1. Ethics code for members

Question 1

What does the code apply to

Answer 1

All IPs in all professional work relating to an appointment and to any work that may lead to an appointment.

Standards outlined in code should be applied to members of his insolvency team

Question 2

What are the 5 fundamental ethical principles

Answer 2

1. Integrity
2. Objectivity
3. Professional competence and due care
4. Confidentiality
5. Professional Behaviour

Question 3

Define Integrity

Answer 3

IP should be straightforward and honest in all professional and business relationships

Question 4

Define objectivity

Answer 4

IP should not allow bias, conflict of interest or undue influence of others to override professional or business judgments

Question 5

Define Professional competence and due care

Answer 5

IP has continuing duty to maintain professional knowledge and skill at the level required to ensure client receives competent professional service based on current developments, legislation and techniques.

IP should act diligently and in accordance with technical and professional standards.

Question 6

Define Confidentiality

Answer 6

IP should respect confidentiality of information acquired and should not disclose any such information to third parties without proper and specific authority unless there is a legal or professional right or duty to disclose.

Confidential information obtained should not be used for the personal advantage of the IP or third parties

Question 7

Define Professional behaviour

Answer 7

Comply with relevant laws and regulations and should avoid any action that discredits the profession.

IPs should conduct themselves with courtesy and consideration with all whom they come into contact when performing their work

Question 8

What is the framework approach IPs use to identify actual or potential threats and to determine whether there are any safeguards available to offset them

Answer 8

1. Take reasonable steps to identify any threats to compliance with fundamental principles
2. Evaluate any such threats
3. Respond in an appropriate manner

Question 9

What should an IP do to identify threats to fundamental principles

Answer 9

IP should take reasonable steps to identify any threats to fundamental principles.

Should take particular care to identify threats which exist prior to or at the time of taking an appointment or which may be reasonably expected to arise during the course of an engagement.

Question 10

What are the categories of threats to fundamental ethical principles

Answer 10

1. Self interest
2. Self review
3. Advocacy
4. Familiarity
5. Intimidation

Question 11

Define self interest threat

Answer 11

Financial or other interests of a:

1. Practice
2. IP
3. Close or immediate family member
4. Individual within the practice

Question 12

Define Self Review threat

Answer 12

May occur when previous judgment made by an individual within the practice needs to be re-evaluated by the IP.

Question 13

Define advocacy threats

Answer 13

May occur when an individual within the practice promotes a position or opinion to the point that subsequent objectivity may be compromised.

Question 14

Define Familiarity threats

Answer 14

May occur when, because of a close relationship - includes both close professional and personal relationship - an individual within the practice becomes too sympathetic or antagonistic to the interests of others

Question 15

Define intimidation threats

Answer 15

May occur when in IP may be deterred from acting objectively by threats, actual or perceived.

Question 16

How should an IP evaluate threats to fundamental principles

Answer 16

IP should consider what a reasonable and informed third party, having knowledge of all relevant information, including the significance of the threat, would conclude to be acceptable.

Question 17

What are the two broad types of safeguards that may be available to reduce threats to an acceptable level

Answer 17

1. Safeguards created by the profession, legislation, regulations
2. Safeguards in the work environment

Question 18

What kinds of safeguards can be introduced in work environment

Answer 18

1. Leadership stress importance of compliance with fundamental principles
2. Polices and procedures to implement and monitor quality control of engagements
3. Documented policies regarding identification of threats to fundamental principles, evaluation of these threats and identification and application of safeguards
4. Documented internal policies and procedures requiring compliance with fundamental principles
5. Policies and procedures requiring consideration of fundamental principles before acceptance of insolvency appointment.
6. Policies and procedures regarding the identification of interests or relationships between individuals within the practice and third parties
7. Timely communication and training regarding policies and procedures
8. Designating a member of senior management to be responsible for overseeing the adequate functioning of the safeguarding system
9. Disciplinary mechanism to promote compliance with policies and procedures

Question 19

What is the most important of the fundamental principles and what are the main threats

Answer 19

Objectivity. Threats to objectivity can be created by conflicts of interest or by any significant professional or personal relationship.

Question 20

Should an IP accept an appointment where a threat to the fundamental principles exists

Answer 20

Generally, it would be inappropriate where a threat to the fundamental principles exist or is reasonably expected to arise during the course of the appointment - unless:

1. Disclosure is made (to Court/ creditors) prior to the IP of the existence of the threat and no objection is made to the IP being appointed
2. Safeguards are or will be available to eliminate threat or reduce it to an acceptable level.

Question 21

What safeguards exist where there might be a threat to fundamental principles

Answer 21

1. Involve/ consult with another IP from within the practice to review work done
2. Consult independent third party, such as creditors committee, RPB or another IP
3. Involve another IP to perform part of the work - may involve taking a joint appointment
4. Obtain legal advice
5. Changing members of insolvency team
6. Use of separate IP and/ or staff.
   7, Procedures to prevent access to information by the use of information barriers - physical separation of teams, confidential and secure data filing.
7. Clear guidelines for practice members on issues of security and confidentiality
8. Confidentiality agreements signed by individuals within the practice,
9. Regular review of application of safeguards by senior individuals within the practice but not involved with appointment
10. Terminate relationship that gives rise to the threat
11. Seek legal advice.

