The government is to bar the Insolvency Service from licensing insolvency practitioners in a bid to counter accusations that the service is open to conflicts of interest, competition minister Kim Howells is expected to tell the profession in an open letter later this week.
The service will retain the right to regulate and discipline practitioners, but the move will combat a serious conflict of interest in its roles.
Currently the government’s insolvency arm not only licences IPs but supervises other licensing bodies like the Insolvency Practitioners Association which believes it is time for a change.
IPA president and PricewaterhouseCoopers insolvency partner Colin Bird said: ‘Should the organisation that regulates the private sector be involved in the direct licensing of practitioners? There is a conflict between these two so we will be looking to the minister to acknowledge that this has to change.’
The letter is also expected to address the issue of disciplinary procedures.
The only sanction open to the Insolvency Service is to remove a practitioner’s license. Practitioners argue it should have a wider range of penalties, like other regulators.
Insolvency experts who produced April’s ‘Ten Years On’ review of the profession are looking for signals from Howells that he is prepared to answer the demands of insolvency specialists.
The profession welcomed the government’s swift response to the concept of setting up an Insolvency Practices Council that was the key recommendation of the report. Now IPs are looking for definite action to amend insolvency laws.
IPA investigation committee chairman Tony Benedict said urgent action was needed to tackle the problem of unlicensed so-called ‘ambulance chasers’.
The IPA is proposing a kite marking system for debt advisers.
The letter was also expected to refer to plans to make it easier for practitioners to transfer cases if someone lost their licence or left their firm.
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