In my opinion, there has to be an independent regulatory body. Stephen Blandford Ryman & Shipleys LLP – Insolvency Practitioners – www.shipleys.com, should take note.
Article by Rachael Singh At Accountancy Age – 21 Dec 2011
Ed Davey MP calls for single insolvency regulator
Edward Davey MP
INSOLVENCY MINISTER Ed Davey has called for a single regulator of the profession in a speech to parliament.
The suggestion was made following a recent consultation on reforms to the regulation of insolvency practitioners, based on an Office of Fair Trading investigation into the industry.
Currently there are nine professional bodies including ICAEW, ACCA, CIPFA, ICAS and CIMA that regulate and licence practitioners. However, the Insolvency Service sits above all the licensing bodies and regulates the professional bodies.
Under planned changes there could be a single regulator of all practitioners.
“The present regulatory regime is a complex one involving a number of different regulators,” he said.
“…Responses to the consultation and subsequent discussions I have held with stakeholders have indicated strong support for an independent single regulator for insolvency practitioners as an effective and efficient way of achieving these aims.
Insolvency trade body R3, which represents more than 90% of UK’s practitioners, welcomed the move.
“The insolvency profession looks forward to working with the minster to consider an independent single regulator while strengthening and simplifying processes for handling complaints,” said R3 president Frances Coulson.
“We share the Minister’s aim to ensure the regulatory regime is transparent, consistent, accessible, independent and accountable.”
However, Coulson added overall the UK insolvency regime did not need radical reform.
Davey also announced he would remove the Insolvency Service’s role as both licenser and regulator of practitioners as soon as possible.
Article By Allan Urry At BBC File on 4
Insolvency practitioners poorly regulated, says expert
Stephen Hunt’s work offers a rare insight into the darker side of insolvency.
With more than 15 years experience as an insolvency practitioner, he makes a living investigating those accused of letting the profession down.
“We have about 500 insolvencies where we’re appointed specifically to investigate or review the conduct of the previous insolvency practitioner,” he says.
“It’s a lot. There’s a steady flow of work which requires investigating.”
When firms go bust it is the insolvency practitioner’s job to get the best price for the creditors from the remaining assets through the administration process, or try to get returns if a company is forced into liquidation.
These can be emotional, highly charged affairs, with insolvency practitioners having to act decisively in complex situations amid angry creditors.
To hear more on this story listen to File on 4 on Radio 4 today at 2000 or listen again on the iPlayer
In this maelstrom, there is no shortage of opportunities for insolvency practitioners to hide malpractice, according to Mr Hunt.
And although there are eight different governing bodies in the UK looking into allegations of malpractice, the system of self-regulation is ineffective and wide open to exploitation, he maintains.
During one recent investigation, “one of the insolvency practitioners created a spreadsheet called, ‘the randomised time generator’,” Mr Hunt recalls.
“He typed in how much money he wanted and it created fake time entries, so he could charge about £500,000 on that spreadsheet – which was entirely fake time.”
Insolvency Practitioner Stephen Hunt Investigator Stephen Hunt says the regulation of insolvency practitioners is ineffective.
In another case, Mr Hunt discovered how three people from the same firm were fraudulently siphoning cash.
“The partner was stealing money. Unbeknown to him the manager was stealing different money and unbeknown to both of them the junior person was stealing cash,” he says.
“It was only when we investigated that we found contradictory documents that made us realise there were actually three frauds and not one.”
A recent report from the Office of Fair Trading (OFT) backs up some of Mr Hunt’s observations. It found that those who complained about the conduct of insolvency practitioners had little confidence in the regulatory bodies.
“We interviewed over 1,000 unsecured creditors and of those who had complained, the vast majority felt the outcome of the complaint process and the way it was considered were unreasonable,” says OFT project director David Stallibrass.
And even those within the business had concerns.
“We were surprised to find that 41% of insolvency practitioners said that their own regulators did not deal effectively with rogues in the profession,” Mr Stallibrass adds.
