Regulation of Insolvency Practitioners
Regulation of insolvency practitioners is carried out by the RPB who authorises the practitioner. Where an insolvency practitioner is authorised directly by the Secretary of State regulation is carried out by IPU.
Regulatory oversight is undertaken by IPPS whose remit is:
IPPS also provide advice, briefing and other information to ministers, senior officials and other government departments on issues which relate to the regulation of insolvency practitioners. The section also deals with ministerial, chief executive and official correspondence on such issues.
The section promotes the better regulation of insolvency practitioners by having regular meetings and discussions with the RPBs (see paragraph 55.9) and the Association of Business Recovery Professionals (otherwise known as R3) (see paragraph 55.34) and the section is a member of the Joint Insolvency Committee (see paragraph 55.32). The section also provides information and guidance to insolvency practitioners in the form of a periodical publication “Dear IP” (http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/dearip/dearipindex.htm) which is sent to all insolvency practitioners and others who have an interest.
A memorandum of understanding agreed between the RPBs and the Secretary of State sets out principles covering the granting of authorisations, ethics and professional standards, the handling of complaints, retention of records, and the disclosure of regulatory information to other RPBs and the Secretary of State. The agreed principles are set out below:
Granting of Authorisations. Each body recognised by the Secretary of State will grant authorisations only to suitable applicants and will work to common standards in considering those applications.
Maintenance of Authorisations: Each body will ensure, through monitoring and other activities, that the authorisations it has granted remain valid.
Ethics and Professional Standards: Each body will apply an ethical code or guide to its members, and will seek to ensure that those members work to common professional standards that are reviewed and, where possible enhanced, to enable creditors and others to receive an efficient service at fair cost.
Handling of Complaints: Each Body will have in place an accessible, effective, fair and transparent procedure for dealing with complaints against members.
Security and Caution: Each body will have in place appropriate mechanisms to ensure that its members comply with legislative requirements for security (in England and Wales) or caution (in Scotland), and to ensure that potential claims arising from the fraud or dishonesty of an insolvency practitioner are identified and made.
Disclosures and Exchange of Information: Each body will freely share information with the Secretary of State and the other Bodies to assist in the proper performance of their regulatory duties.
Retention of Records: Each body will retain members’ monitoring reports and records relating to complaints for sufficient time to allow the Secretary of State to be satisfied that the principles set out in this memorandum are being met.
Reporting to the Secretary of State: Each body will furnish the Secretary of State with sufficient information to enable the Secretary of State to be satisfied that the Body is meeting its legislative and otherwise agreed obligations. Such information will also enable the Secretary of State to maintain a comprehensive database of currently authorised practitioners.
Although IPU is not party to the memorandum of understanding there are agreed internal procedures to ensure that IPU comply with the principles, and is subject to a similar level of regulatory oversight to that of the RPBs.
Complaints about insolvency practitioners are dealt with by the body that authorises the practitioner, whether that be the Secretary of State (see paragraph 55.11) or one of the RPBs (see paragraph 55.10). The authorising body is unable to intervene in individual insolvencies, compel a practitioner to do any action or reverse any action carried out by the practitioner. Insolvency, by its very nature, deals with a number of competing interests, most notably between the insolvent and his/her creditors and, ultimately, commercial or other disputes may only be able to be resolved by the courts.
If, on receiving a complaint about an insolvency practitioner, the official receiver knows from which of the RPBs the practitioner receives his/her authorisation (this may be established by reference to the insolvency practitioner database – http://www.insolvency-service.co.uk/newipsearch.htm) the complainant may be directed to that body. For those cases where the details of the RPB cannot be established, the complainant should be referred to IPPS who will deal with the matter appropriately.
For complaints against those practitioners who receive their authorisation from the Secretary of State, IPU will deal with the complaint. The section will seek information from the complainant and practitioner to establish whether or not to uphold the complaint. The Secretary of State, however, has no power to impose any disciplinary sanction against the practitioner or to order any compensation to be paid. Justified complaints are taken into account when the insolvency practitioner seeks re-authorisation.
Under Principle 2 of the memorandum of understanding each body is required to monitor the pratitioners it authorises. The principles for monitoring insolvency practitioners sets out the principles in accordance with which monitoring will take place.
The purpose of monitoring is to facilitate the gathering of sufficient relevant information by a body on the conduct and performance of the practitioners it authorises to enable an informed and unbiased decision to be made as to whether a practitioner is, and continues to be, a fit and proper person to act as an insolvency practitioner.
Every practitioner holding at least one appointment is subject to monitoring visits and when a practitioner begins to accept appointments, the authorising body should arrange an early visit unless it is satisfied that such a visit is unnecessary. Each practitioner should be visited at least once every three years but, if satisfactory risk assessment measures are employed, the gap between visits may be extended to, but not exceed six years. Conversely, targeted interim visits should be carried out if an authorising body becomes aware of concerns about a practitioner’s activities. These concerns may arise from previous monitoring visits, from desk-top monitoring or from complaints.
A practitioner who does not hold any appointments and has not held appointments in the period since the issue of authorisation or the previous monitoring visit will not normally be subject to monitoring visits.
IPPS carry out monitoring visits on the RPBs and IPU to ensure that they are complying with the memorandum of understanding. The frequency and nature of the monitoring visits is determined by reference to information available to IPPS, including information provided by the RPBs and IPU through an annual return to IPPS; information on complaint handling and regular meetings with the RPBs and IPU. IPPS works to ensure it complies with the Hampton Principles and the principles of better regulation – that regulation should be transparent, accountable, proportionate, consistent and targeted.
IPPS produce an annual review of insolvency regulation which provides an overview of the insolvency regulatory regime and details regulatory activity carried out by IPPS during the year. It also provides statistical data on the number of insolvency practitioners and the number of complaints received about insolvency practitioners and provides information on regulatory and disciplinary outcomes taken against specific insolvency practitioners.