Question 22

What should an IP consider when deciding to an accept an appointment where threats have been identified

Answer 22

IP should consider whether the interest of those he would represent would be better served by the appointment of another IP

Question 23

What should an IP do if the threats cannot be reduced to an acceptable level

Answer 23

IP should conclude that it is not appropriate to accept an insolvency appointment.

Question 24

If IP accepts the appointment knowing level of threats, what should they do

Answer 24

Threats should be kept under review and IP should be mindful that other threats may come to light or arise.

In deciding whether to continue an appointment, IP should consider the wishes of creditors, who after full disclosure have been made have the right to retain or replace the IP.

Question 25

How does an IP balance confidentiality with transparency. How should they report

Answer 25

IP has a professional duty to report openly to those with an interest in the outcome of the insolvency. IP should always report on acts and dealings as fully as possibly in a way that is transparent and understandable.

Question 26

What should an IP do prior to accepting an appointment to ensure he can act with professional competence and due care

Answer 26

1. Obtain knowledge and understanding of entity, its owners and those responsible for governance and business activities
2. Acquire appropriate understanding of the nature of entities business, complexity of operations, specific requirements and purpose, nature and scope of engagement
3. Acquire knowledge of relevant industries of subject matters
4. Possess or obtain experience with relevant regulator or reporting requirements
5. Assign sufficient staff with necessary competencies
6. Comply with quality controls and procedures designed to provide reasonable assurance that engagements are only accepted when they can be performed competently.

Question 27

How is professional competence and due care threatened by self interest

Answer 27

IP should only accept an engagement where they have sufficient expertise. Self interest threat in accepting engagement and fees can threaten professional competence where IP and their staff do not have sufficient skills or resources to carry out the appointment.

Question 28

Professional relationships may include (but are not restricted to) relationships with

Answer 28

1. Entity
2. Director, shadow director, former director of entity
3. Shareholders of entity
4. Any principal or employee of the entity
5. Business partners of entity
6. Companies or entities controlled by the entity
7. Companies which are under common control
8. Creditors (inc. debenture holders)
9. Close or immediate family or the entity or its officers
10. Others with commercial relationship with the practice

Question 29

What considerations should be made to evaluate the impact of the relationship in the context of the appointment

Answer 29

1. Nature of previous duties undertaken by a practice during a prior relationship
2. Impact of work completed by the practice on the financial state/ stability on the entity
3. Whether the fee received for the work by the practice was significant to the practice itself of was substantial
4. How recently any professional work was carried out - greater risks will arise (or be seen to arise) where work has been carried out in past 3 years.
5. Whether work being considered by IP involves consideration of work previously undertaken by the practice for that entity.
6. Nature of any personal relationship & proximity of IP to individual with whom the relationship exists.
7. Whether any reporting obligations will arise in respect of the relevant individual with whom the relationship exists - i.e directors return.
8. Nature of work undertaken by individuals within the practice during any earlier relationship with the entity.
9. Extent of insolvency teams familiarity with the individuals connected with the entity.

Question 30

What are three main safeguards which may be considered to reduce threat created by professional or personal relationship to an acceptable level

Answer 30

1. Withdrawal from insolvency team
2. Terminating (where possible) financial or business relationship giving rise to the threat
3. Disclosure of the relationship and any financial benefit received by the practice - directly or indirectly - to the entity or to those on whose behalf the IP would be appointed to act.

Question 31

What constitutes a Significant personal/ professional relationship and what are the consequence

Answer 31

Where threat arising from professional or personal relationship is such that no reasonable safeguards can be introduced to eliminate or reduce threat to an acceptable level, that relationship is deemed to be significant.

Where this is the case, IP should conclude that it is not appropriate to accept the appointment.

Question 32

What should the IP consider when considering threat of personal and professional relatioships

Answer 32

Perception of others. In some cases the perception may be sufficient to make the relationship significant.

Question 33

What threats arise when dealing with assets of an entity

Answer 33

IP should not themselves acquire, directly or indirectly, any of the assets of the entity, nor knowingly permit any individual within the practice or any close or immediate family member of the IP or individual within the IPs practice to do so.

Question 34

What should an IP consider when obtaining specialist advice and services

Answer 34

Whether reliance on their work is warranted, giving consideration to their reputation, expertise, resources and professional standards.

Threats can arise to if services are provided by a regular source of independent of the practice.

Question 35

What safeguards can an IP apply when dealing with professional service providers

Answer 35

1. Ensure that a proper business relationship is maintained.
2. Review the relationship periodically to ensure that best value and service is being obtained
3. Introduce practice policies and guidelines on professional relationships
4. Consider disclosure of such business relationships to creditors/ creditors committee.