201504 CM April

INSOLVENCY NEWS
END OF TERM REPORT
THE Insolvency Service (IS) annual
report, ostensibly a review of 2014,
reads a little like an end of term
report. Published just before the
pre-election lock down, it summarises
a number of different strands of activity,
many of which have been in the making
throughout the lifetime of this Government.
By way of introduction, and
perspective, the IS rightly reminds us
that most of the regulatory activity is
undertaken fairly, professionally and
effectively. There is a recognition though
that a lack of understanding of the regime
by stakeholders can mean that much
of the good work is in danger of being
eclipsed by unfulfilled expectations. In
particular here I think the IS is referring
to some complainants, whose demands
may be unrealistic. All the regulators will
have had experience of cases in which
the deployment of resources has been
disproportionate to the degree of alleged
misconduct. Those cases divert effort
away from more serious matters.
The key to addressing this is in part
transparency. More publicly available
information, centralised and easily
accessible, for example regarding
outcomes involving some form of sanction,
will help. This will highlight any major
differences between regulators, and the IS
has a key role to play here in making sure
there is a level playing field.
The Bills before parliament include
measures to introduce regulatory
objectives and sanctions against
regulators, but the real impact of those
will depend on the IS's willingness to
tackle departures from the standards it
sets. The annual report shows there are
some inconsistencies that have yet to be
ironed out. The existence and continuation
of some apparently material differences
is disappointing in a mature regulatory
regime. It seems there is much still to be
done, and the longer the present situation
persists, the greater is the prospect
of calls for use of the Bill’s backstop
provision for a single regulator. That is
contrary to the IS’s stated intention of
seeing the present regime work well, but
how well it works is in some respects
down to the IS itself, in its capacity as
oversight regulator, as well as of course
the individual regulators.
Physical meetings
Other measures in the Bill include removal
of physical meetings of creditors as a
default position in insolvencies. At one
level this might look like a sensible red
tape measure, but it flies in the face
of other objectives around creditor
engagement and removes practitioner
discretion. A better approach would be
to let practitioners make a professional
judgement on a case-by-case basis.
The de-regulation Bill will see partial
licensing for practitioners who want
to specialise in personal or corporate
work. The IPA supports that move, as it
increases choice. Subject to safeguards
that can be built into the examination
structure, this is a low risk innovation.
Practitioner fees receive only a passing
mention in the report but the IS has
published its plans for fee estimates,
based on representations made by the
profession and others. More on that in a
later edition.
Pre packs continue to absorb a lot
of time and effort. Interesting to note
that there were 250 connected party
translations in 2014. The new prepack
pool should be up and running shortly,
and CICM, R3, IPA and other regulators
along with some other stakeholders wrote
to Vince Cable to confirm support for and
a commitment to the new system. A new
SIP16 should be out by the time you read
this.
Standards setting through the Joint
Insolvency Committee chaired by Philip
King continues its work, and issued new
guidance on Reservation of Title last year.
Complaints were made through the
gateway for the whole of 2014, its first
full calendar year of operation. Seventy
five to 80 percent of the complaints made
were passed to regulators for further
enquiry, the remainder being rejected by
the IS gateway staff. IVAs accounted for
about 1/3 of complaints in 2014. Nearly
half of all complaints were from debtors,
and this represents a significant change,
as historically the majority of complaints
have come from creditors. PPI-related
complaints have featured strongly.
This year will see changes to the
regulatory environment, with one or
more of the current regulators probably
withdrawing and some consequent
rationalisation in the insolvency market.
Legislative changes in October, to be
followed by Rules consolidation in early
2016, provide plenty of scope for debate
in the coming months. The real challenge
comes in the perceptions of creditors
and others about the effectiveness of the
regime, and that is an open question.
David Kerr MCICM is the
Chief Executive of the Insolvency
Practitioners Association (IPA).
CREDIT MANAGEMENT
CM
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