BusinessBusiness RecoveryInsolvency watchdog under fire

Insolvency watchdog under fire

Insolvency Service needs to change its disciplinary procedures to become an effective watchdog, according to insolvency professionals

Is the Insolvency Service an effective watchdog for its own insolvency
practitioners? With the Office of Fair Trading looking at the service as a
licensing body, some in the profession have questioned its lack of structure for
disciplining members.

In the 12 months to December 2009 complaints were made to all eight of the
bodies that issue insolvency licences in the UK about their insolvency
practitioners (IPs), including the service. All bodies can dish out sanctions to
practitioners, including fines and limitations on their case work. However, the
Insolvency Service took no disciplinary action against any of the 88
professionals it licences.

According to the service it has “no power to impose any disciplinary sanction
or penalty against an insolvency practitioner, nor can he or she order the
practitioner to pay compensation if the complaint is upheld”. It did add that
earlier complaints would be taken into consideration if an IP sought
“re-authorisation” for their licence.

One Big Four IP told Accountancy Age this unsophisticated structure made
licensing unfair on practitioners regulated by other bodies and the Service
should change its disciplinary procedures to fall in-line with them.

A senior member of a licensing body said it wasn’t sensible for the service
to only be able to strike off a member: “You wouldn’t go golfing with just one
club.”

Even if the service hopes to amend its procedures it could find itself beaten
to the punch by the OFT.
David Stallibrass, project director on the OFT investigation into the insolvency
profession, let slip earlier this year that perhaps there should be a body which
focuses just on regulating – taking licensing out of its hands entirely.

As the profession is steadily being placed under the microscope by the OFT
and the public, the Service may need to re-think its role and structure as
licensee. The OFT investigation report is due to be released at the end of June.

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