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ICSI Professional Body & Professionalism - 7

This is part 7 and concluding part of the topic Professional Body and Professionalism by CMA B V Prabhakar. He discusses on how accounting bodies IMA-USA, ICWAI-INDIA & ICSI-INDIA apply the above principles.


THE COMPANY SECRETARIES ACT, 1980
ICSI, being a statutory body is regulated by the CS Act and for the management of the affairs and for discharging the functions assigned to it by the CS Act , there is a Council of the Institute.

Every member of the Institute is entitled to designate himself as a Company Secretary.
There are two classes of members,
c) those who are in practice and
d) those who are otherwise occupied.


The practising members conduct secretarial audit, annual return certifications and various other statutory certifications. Conducting of such statutory audits and certifications require high degree of competence and proper professional conduct.

The Council has been empowered to institute any enquiry into cases where it is prima facie of the opinion that a member is guilty of professional or other misconduct.

Professional misconduct defined
Section 22 of the Act read with the Schedules to the Act , contains an illustrative, though not exhaustive definition of "Professional misconduct". These constitute the Code of professional conduct applicable to Company Secretaries.
Professional Misconduct falls under the following categories:

FIRST SCHEDULE:

Part I : Professional misconduct in relation to Company Secretaries in Practice
Part II : Professional misconduct in relation to Members of the Institute in service
Part III: Professional misconduct in relation to Members of the Institute in generally
Part IV: Other misconduct in relation to Members of the Institute generally

SECOND SCHEDULE:

Part I : Professional misconduct in relation to Company Secretaries in Practice
Part II : Professional misconduct in relation to Members of the Institute generally
Part III: Other misconduct in relation to Members of the Institute generally

"Other Misconduct"

A member is liable to disciplinary action under the CS Act, if he is found guilty of any professional or "other misconduct".

"Other misconduct" as listed in Part III to the Second Schedule has not been defined in the Act but this provision empowers the Council to enquire into any misconduct of a member even if it does not arise out of its professional work. This is considered necessary because a Company Secretary is expected to maintain the highest standards of integrity even in his personal affairs and any deviation from these standards, even in his non-professional work, would expose him to disciplinary action.

"Other misconduct" would also relate to conviction by a competent court for an offence involving moral turpitude punishable with transportation or imprisonment or to an offence not of a technical nature committed by the member in his professional capacity.

DISCIPLINARY ACTION AGAINST PROFESSIONAL MISCONDUCT

ICSI has a three-tier mechanism to deal with Professional misconduct of its members – Disciplinary Directorate, Board of Discipline & Disciplinary Committee.

Disciplinary Directorate makes investigations in respect of any information or complaint received by it.

1)If the member is guilty of any professional or other misconduct mentioned in the First Schedule, Disciplinary Directorate places the matter before the Board of Discipline.

2)If the members is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedules, Disciplinary Directorate places the matter before the Disciplinary Committee.

The Board of Discipline and Disciplinary Committee on referral by Disciplinary Directorate, after affording the member an opportunity of being heard make an order and take any one or more of the following actions:

d) reprimand the member
e) remove the name of the member from the Register
f) impose fine

For the purpose of an inquiry under the provisions of CS Act, the Disciplinary Directorate, Board of Discipline & Disciplinary Committee have the same powers as are vested in a civil court.


QUALITY REVIEW BOARD



CS Act provides for establishment of Quality Review Board to perform the following functions:
a)to make recommendations to the Council with regard to the quality of services provided by the members of the Institute
b)to review the quality of services provided by the members of the Institute including secretarial services; and
c)to guide the members of the Institute to improve the quality of services and adherence to the various statutory and other regulatory requirements

ICSI CODE OF CONDUCT AND ETHICS FOR COUNCIL MEMBERS AND SENIOR MANAGEMENT OF THE INSTITUTE

There is a dramatic increase in the expectations of members, students and other stakeholders that all those who are vested with policy/decision making should act and conduct themselves as per certain ground rules of ethical conduct. The purpose of this Code is therefore, to lay down certain ground rules to promote ethical conduct and good practices and to deter wrong-doing. The purpose of the Code is also to make the relationship mutually pleasant and productive and to enhance the sense of community with common values and mission. Further Code of Conduct shall be a step towards ethical decision making in which strategic management decisions result from due deliberations and objective analysis of facts, distanced from personal biases, leanings, subjectivity or emotional perceptions.

The Code is designed to assist in defining appropriate personal and professional conduct, to provide guidance in the identification and resolution of ethical issues, and to help the members of the Council and the members of the Senior Management of the Institute to maintain the culture of honesty, integrity, transparency and accountability.

