Single regulator for the insolvency profession not the way forward
The Institute of Chartered Accountants of Scotland (ICAS) today announced its support for the UK government’s decision not to create a single regulator for the insolvency profession. In December 2021, the government asked for views on a range of changes to the insolvency regulatory framework. The most controversial of these was to establish a single regulator to sit within The Insolvency Service.
Robert Mudge, Executive Director, Regulation at ICAS, said:
“It’s encouraging that the UK government has acknowledged that the existing Recognised Professional Bodies (RPBs), including ICAS, already deliver effective oversight of the insolvency profession, and that the best way forward is to work together to make improvements where these are needed. We believe that the proposal for a single regulator, would have resulted in significant risks, large scale disruption and would have come at a huge cost.
“ICAS has worked collaboratively with The Insolvency Service and the other three RPBs for many years to deliver a highly respected insolvency regime. We support the need to continually review, develop, and amend the regulatory framework over time, but feel this should be a process of evolution, rather than revolution.
“For more than 12 years we’ve asked for regulation to be extended to firms that offer insolvency services, to supplement the existing arrangements, which only cover individual insolvency practitioners.
“We’re committed to further enhancing the first-class worldwide reputation that the UK insolvency regime has. We look forward to working with The Insolvency Service and the other RPBs to identify how firm regulation can be implemented effectively and as swiftly as possible.”
ICAS welcomes proposals to establish a statutory register of insolvency practitioners and firms providing insolvency services. However, there are concerns about the proposal to give the power for the establishment of professional operating standards for the insolvency profession to the Secretary of State.
Currently standards are established by the Joint Insolvency Committee which has an effective majority of lay members.
David Menzies, Director of Practice, at ICAS, said:
“Transferring ethical and standard setting powers from an independent body to government creates unnecessary bureaucracy and risks.
“The current inclusive approach to setting standards; involving the profession and wider insolvency stakeholders, is essential to produce authoritative standards that are supported by users and regulators alike, as well as being relevant and realistic.
“While the government intends to continue to collaborate with profession experts and the RPBs, there will be significant implications in terms of cost, effectiveness and timeliness for the development of standards which will need to be addressed.”
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NOTES FOR EDITORS
1.The UK government launched a consultation in December 2021 on the future of insolvency regulation. The key changes set out included:
- Establishing a single independent regulator to sit within the Insolvency Service, replacing the current system of using Recognised Professional Bodies.
- Extending regulation to firms that offer insolvency services, as the current regime only covers individual insolvency practitioners.
- Creating a public register of all individuals and firms that offer insolvency services.
- Creating a system of compensation and redress.
- Amendments to the current arrangements for insolvency practitioners to hold security (bonding) to cover losses in the event of fraud or dishonesty.
2.The UK government’s consultation and response to the consultation can be accessed at https://www.gov.uk/government/consultations/the-future-of-insolvency-regulation
3.The four Recognised Professional Bodies authorised to regulate Insolvency Practitioners in the UK are The Institute of Chartered Accountants of Scotland (ICAS), The Institute of Chartered Accountants in England and Wales (ICAEW), The Institute of Chartered Accountants of Ireland (ICAI) and The Insolvency Practitioners Association (IPA).
4.ICAS currently regulates 88 insolvency practitioners and is the largest regulator of insolvency practitioners in Scotland.