International Association of Insolvency Regulators (IAIR) Nick Howard, Director of Policy, The Insolvency Service, U.K. December 16, 2009 Kiev, Ukraine
Regulation of Practitioners Cover this under four headings 1. Why the need for regulation of practitioners? 2. Role of regulatory or supervisory bodies 3. Competence and integrity of insolvency practitioners 4. Different forms of regulation
1 The need for (separate) regulation of practitioners Historically IP s supervised by courts and creditors During 1980 s problems emerged with competence and integrity of IP s Systems was found to be inadequate:
Insolvency involves special circumstances Practitioners in a unique position of trust Paid by creditors IPs take their fees from funds they themselves are managing Often creditors are apathetic
Role of regulatory or supervisory bodies Bodies responsible for regulating or supervising insolvency representatives should: Be independent of Practitioners; Set standards Have appropriate powers and resources
Competence and integrity of insolvency practitioners The regulatory system should ensure that: Insolvency practitioners are competent Insolvency practitioners act with integrity Insolvency practitioners are accountable Clear criteria as to who may be an insolvency practitioner
Different forms of regulation Systems vary widely and there is no right or wrong way Can be court based Can be self regulated Can be government regulated Can be a combination of all
Australia Regulator is a government agency (IG) IG s regulation function has four key elements: 1. Licensing of IP s 2. Monitoring standards - inspection program 3. Investigating complaints against IP s 4. Disciplining of IP s
Australia 1. Licensing of IP s To practice, IP s must apply to IG for license IG and Committee to approve applications Committee to be satisfied as to competence, qualifications and integrity IG must accept committee s decision
Australia 2. Monitoring IG s staff attend each IP s office Examine office systems Test the IP s standards of practice Use intelligence/information received Attend creditors meeting If errors are found IP must attend to them
Australia 3 Investigation of complaints Any complaints against IPs can be sent to the IG All complaints are investigated If complaint justified, IP is required to rectify disciplinary action can be taken by IG 2008-09 418 complaints received; 17% found to be justified
Australia 4 Disciplining of IP s IG has power to take disciplinary action If IG not satisfied with response, IG can convene a committee Committee decides on sanctions Decision can be appealed to tribunal or court
UK Government monitored self-regulation Regulation introduced in 1986 Role of Secretary of State 8 Recognised professional Bodies
UK Achieving consistent standards Memorandum of Understanding Principles for Monitoring Joint Insolvency Committee
UK Memorandum of Understanding Academic qualification JIE Ethical code and professional standards Complaint handling Exchange of information Retention of records Reporting to the Secretary of State
UK Principles for Monitoring Desktop monitoring Monitoring visits Compliance with legislation and accepted professional standards Professional competence
UK Joint Insolvency Committee Members are RPBs and Secretary of State Discussion of Regulatory matters Statements of Insolvency Practice & Ethics Insolvency Guidance papers
UK Financing Regulation RPBs membership fees Secretary of State cost recovery
UK Pre-packs and SIP 16 Struggling company approaches IP IP and Directors discuss options Sale of business organised Company placed into Administration Business sold within days (sometimes to the Directors) Many creditors left unpaid
UK Pre-packs and SIP 16 1.1.09 - SIP 16 introduced Faster than introducing legislation Accepted by the profession Monitored by Secretary of State Initial report showed 65% compliance