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October 13, 2020

ICAI issues notices to CA’s who are members of BNI and similar networks for Professional Misconduct

by facelesscompliance in ICAI

ICAI issues notices to CA’s who are members of BNI and similar networks for Professional Misconduct

Chartered Accountants play a pivotal role in our society. We rely on them for sound financial accounting, management, and advice on a variety of business and taxation matters.

Every accountant is duty bound to follow basic fundamental principles such as integrity, objectivity, professional competence and due care, confidentiality, professional behavior and technical standards. According to Section 22 of the Chartered Accountants Act, 1949, the expression “professional misconduct” shall be deemed to include any act or omission specified in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Council under section 21(1) to inquire into the conduct of any member of the Institute under any other circumstances.

According to Point (6) of Part I of the First Schedule, a chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means. However, nothing herein contained shall be construed as preventing or prohibiting:

  • any chartered accountant from applying or requesting for or inviting or securing professional work from another chartered accountant in practice or
  • a member from responding to tenders or enquiries issued by various users of professional services or organisations from time to time and securing professional work as a consequence

According to Point (7) of Part I of the First Schedule, a chartered accountant in practice shall be deemed to be guilty of professional misconduct, advertises his professional attainments or services, or uses any designation or expressions other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of Chartered Accountants of India or of any other institution that has been recognised by the Central Government or may be recognised by the Council. However, a member in practice may advertise through a write up setting out the services provided by him or his firm and particulars of his firm subject to such guidelines issued by the Council.

In simple words a Chartered Accountant in practice is not allowed to advertise his professional attainments to solicit client or for any other purposes.

ICAI announcement in 2019 on Joining/Association with “Networks” by Members in Practice

In 2019, ICAI released an announcement that it was not permissible for members in practice to join Networks (by whatever name called) other than the Networks registered with the Institute. Joining such networks could result in noncompliance of the below stated provisions of the Act resulting in disciplinary proceedings in accordance with the provisions of the Act:

  • Clause (2) of Part I of First Schedule – A CA in practice shall be deemed to be guilty of professional misconduct, if he pays or allows or agrees to pay or allow, directly or indirectly, any share, commission or brokerage in the Fees or profits of his professional business, to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner, or a member of any other professional body or with such other persons having such qualifications as may be prescribed, for the purpose of rendering such professional services from time to time in or outside India.
  • Clause (3) of Part I of First Schedule – A CA in practice shall be deemed to be guilty of professional misconduct, if he accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute.
  • Clause (5) of Part I of First Schedule – A CA in practice shall be deemed to be guilty of professional misconduct, if he secures, either through the services of a person who is not an employee of such CA or who is not his partner or by means which are not open to a chartered accountant, any professional business
  • Clause (6) of Part I of First Schedule – A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he solicits clients or professional work either directly or indirectly by circular, advertisement, personal communication or interview or by any other means.

Many people thought and directly connected and circulated the news with the name of a business networking group i.e. BNI.

What is the BNI group?

The mission of BNI is to help Members increase their business through a structured, positive and professional referral marketing program that enables them to develop long-term, meaningful relationships with quality business professionals. BNI is one of the world’s leading business referral organization. Thus, the business model of this group is referral and this group is also not registered with ICAI hence a CA cannot be a member of such group and if any practicing Chartered accountant becomes a member of such group, he would be held responsible for professional misconduct.

Notice circulated to CA’s accusing of professional misconduct

Now, a notice is being circulated in various groups wherein the practicing CA has been accused of professional misconduct as he is a member of such group. Such groups were promoting things like advertising the services and soliciting work which was strictly prohibited by ICAI and ICAI had warned of people being charged of professional misconduct if they enter into such networks.

The notice has nothing to do with one particular business group. It is against professional ethics of ICAI if a practicing CA becomes member of group which is not linked or affiliated by ICAI and the member advertises his service there. Thus, even if one is a member of some other business group of similar nature, he might receive such notice.

What are the contents of these notices?

ICAI has mentioned that they had noticed that the said firm was a member of the BNI Referral Network organisation which is not in compliance with ICAI’s guidelines on Network and ethical Compliances. ICAI has requested to offer comments/clarifications on the following:

  • Date from which the firm/member is a member of the BNI Referral Network organisation
  • Whether firm/member has entered into agreement with BNI Referral Network organisation or not. If yes, then the said agreement is requested
  • Whether firm/member is paying any fees for becoming a member of the BNI Referral Network organisation or not. If yes, then the details of the fees paid is to be provided
  • Whether firm/member has received any referral in the firm of assignment of professional nature from the said network or not. If yes, then whether firm/member has paid any referral fees or not. Details or all references received and all referral fees paid are asked for
  • Visiting card of member and all partners of the firm is asked for
  • Whether firm/member has provided any referral work to another firm and has received any referral fees for the same
  • Copy of any Form D if the same is filed with ICAI
  • Being a member of the Network PI, ICAI has asked to mention all the obligations and benefits derived from the network and vice versa
  • Operational bye laws of the said network
  • Whether members of the BNI Network are CA or belong to any other profession   

What happens when a CA is found guilty of professional misconduct?

If the Director is of the opinion that the accountant is guilty of an act that falls under the First Schedule – then the complaint is forwarded to Board of Discipline. The Board of Discipline will follow a summary disposal procedure. If the member is found guilty of misconduct, the member will be given an opportunity to be heard and the following steps can be taken:

  • Reprimand the member
  • Remove his name from the Register for a period of up to 3 months
  • Impose any fine it may think as fit that extends up to one lakh

If the Director is of the opinion that the accountant is guilty of an act that falls under the Second Schedule or both Schedules – the complaint is forwarded to the Disciplinary Committee. If the member is found guilty of misconduct, the member will be given an opportunity to be heard and the following steps can be taken:

  • Reprimand the member
  • Remove his name from the Register for a period it may deem fit
  • Impose any fine it may think as fit that extends up to five lakhs

Earlier also there have been various instances where Practicing CA’s have been accused of advertising their services because of which many CA’s have either surrendered their COP (Certificate of practice) and have become financial consultant or become advocate where they get freedom of all such things. Although right now no official statement has been released by ICAI on same but many senior professionals had also posted on their twitter that ICAI is issuing such notices.

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