Lloyd’s approves proposals for amended auditing and disclosure rules

Lloyd’s of London has nearly unanimously approved a resolution to amend the Lloyd’s Act 1982 in a way that clarifies regulations around the appointment and dismissal of auditors, as well as the requirements for financial disclosure.
The proposals are as described in a consultation document issued by HM Treasury in March 2008 and summarized in a letter sent to all members of Lloyd’s by the Chairman of Lloyd’s on Mar. 7 2008.
Essentially, the Audit Directive contained in the proposals requires express provision be made for the appointment of auditors.
Also, the Audit Directive requires that there be rules preventing the dismissal of auditors on improper grounds. The amendments make it a criminal offence for Lloyd’s entities not to notify authorities about the dismissal or resignation of an auditor.
The proposals also contain a ‘Reporting Directive’ requiring disclosure of details about the nature and purpose of off-balance sheet arrangements.
In addition, information must be disclosed concerning related party-transactions. Currently the Lloyd’s Act prohibits most associations between Lloyd’s brokers and managing agents.
If the Reporting Directive is passed as is, “there will no longer be statutory barriers to such associations,” the HM Treasury consultation document notes. “It is appropriate for additional information to be disclosed in the accounts, to ensure that greater transparency is given to relationships between managing agents and brokers as a safeguard against potential conflicts of interest, and to ensure that the effects of transactions between the managing agent and related brokers on the financial position of the syndicate is apparent.”