The UK government has announced plans to introduce new rules requiring the regulation of firms offering insolvency services, in line with audit and legal services.
Currently, the regulation only applies to individual Insolvency Practitioners (IPs), meaning that regulators cannot hold their firms accountable for failures when things go wrong.
As the size and complexity of firms and volume-based business models increase, there is a need to extend regulation to firms. The government believes this will close a gap in regulatory coverage and offer better protection for the users of insolvency services.
The reforms will also introduce a public register of all individuals and firms that are authorised to provide insolvency services. This will also show whether they are subject to sanctions by their regulator, therefore improving transparency and allowing users of insolvency services to make more informed choices.
ICAEW and the three other recognised professional bodies (RPBs) that currently regulate individual IPs will continue to have oversight of the profession, the government says. In addition to providing them with additional tools, the government will work with the RPBs to deliver transformational improvements to the regulatory framework without the need for legislation, and create a modern regulatory framework that will increase public trust in the vital work done by the insolvency sector.
The introduction of a single regulator has not been ruled out. Instead, the government proposes creating a power to implement a single regulator approach “should that prove necessary”.
“While the UK insolvency sector is highly-respected globally and the vast majority of IPs do a great job, there are still examples of poor conduct that impact on users of insolvency services,” says Kevin Hollinrake, Minister for Enterprise, Markets and Small Business.
“When that happens, it tarnishes the reputation of the whole profession and undermines confidence. This forward-looking package of reforms reaffirms the government’s commitment to ensuring the insolvency profession is effectively regulated, with a regulatory framework fit for the future. These reforms will deliver transformational improvements, modernise the regime and, crucially, increase public confidence.”
Duncan Wiggetts, ICAEW Chief Officer, Professional Standards, says that the Institute is pleased that the Insolvency Service has listened to feedback when making these reforms.
“Regulating firms as well as individual Insolvency Practitioners (IPs) will strengthen our powers as a regulator. We have long argued that this has been the biggest problem with the existing regime, not the identity of the enforcing body, so are also pleased that the four RPBs will continue to have oversight of the profession.”
ICAEW had expressed concerns that substantial changes to the landscape at this time could create a regulatory vacuum. However, says Wiggetts: “Maintaining the existing RPB model will bring the best outcomes for businesses, the insolvency and restructuring profession, and the public. We look forward to working closely with the Insolvency Service and our fellow RPBs to take forward these reforms and strengthen the framework.”
ICAEW’s actions relating to its investigation of the administrators of Comet, the electrical goods chain that collapsed in 2012, demonstrate that RPBs do act robustly. In this particular case, not only did ICAEW impose the largest ever financial penalty for insolvency failings, but it also challenged the administrators in the High Court and secured the appointment of an additional liquidator to reinvestigate the matter. That liquidator has since won a High Court case (subject to appeal) and recovered £100m for Comet’s unsecured creditors.
Better Regulation project
The Better Regulation project aims to help ICAEW and its members understand how the UK’s regulatory regime might be improved and to use our insights to call for change.
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