[1] The MIA and its Council

The Malaysian Institute of Accountants (‘the Institute’ or the ‘MIA’) is the body that regulates and oversees the accountancy profession.

A ‘Council’ manages MIA’s affairs.

[2] Several sources of law regulate the life of a professional accountant:

(1) The Federal Constitution (‘Class A rules’)

(2) The Accountants Act 1967 (‘Class B rules’)

(3) Other statutory laws (we shall not speak on them today)

(4) The Common Law

(5) Institute’s AGM Rules (‘Class C rules’) and

(6) The Council’s By-Laws (‘Class D rules’)

[3] The first is ‘Class A’: the Federal Constitution

If any Act or subsidiary legislation breaches the Constitution, it is void: Article 4 Federal Constitution.

[4] The Accountants Act 1967 creates 3 kinds of rules

The first are the ‘sections’ in the Act. We shall call them Class ‘B’ Rules.

The next are the Rules created by the mechanism within the Act: We will call them Class ‘C’ Rules.

The fourth class is are ‘By-Laws’. The Council can make these.

[5] Class ‘A’ is the highest. And Class ‘D’ is the lowest

[6] Let us go to Class ‘C’ Rules

The Act says that only the ‘Institute in an AGM’ can make certain ‘rules’ on specified subjects: see Section 7, Accountants Act 1967.

Like what? The Act specifically defines them. These are ‘rules’ on: –

Sec. 7(1)(a): Regulating of the practice of the accountancy profession,

Sec. 7(1)( (k): The procedure of the Investigation Committee, the Disciplinary Committee and the procedure relating to any complaint to any such committee;

Sec. 7(1)( (ka): The procedure of the Disciplinary Appeal Board’.

[7] Only the Institute in AGM can make these ‘self-regulation’ ‘rules’

Why?

Because, of the phrase, in sec. 7(1):

‘The Institute may at any general meeting make such rules’ etc.

This means the Institute – not the MIA Council – regulates misconduct.

Only the Institute in General Meeting – not the Council – can make ‘regulatory Rules’.

[8] Are there Type-C ‘Rules’ on Discipline?

Yes, there are.

It is called the Malaysian Institute of Accountants (Disciplinary) (No.2) Rules 2002.

We will call this the ‘2002 Rules’.

[9] To be valid, any Type C ‘Rules’ must go through 3 hurdles

Type ‘C’ rules are ‘special’ because they need to pass through 3 statutory hurdles.

Sec 7(1)  and (2) demand it:

(a).​These Type C rules must be tabled and approved during any annual general meeting.

(b). ​the relevant Minister must approve them; and

(c).​these must be ‘gazetted’ (a publication on an official government website).

[10]​ Are these 2002 Rules valid?

That depends on 3 things.

First the 2002 Rules must satisfy 3 statutory preconditions:-

(a). the Institute in an AGM must approve them.

(b). the relevant Minister must approve it.

(c). it must be Gazetted.

[11] Assuming 2 out 3 steps are satisfied, but not step-1, then what happens?

So, what if there has been NO AGM approval ?

The answer is: the rules becomes invalid in law.

A vital statutory precondition has been missed.

If not, any disciplinary proceedings conducted under these ‘Institute Rules’ – which if they did not pass through the 3 hurdles –  can be challenged for lacking statutory legitimacy.

[12] How can a challenge be made?

If a subordinate legislation is inconsistent with the parent Act is void to that extent.

The Federal Court has said that it is ‘beyond the scope or ambit of the parent Act’.

[13] There is a 4th hurdle: these must be valid under the Interpretation Acts 1948 and 1967

The 2002 Rules are ‘subsidiary legislation’.

A ‘subsidiary legislation’ is any ‘rule’ or ‘By-Law made under ‘any Act’.

[14] Apply this principle: for example:

Are Rules 7 & 8 of the 2002 Rules valid?

Rule 7 says the Investigation Committee may call upon any member to produce documents.

Rule 8 says if he refuses, it is an offence.

This ‘sledgehammer provision’ says, ‘if you do not obey you can be convicted, fined a maximum of RM5,000.00, and sent to the DC’.

True it is that a subsidiary legislation can make it an offence to contravene any rule.

The law allows it.

But section 27 of the Interpretation Acts says such a Rule cannot impose a fine of more than RM1,000.00.

[15] So what?

First, if  –  and only if – the 2002 Rules have not passed any one of the 3 statutory preconditions, the 2002 Rules cannot be enforced.

Second, any fine imposed by the Disciplinary Committee above RM1,000.00 is invalid.

Any ‘reference’ or complaint to the DC based on section 7 becomes invalid.

[16] We now come to ‘Class D’ Rules: Council’s By-Laws

The MIA Council has created ‘By-Laws (On Professional Ethics, Conduct, and Practice).

What powers that are absent in Accountants Act and Institute AGM Rules, seems to be made up in the By-Laws.

Is this legal?

[17] The primary Act permits this, but that is ‘subject to’ certain strict preconditions.

Let us examine them.

The power of the Council to make By-Laws comes from sections 9, and 10(a).

If you read sections 9 and 10 carefully, you will see that s.9 allows the Council ‘general powers’, while s.10 grants it ‘special powers’.

Section 10 is the servant of section 9.

And Section 9, in turn, is the servant of section 7.

Section 7 says the ‘MIA in an AGM’ can ‘regulate the practice of the accountancy profession’ and its ‘disciplinary procedure’.

Section 9 says the Council can do all those things that fall outside the MIA’s powers in a general meeting.

And section 10(a) says the Council can ‘make By-Laws to provide for all matters not expressly reserved for the Institute in general meeting’.

[18] Class C Rules and Class D Rules are like oil and water-they cannot mix

This means several things:

(a). the Council can make its own rules – Class D Rules;

(b). it cannot override Class C Rules; and

(c) the Council can only make By-laws in areas not specifically handed over to the MIA in an AGM.

So, Class ‘C’ rules –rules created by the ‘Institute AGM’ – are a ‘No-Go Area’ for the Council.

This means the Council cannot make laws in ‘No-Go Areas’.

These are areas where only the Institute in an AGM can venture.

So, if the Council makes By-Laws on disciplinary matters, it breaches sections 7, 9, and 10(a) — read together.

[19] What solutions are there for the Institute?

The Council has to go back to its AGM and ask it to convert all the By-Laws into ‘Class C Rules.

[20] What about earlier disciplinary proceedings?

Can they be saved?

Can the Institute call an urgent AGM?

Can it ask for a ‘Validation and Ratification order’ and ‘back date’ it?

First, the Act gives no such power to the Institute, the AGM or the Council.

So, even if the 30,000 MIA members, if all say, ‘Aye’, it still does not validate an invalid action.

So, the answer is ‘No!’

Second, the law has always considered disciplinary proceedings as being quasi-criminal. The courts will not countenance the back dating of an act or of criminalising it.

Third, the Federal Constitution disallows retrospective criminal law: Article 7

This principle therefore must also apply to the MIA’ Council’s By-Laws.

So the Malaysian Institute of accountants must seriously consider validating its By-Laws through a proper parliamentary amendment.