Tighter controls needed
Conway says that while there are not that many rogue operators in the mould of Ariff, there might be some who push the boundaries.
“I don’t believe there are cowboys in the insolvency profession but undoubtedly there are probably those that benefit from the broader lack of awareness of what actually takes place during the process.”
He says one of the big issues for some members of the public is the fact that insolvency professionals charge fees, irrespective of the state of the company. “That’s natural, someone has to do the job,” he says. “The challenge really is to ensure that the disbursements the insolvency practitioner receives during the course of the administration are reasonable and that disbursements are well understood and that those disbursements, importantly, are a true reflection of the costs of administration and that the remuneration of the liquidator is proportionate.”
Conway says the three accounting bodies have a common code that has regular assurance reviews, disciplinary tribunals and the ability to impose a range of sanctions from financial penalty to disqualification as a member. The problem, he says, is dealing with practitioners who are not members of the accounting bodies. This is a significant issue because according to the last census, some 400,000 people in Australia claimed to be accountants but the three bodies only had 190,000 members.
“There is a significant gap between those who claim to be accountants offering services to the public and those who are actually members of professional bodies and subject to rules and responsibilities that come with that,” he says.
He says that in other countries, governments had brought in laws prohibiting people from hanging out their shingles as accountants without being qualified or members of a professional body. Australia, on the other hand, was an open market. He says the Government should bring in regulations to bring all accountants into line, including insolvency practitioners.
“We believe there is a consumer protection risk when we don’t have a regulatory framework around the services that can be provided by an accountant,” he says.
“We believe the time has come for us to have a mature discussion about regulating and protecting the term accountant in Australia to ensure that when a person engages the services of a professional accountant that they have the confidence that the person is appropriately qualified and bound by any professional and ethical standards and is subject to quality assurance reviews and holds relevant insurances.”
[breakoutbox][breakoutbox_title]Table 3. Complaints about insolvency practitioners[/breakoutbox_title][breakoutbox_content]
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An isolated problem?
Denise North, chief executive of the Insolvency Practitioners Association, says she does not believe there are that many “cowboys” in the insolvency profession. She says that when people had raised the matter with her, they were unable to name anyone else apart from Ariff.
“It’s too easy for everybody to say there are a whole lot of cowboys but I don’t see any evidence of that and we don’t believe there are,” North says. Nor does she believe there is a need for more regulation. “There is an enormous amount of regulation at the moment and we don’t think that more regulation is needed,” she says.
“We think that what’s very important is that the regulating regime in place is effectively enforced, that practitioners have access to appropriate education and appropriate guidance about the best way to carry out their practice and that there is early identification of someone who might not be doing the right thing.
“In the case of Stuart Ariff, we would argue that in the end, the regulatory system has done what it needed to do in his case. What’s unfortunate in his case is that some of those things weren’t achieved earlier in the piece.”
She says that the Government’s options paper recommends mechanisms to ensure that ASIC would be in a position to act more quickly. She says her organisation had already improved its member disciplinary processes. Last year, the Insolvency Practitioners Association had changed its constitution to allow it to act more speedily in relation to a practitioner suspected of not upholding the right standards.
“When we might refer a practitioner to ASIC or to another body for review we may suspend them at the same time, rather than waiting,” she says. In its submission to the Senate inquiry, the Association had argued strongly for a better alignment of the personal and corporate insolvency regimes. “We have recommended a number of things that happen in the personal insolvency regime, such as regular reviews of practitioners and their practices and the regulator attending creditors’ meetings on a regular basis, be bought into practice.
“We have also recommended such practices as interviewing applicants for registration as liquidator be adopted and that there be panels to review discipline matters when they come up.”
Improvements take time
Peter Day, a board member of the Accounting Ethical and Professional Standards Board and a former deputy chair of ASIC, questions the government’s proposal to remove the discipline of liquidators from the CALDB. “I happen to think based on my experience of the CALDB that that’s a process that could be enhanced and improved,” he says. “I think creating another institution isn’t necessarily the answer, unless there are seen to be gaps. Improvements take time and you have to work on them and have a commitment from all the parties.
“I like to see existing institutions used to their maximum effect before you create new institutions. That doesn’t mean to say that the institutions can’t be more effective.”
He does not believe there is a need for more regulation, unless the regulator makes it clear that it’s needed. “My first instinct is no but my second instinct is to say if the regulator demonstrates clear need, then I would support that.”
Whether the Government’s proposed changes go far enough remain to be seen. But whatever the impact, insolvency is likely to remain an emotive and troublesome issue for the profession.
