.

The commission concluded that the club had artificially inflated its financial position by more than £900 million through an arrangement that allegedly concealed the origin of shareholder funds and gave a misleading impression of its finances.

It also found that the arrangement left the club’s auditors unaware of the alleged scheme.

Manchester City has rejected the commission’s findings and filed an appeal, arguing that the judgment contains “material errors of law, principle and fact and is unsafe.”

The FRC’s involvement could bring additional scrutiny to the work of BDO, the accounting firm that audited the club. The regulator has the authority to examine whether auditors complied with relevant professional standards and can impose sanctions on individuals subject to its disciplinary rules.

The case has also raised questions about the regulator’s ability to hold major companies and their directors accountable.

Liam Byrne, chairman of the House of Commons Business Select Committee, expressed concern about gaps in the FRC’s powers, particularly its ability to compel Manchester City to provide evidence and pursue directors who fall outside the scope of its disciplinary rules.

In a post on X, Byrne said the regulator’s letter highlighted weaknesses in the existing accountability framework.

“The regulator’s letter exposes gaps in its ability to compel evidence from the club and pursue directors who fall outside its disciplinary rules,” he wrote.

He added that the government needed to explain why proposed reforms to address the gaps had been abandoned and what steps would now be taken to strengthen accountability.

The FRC’s preliminary inquiries do not amount to a formal finding of wrongdoing by the club’s auditors. Any further action will depend on the regulator’s assessment of the available evidence and whether professional rules may have been breached.