ICAEW’s Insolvency Licensing Committee (ILC) has a range of specific regulatory responsibilities under the Insolvency Act. Its main work involves reviewing Quality Assurance Department (QAD) reports on visits to insolvency practitioners (IPs), responding to these reports and deciding if any regulatory action is needed. The committee also considers new applications for insolvency practitioner licences.
The committee – which has a minimum of eight members, of whom at least half must be lay members – is charged with:
- ensuring IPs licensed by ICAEW are ‘fit and proper persons’ and meet acceptable requirements for education, practical training and experience; and
- that the good reputation of licensed IPs is maintained.
“Our committee’s main role is effectively to make sure that IPs are doing their job to the required standard, and as a result of that, ensuring that the reputation of other IP’s licensed by ICAEW isn’t tarnished by a few,” says Alessandro Sidoli, IP at Kay Johnson Gee and ILC member.
Fit and proper
The committee considers reports from QAD that involve the most serious matters: the cases where QAD believes that regulatory action might be appropriate. “Those are the only ones we see,” says Sidoli. The rest, as well as some of the committee’s other duties, are dealt with by the Professional Standards Department (PSD) under delegated powers. “So it’s a small number that come before us, especially in comparison with the number of IPs across the country,” he emphasises.
“But we retain an oversight role in that we check what has been done by the PSD,” Catherine Boyd, lay Chair of the ILC stresses. “So even though we might not see those less serious concerns, there’s an annual review of the PSD’s decisions by members of the committee, so we can check that everything is being dealt with appropriately.”
Pre-Covid-19, the ILC met six times a year, usually at Chartered Accountants’ Hall in London. And it has since continued to meet virtually in a similar format. ILC members receive the relevant papers several days before the meetings. “We will all have read the papers before we come to the meeting, and then in each case we consider the QAD report, and recommendation, any relevant background, and information from the IPs.” explains Boyd. “Then we make a decision as to whether to go with QAD’s recommendation and what, if any, action needs to be taken, whether we can deal with it or whether the issues seem so serious that it requires further investigation and we need to refer it to the Professional Conduct Department.”
“What we do is look at the problem, and ask why and how has it occurred, and is it something systemic in the way the IP works or is it something they’ve done on purpose?” adds Sidoli. “So it all comes back to making sure the IPs out there are fit and proper to do their job.”
“There’s always quite a healthy debate,” says Boyd. “Everybody contributes to the decisions. I’m a lay person, so the key thing for me is to get the views of the IP members because they’re the ones doing the job every day. They are really important in putting things into perspective because they have a real life view of what goes on in a practice and why someone might not have achieved the highest standards at a particular time.”
This combination of lay and non-lay members significantly contributes to the debate and the validity of the decisions. Mike Jervis, Partner, Restructuring and Insolvency, PwC, and Deputy Chair of the ILC, believes the common sense and experience from different walks of life brought by the lay members, augmented by the view of the IPs – who understand the pressures of practice – combine to get the right result. “You get a fusion of approaches,” he observes.
“And something that always strikes me,” he adds, “is that the decisions end up being consensual. We are a committee of eight or nine, but it’s not ever a five to four, or eight to one, decision. The decisions are not made by vote.” And that is the outcome of what he agrees is a “healthy and, in many cases, lengthy debate”.
Poor control of cases
There haven’t been any notable trends in recent cases referred to the ILC, but the committee members do have some general advice for IPs. “There isn’t one thing we can point to that’s happening commonly,” notes Sidoli. “But there is a broader issue that comes up; and that’s poor control of cases.”
“Thinking back over the past year,” he says, “if some of the IPs we consider had maintained a tighter grip over their cases, and were more in touch with the case management, then potentially some of the issues that arose on those cases may not have arisen.”
Another area where IPs can fall down is having weak or no internal compliance reviews (ICRs). Although there is a lot of discretion as to how to carry out an ICR, ICAEW’s regulations require them to be completed annually. “This is often about people not remembering the requirement to do a compliance review, and why that’s important and helpful for themselves and for ICAEW,” says Boyd.
She also finds it frustrating how frequently IPs fail to read the information that ICAEW and other regulatory authorities send out to help IPs keep up-to-date with legislative developments and other requirements. “There is a lot of information disseminated through things like ‘Insolvency News’ from the ICAEW and ‘Dear IP’ from the Insolvency Service,” she emphasises. “But I don’t think some IPs use the resources that are provided, and that’s disappointing. They must stay up-to-date with their understanding of the requirements, which are placed on every IP.”
“In any regulatory role you are not there to randomly pick up on any failings; you are there to do justice to the nature of the concern and look at it objectively, fairly and consistently,” stresses Boyd. “And I think by doing that we are serving the public interest. We are bringing many different pairs of eyes to the same issue and reaching a view as to what is the most appropriate way of dealing with it.”
“We’re also looking at the public as the body of creditors who lose money as a result of an insolvency,” notes Jervis. “One of the things we look at specifically is whether a failure to abide by the standards of professional conduct has caused a loss to creditors, for example, have they had their claim incorrectly calculated. So, is there a loss to the general body of creditors?”
“Every time we look at something, we are mindful of the impact of alleged failings both on the users of the IP’s services, but also on the reputation of the profession,” adds Boyd. “People have got to have confidence that the regulator and therefore the regulatory committees are addressing the issues that are being highlighted during QAD reviews.”
“It’s also about addressing the issue of why should the good IPs out there face competition from people who are not abiding by the standards and creating negativity around the profession,” she emphasises.
“Our ultimate goal,” concludes Sidoli, “would be to have no reports coming to us. That would be the best outcome because it would mean the profession is lifting itself up and holding itself to a higher standard.”
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