Elements of a Regulatory Framework
Presentation:- World Bank Group International Finance Corporation
June 2011 – Ukraine
David Kerr MIPA MICM Chief Executive Officer
About the IPA
Membership body
2,000 members, 700 students, 500 IPs
Leading the UK insolvency profession in:
Development of professional standards Creation of insolvency qualifications
Widening access to insolvency knowledge Debates on current insolvency issues
Insolvency Practitioner Regulation
Licensing of IPs introduced by Insolvency Act ’86 Licensing by Government’ Insolvency Service &
by Recognised Professional Bodies which have:
Rules for governing membership
Procedures for monitoring and inspection Powers to regulate and discipline
Insolvency Practitioners
Individuals (natural persons) required to
- Have passed Joint Insolvency Examination Have not less than 600 hours experience in
three years before applying
Be fit and proper
Have professional indemnity insurance
Have insolvency bond against fraud/dishonesty Have maintained professional education
IPs – Joint Insolvency Examination
Set by JIE Board at degree-equivalent level Held once each year
Comprises three 3.5 hours papers
- Personal (natural persons) insolvencies (Bankruptcy
and Individual Voluntary Arrangements)
Company Liquidations (winding-up)
Company Voluntary Arrangements, Administrations
IPs - Experience
Engaged in work relating to:
administration of estates (over which IP appointed) Involving not less than 600 hours experience in
management/supervision of cases on IP’s behalf
Work in last three years
To be certified by one or more IPs for whom
IPs – Fit and Proper test
Applicants for licence required to make
declarations covering any
personal:- Criminal proceedings Civil proceedings
Bankruptcy or other insolvency proceedings Adverse findings, restrictions or removal by a
professional body
IPs – Insurance and Bonding
IPs require Professional Indemnity Insurance Negligence
Specified cover levels
IPs require (by statute) insolvency bond: Fraud and dishonesty
Annual enabling (general) bond Monthly returns/ cover schedules Specified cover levels
IPs – Professional Education
Minimum 25 hours annual structured learning:
Continuing Professional Education (CPE)
May include attending or speaking at courses,
conferences, seminars and lectures organised by commercial course and conference providers,
in-house or by own/other professionals firm
IP Standards
IPs required to comply with:–
Legislation
Statements of Insolvency Practice
and act in accordance
with:- Code of Ethics
and take account or have regard
to:- Guidance issued
“Dear IP” bulletins issued by the Government’s
IP Monitoring and Inspection
IPs are required
to:- renew licence each year & declare fitness to act Submit annual* self-certifications of conformity
for sample of cases selected by IPA
* (other than in year of visit)
Co-operate and provide answers to complaints Subject themselves and their staff/firms to
IP Regulation
Committees consider –
Licence applications
Reports of inspection visits Complaints
Other information obtained about practices
which may be unprofessional, unethical, improper or unfair
IP Disciplinary measures
Regulator power to –
Withdraw or suspend licences
Impose restrictions or prohibitions Issue warning letters
Impose fines
Order payment of costs
Require additional (targeted) inspections and/or
IP Disciplinary (appeal) measures
IP subject to disciplinary measure can appeal
Complainant can ask for matter to be referred to
independent Reviewer of Complaints
But IPA –
Cannot intervene directly in, or give directions re
conduct of insolvency assignments
Cannot order payment by way of compensation
Regulator
Responsibility/Accountability
Set out in Memorandum of Understanding and
Principles of Monitoring with Insolvency Service
Subject to oversight and three-yearly inspection
by Insolvency Service
Provide details of its procedures on its website Publish disciplinary findings/ regulatory decisions Provide annual reports of regulatory activity to
Best practice and ethics
Code of ethics
Common code for all practitioners
Principles-based with specified prohibitions Five fundamental principles
Integrity Objectivity
Professional competence* Confidentiality
Professional behaviour
Ethics code
Over-arching code
Framework approach Threats and safeguards Conflicts
e.g. self-review threats
Perception
incl. acceptance of gifts:
e.g. per Ukraine draft code paragraph 4.3.3
Revision of UK code 2009
Structure & specific prohibitions retained New guidance on some issues
(e.g. advertising and joint appointments)
Review of some areas (e.g. commissions) IFAC principles
‘Competence’ principle extended to ‘Due care’ ‘Confidentiality’ introduced
Transparency
Confidentiality in context IPA transparency guidance
Open reporting – expectations of others Decisions/transactions explained (6.6.1) A code fit for the insolvency profession Emphasis on perception
Ongoing review of potential conflicts Record keeping
Minimising risk
Risk to reputations:- Individual
profession-wide
Familiarisation with code
Identification of threats to objectivity Recognition of perception of others
Assessment of self-interest (e.g. re fees) Consultation and contemporaneous note
Statements of Insolvency Practice
A suite of statements on specific areas of
practice:- Originally guidance on BEST PRACTICE Now setting out ‘REQUIRED PRACTICE’ SIP1 – introduction – regulatory status
‘Transparency’ of primary importance Consultation and revision
Enforcement
SIPs topics
Liquidator’s investigations Voluntary Arrangements
+ new Protocol re consumer IVAs
Directors’ conduct returns (content/timing) Meetings of creditors
Remuneration and accounts
+ new statutory Rules, April 2010
Funds (separate bank accounts)
Regulation of ethics
Cost of regulatory procedures versus
effectiveness
e.g. sampling Assumptions Monitoring
Visits and self-certifications CPE
Complaints – disciplinary sanctions
Essential elements
Any regulatory system must have: Integrity
Independence (lay input) Consistency/ fairness
Sufficient robustness
Effectiveness (real and perceived) Oversight