The Code of Conduct shall be in addition to and not in derogation of the Code of Conduct to members of the Institute as regards the Council Members and the Code of Conduct laid down in the ICSI Service Rules as regards the members of the Senior Management. Every Council Member and Member of the Senior Management must comply with the letter and spirit of this Code.

SEMINARS, MANAGEMENT DEVELOPMENT PROGRAMS, PROFESSIONAL DEVELOPMENT PROGRAMS, REGIONAL & NATIONAL CONVENTIONS

ICSI regularly conducts seminars, MDP, PDP, Regional & National conventions to enable Members participate in the same to deliberate and update their knowledge in the areas of Company Law, Competition Law, Industrial & Labour laws, WTO, Intellectual Property Rights, Corporate Governance, Capital & Financial Markets, Mergers & Acquisitions, Securities Management, Joint Ventures, Foreign Collaborations, etc.

CONCLUDING REMARKS

Thus, we can see that these Professional Institutes are striving hard to inculcate and maintain professionalism in their Members by keeping them trained, updated and informed of latest developments in their professional field, in the present era of globalization as well as enforcing a code of conduct and ethical behaviour.
SATYAM EPISODE & PROFESSIONALISM

Satyam episode has brought out clearly the importance of professionalism among professionals. It has clearly embarrassed professional folks, as various professionals have failed to exercise ethical standards and professional conduct:

- Internal Auditors (Incidentally, the Internal audit department of Satyam bagged the Best Internal Audit Department award from Institute of Internal Auditors, USA)
- External Auditors (One of the Big4)
- Company Secretaries
- Independent Directors
What were these professionals doing while the fraudulent activities of gigantic proportions were going on allegedly for so many years, will be the question raised by Professional fraternity, Investment community and General public alike.

There could have been four scenarios:

1) These professionals would have been part of the fraud, in which case they clearly failed the test of professionalism. If media reports are to be believed, the external auditors One hopes the law will it course and will be allowed to take its course.

2) These professionals would have been unaware of the fraudulent activities. This again raises questions on the Competence of these professionals in their failure to locate the fraud of such proportions. Clearly, there is a need for a relook on Auditing Standards, Accounting Standards, Auditing Sampling Methods, Functioning of Independent Directors and Audit Committees

3) These professionals would have known the fraudulent activities but were afraid of losing their jobs if they turn whistle-blowers. This brings out the need for a law in India for protection of Whistle-blowers assuring their jobs in case the professionals function as Whistle-blowers. Professional Institutes should also come out strongly in favour of their Members who turn whistle-blowers and must help them.

4) These professionals would have known the fraudulent activities but were not aware or sure how to proceed to inform the relevant authorities. Here comes the role of Professional Institutes in helping their Members to provide a Helpline and appointment of Ethics Counsellor to help such Members in resolving the ethical conflicts. Further, it would be appropriate for the Professional Institutes to include certain hours of Ethical topics as part of CPE ala IMA, USA.

Professionalism is just not about possessing the necessary skills & competence to discharge professional duties but also discharging such duties with other qualities - honesty, integrity, objectivity, due diligence and discretion.
In the wake of corporate scams like Enron, Worldcom, Satyam the importance of ETHICAL STANDARDS and foster such ethical standards in the members of Professional Bodies cannot be overemphasized. Professional Bodies must start giving greater importance to ETHICAL TOPICS in their curriculum and help their Members solving ethical dilemmas in discharge of their professional duties.

In India, professionals are well-trained in the concepts part but there is less emphasis on ethical front.


During my interaction with few Professional groups – professionals like CS & CMAs have expressed surprising opinions like:

- Professional will land up loosing his Job if he chooses to be a whistle blower against the will and wish of the management.
- If an Individual sitting on the Volcano and if after quite for some Volcano burst down who is responsible Volcano or said individual


This clearly shows that such professionals are facing ethical dilemmas in their professional life and are not sure of the course of action to be taken.

Though Professional Institutes like ICWAI & ICSI have provisions embodied in their respective Acts, namely CWA Act & CS Act to prevent/discourage/deter its Members in indulging in Professional misconduct, but these provisions are in my view, amounts to negative reinforcement – these provisions define what is Professional misconduct by listing certain acts as amounting to Professional misconduct by way of Schedules to the Act.

Nowhere these Acts define what is Professional conduct!!! One may just have to assume that whatever act does not amount to Professional misconduct is just a Professional conduct.

Instead, there should be a positive reinforcement by defining what is Professional conduct in these Acts itself and provide clear guidelines on what conduct the Members are expected to display and train them in that way to play the role of Whistle-blowers wherever and whenever necessary.

It is also high time, ICWAI & ICSI push the Federal Government to pass the Law for protection of Whistle-blowers.

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