Lecture 8: The regulation of the insolvency profession Flashcards
Who regulates insolvency practitioners?
RPBs:
ICAS, ICAEW, CAI, ACCA, IPA
Act as self-regulators of individual IPs.
What was the previous role of the Secretary of State?
Could previously authorise an individual to act as an IP.
Role was performed by the Insolvency Practitioner Service (IPS) of the Insolvency Service (an executive agency of the department of business innovation and skills) – but this ceased since Oct 2016
What is the role of the insolvency service?
Responsible for ensuring that RPBs regulate their member properly.
Does this by making regular visits to the RPBs.
How were RPBs monitored historially?
Historically, a memorandum of Understanding prescribed how RPBs should regulate their members.
But this is now on its way out, following the introduction of statutory objectives for RPBs in discharging their regulatory functions.
How did regulation of IPs change after the Deregulation Act 2015 and the Small Business Enterprise and Employment Act 2015?
- Have a system of regulating IPs that secured fair treatment for persons affected.
- Reflects the regulatory principles of transparency, accountability, proportionate, consistent and targeted where needed.
- Encourage an independent and competitive IP profession.
- Promoting the maximisation of the value and promptness of returns to creditors.
- Protecting and promoting the public interest.
What powers does the secretary of state have?
The Secretary of state can revoke status as an RPB where it is satisfied the RPB is not adequately fulfilling its role as a regulator.
- Reserved power to establish a single regulator of IPs.
What occurred during the inspection of ICAS in 2015, and what were the results?
ICAS was subject to monitoring visit between April and June 2015.
Areas inspected include:
- Granting of authorisations
- Monitoring of authorisations
- Ethics and professional standards
- Complaints handling
- Bonding arrangements
- Disclosure of information
- Retention of records.
It was found that ICAS has “strong controls in place across all of its processes”
What are the qualifying criteria for IPs?
Since 1990, all applicants must have passed the JIEB exams (Joint Insolvency Examination Board)
- From 1 Oct 2015, a new regime allows for partial authorisation.
- So IPs can be authorised in relation solely to companies, solely to individuals or both.
Require minimum level of appropriate work experience.
Must be fit and proper.
Acting as an IP when no qualified to do so is a criminal offense.
How is the insolvency profession self-regulated?
The Insolvency Service acts as oversight.
The RPBs are bound by the Insolvency Act 1986, Insolvency Regulations and rules, a memorandum of understanding between the RPBs and the Insolvency Service (for the time being) and statutory objectives.
Within the profession, we also have R3 and the Joint Insolvency Committee (JIC)
What is the role of the Joint Insolvency Committee?
Intended to promote consistency across the profession.
- Responsible for SIPs, Insolvency Guidance Papers and Code of Ethics.
- Current membership of JIC is as follows:
○ Association of British Insurers ○ British Property Federation ○ HMRC ○ Chartered Institute of Credit Management ○ Stepchange Debt Charity ○ Insolvency Service ○ Insolvency Service Northern Ireland ○ ICAEW, ICAS, CAI, ACCA, IPA
What are the fundamental principles that an insolvency practitioner is required to comply with?
Integrity - straightforward and honest in all professional and business relationships.
Objectivity - Should not allow bias, conflict of interest or undue influence of others to override professional or business judgments.
Professional competence and due care - continuing duty to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional service.
Confidentiality - Respect the confidentiality of information as acquired as a result of professional and business relationships. Only disclose to others if there is a legal or professional right or duty to disclose.
Professional Behaviour - Comply with the relevant laws and regulations and should avoid any action that discredits the profession.
What is important to consider for IPs to follow the fundamental principles?
Time management issues on formal insolvency appointments. (professional competence and due care) - ensure fees are reasonable and the correct staff are appointed with relevant experience.
Trading strategy (integrity)
Compliance with SIPs and statute
Bank - IP relationships (objectivity and integrity)
Pre-packs - marketing, conflicts of interest (pre-and post appointment work)
Prior material relationships.
What is the purpose of the code of ethics?
Intended to assist insolvency practitioners meet the obligations expected of them by providing professional and ethical guidance.
Hold IPs accountable, guide for best practice.
Makes IPs aware of potential threats and best action to prevent them.
What is the framework approach?
The framework approach is a method in which IPs can use to identify actual or potential threats to the fundamental principles and determine whether there are any safeguards that might be available to offset them.
Requires IPs to:
a) take reasonable steps to identify any threats to compliance with the fundamental principles.
b) evaluate any such threats
c) respond in an appropriate manner to those threats.
What are the threats to the fundamental principles?
Self interest threat- may occur as a result of the financial or other interests of a practice or an Insolvency Practitioner or of a close or immediate family member of an individual within the practice.
Self review threat - may occur when a previous judgment made by an individual within the practice needs to be re-evaluated by the IP.
Advocacy threats - may occur when an individual within the practice promotes a position or opinion to the point that subsequent objectivity may be compromised.
Familiarity threats - may occur when, because of a close relationship, an individual within the practice becomes too sympathetic or antagonistic to the interests of others.
Intimidation threats -which may occur when an IP may be deterred from acting objectively by threats, actual or perceived.
