Insolvency Service splits - it's about time too

So the Insolvency Service has done the decent thing and said it will separate its practitioner licensing arm from its regulatory division.

This comes after its first annual review of how it regulates the insolvency profession. The government agency said it will now put its ‘authorisation function at arm’s length from its overarching regulatory role’. The changes mean the person who authorised an IP will not be allowed to regulate or investigate them at a later stage.

Reading between the lines, the move has surely been made to help the regulator ward off future broadsides from politicians ­ and even the practitioners themselves.

MPs hammered the department for its monitoring of pre-pack administrations, warning that the integrity of the service and the IPs under its purview was on the line.

With the threat of company collapses looming larger than it has since the early 1990’s, the Insolvency Service can ill afford people taking swipes at its operating policies.

The body is intending to keep the functions separate as much as it can, but it did admit the regulatory side would take precedence because of efforts to be ‘as transparent as possible’.

The service authorises about 90 licences a year, a figure they believe will remain about the same despite the spike in demand for practitioners. As for the rule change itself, insolvency figures have welcomed it after some practitioners previously raised issues about potential conflicts of interest.

Peter Burton, head of regulatory policy at ICAEW, said last week: ‘The Insolvency Service is on the road to recognising this is an issue and are taking steps to tackle it. There are a number of people who have been poking them for wearing two hats,’ he said.

David Jetuah is a reporter on Accountancy Age