41% of insolvency practitioners said that their own regulators did not deal effectively with rogues in the profession”
David Stallibrass Office of Fair Trading
Vernon Soare, who speaks for the largest of the regulatory bodies, the Institute of Chartered Accountants in England and Wales, questions some of the methodology used for the OFT survey.
“Insolvency is an area where you will not satisfy everybody’s expectations,” he says.
“The OFT didn’t come to us to see how any of the complaints were handled. A lot of the issues are a matter of judgement.”
While Mr Hunt has seen some extreme cases of criminal fraud, complaints also arise because of negligence and incompetence and the failure of insolvency practitioners to ensure all parties are treated fairly.
The OFT report found the group most vulnerable to unfairness was that comprising unsecured creditors, who have no automatic right of repayment.
In a landmark case in July, a judge decided to tear up an agreement put together by administrators involved in the case of the landlord of a boutique shopping centre in Liverpool.
It involved a fashion brand called Miss Sixty, which was run by a company called Sixty UK, pulling out of a long-term lease on two shops they rented at the city’s Met Quarter precinct.
A court found the administrators had set aside guarantees drawn up between the landlord and Sixty UK’s Italian parent company and put forward an offer for the surrender of the lease that was much lower than an independent valuation suggested.
The judge in the case said the documentary evidence put before him painted a “disquieting” picture of administrators who appeared to have, “abdicated their responsibilities as office holders”.
“Insolvency practitioners have a duty of care, to treat all creditors fairly in the same way they have to follow the insolvency rules,” the landlord’s lawyer Caroline Howard points out. “They didn’t appear to do any of that.”
Ms Howard says it looks as though the administrators were simply following the instructions of the parent company in Italy, and that this resulted in an “unfair manipulation of the system”.
The two insolvency practitioners who were the administrators in the Miss Sixty case say they had acted on legal advice throughout, but they were not prepared to comment further because of a preliminary investigation by their governing body.
The OFT has recommended far reaching reforms of the regulatory regime to the government, which is expected to respond by the end of the month.
Article by By Richard Tyler At The Guardian – 21 Dec 2011
Insolvency profession told to tackle excessive fees
A Government review has concluded the profession should be given a chance to improve before it loses its ability to self regulate
Ed Davey, the BIS minister, said creditors expected more from insolvency professionals
The insolvency profession must tackle practitioners charging excessive fees and poor complaint handling or lose its system of self regulation, the Government has said.
A year long review has found the insolvency regime working “reasonably well” but that “a great deal more could be done to improve [its] effectiveness”, Ed Davey, the Business Department minister, has said.
The department intervened after receiving evidence from the Office of Fair Trading that suggests that unsecured creditors “do not always get the returns they might expect”.
“I believe that confidence in the insolvency regulatory regime plays a vital role in ensuring that markets operate fairly and efficiently, by ensuring that in the event of insolvency as much is fairly returned to those extending credit as is possible,” said Mr Davey.
He favours a single regulator to replace the nine professional bodies that regulate and license practitioners, but has given the profession time to get its own act in order to avoid “such significant change”.
Insolvency Service lets ‘serious’ cases go
But the Government will focus on improving “handling complaints, including on excessive fee charging, and achieving consistent and transparent sanctions”.
Vernon Soare, a director at the Institute of Accountants in England and Wales, said: “The rise in insolvencies during the recession put insolvency practitioners under the spotlight so it is little wonder the profession has come under closer scrutiny.
“However, the results of the Government consultation reveals a system that works, which reflects a profession that does a good job often in difficult circumstances. In the current climate, we don’t believe the time and cost associated with establishing a new single regulator is feasible.”
The Insolvency Services regulates the professional bodies.
Stephen Blandford Ryman & Shipleys LLP – Insolvency Practitioners – www.shipleys.com
In my opinion, there has to be an independent regulatory body. Stephen Blandford Ryman & Shipleys LLP – Insolvency Practitioners – www.shipleys.com, should take note. I will take complaints to the highest level & maximum extend of the law and media visibility both online & offline.