NextFin News - Britain’s accounting watchdog has launched a formal investigation into PricewaterhouseCoopers’ audit of Digital 9 Infrastructure, marking a significant escalation in the scrutiny surrounding the collapsed investment trust’s financial reporting. The Financial Reporting Council (FRC) announced on Thursday that it is probing the audit of the company’s financial statements for the year ended December 31, 2022, a period that preceded a catastrophic collapse in the fund’s market value and its subsequent decision to wind down operations.
The investigation arrives at a delicate moment for the "Big Four" accounting firms, which have collectively lobbied the FRC to stop naming companies and individual partners in public probe announcements. For PwC, the Digital 9 case represents a fresh challenge to its reputation in the investment trust sector, following a series of high-profile valuation disputes across the London-listed infrastructure space. The FRC’s decision to move forward with a public notice suggests that the regulator sees a compelling public interest in examining how the fund’s assets—ranging from data centers to subsea cables—were valued during a period of rising interest rates and tightening liquidity.
Digital 9 Infrastructure was launched in 2021 with the promise of steady returns from the "backbone of the internet," but its fortunes soured rapidly. By late 2023, the trust faced a severe liquidity crunch, leading to the sale of its crown jewel, the data center operator Verne Global, and a total suspension of its dividend. The 2022 audit, now under the FRC’s microscope, was conducted during a year when the trust reported a net asset value (NAV) that many analysts later argued failed to reflect the deteriorating market conditions for long-duration infrastructure assets. The trust eventually reported a massive valuation reset in its 2024 results, with NAV plunging to £297 million, or roughly 34.4p per share, a fraction of its peak valuation.
The probe is likely to focus on the "level 3" assets within the portfolio—investments that lack a liquid market and rely on complex discounted cash flow models for valuation. According to industry analysts at QuotedData, who have tracked the trust’s wind-down, the transition from its original manager, Triple Point, to InfraRed Capital Partners in late 2024 exposed deep-seated discrepancies in how future earnings and capital expenditure requirements were modeled. While PwC has not commented on the specifics of the probe, the firm has historically defended its audit quality, noting that valuations are ultimately the responsibility of the fund’s board and its independent valuers.
From a broader market perspective, the FRC’s move underscores a hardening regulatory stance on the audit of "alternative" assets. As of April 2026, the FRC has introduced a more aggressive supervisory model for Public Interest Entities (PIEs), giving it greater powers to intervene when it suspects systemic failures in audit judgment. This case serves as a test of that new framework. For shareholders who saw the trust’s share price collapse from over 110p to less than 20p before the wind-down began, the investigation offers a potential path toward accountability, though it provides no immediate financial relief.
The fallout extends beyond PwC. The investigation adds pressure to the entire UK investment trust sector, which has struggled with wide discounts to NAV and investor skepticism over asset valuations. If the FRC finds that PwC failed to sufficiently challenge the assumptions provided by Digital 9’s management in 2022, it could trigger a wave of litigation from institutional investors who relied on those audited figures to maintain their positions. Conversely, some market participants argue that the FRC is "fighting the last war," focusing on historical accounting entries while the company is already in the process of returning what remains of its capital to shareholders.
The timeline for the investigation remains open-ended, but the FRC typically takes 12 to 18 months to conclude such probes. In the interim, Digital 9 continues its managed wind-down, with its remaining assets, including a stake in the UK broadcast infrastructure firm Arqiva, not expected to be fully realized until late 2027. The outcome of the PwC probe will likely determine whether the final chapter of Digital 9 is written in the liquidation courts or the regulatory chambers of the FRC.
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