Improving regulation of the insolvency profession

The Senate Economics Reference Committee has made recommendations to government on the regulation of insolvency practitioners in Australia, with the aim of giving corporate insolvency greater priority and prominence in the regulatory framework.

The Institute was closely involved in the Senate Committee consultation process through a detailed submission and an invitation to provide evidence.

We support the push for greater prominence of the insolvency profession but not just with the regulatory structures. A better understanding of insolvency activities and challenges will greatly assist quality outcomes.

The Committee's work was triggered by concerns over the conduct of some insolvency practitioners and claims there had been a lack of action by the regulator, Australian Securities and Investment Commission (ASIC).

The most controversial recommendation was to remove the task of regulating corporate insolvency from ASIC and pass the job onto the Insolvency and Trustee Services Australia (ITSA) agency. This seems like an unlikely outcome, given the transfer of key functions by government to ASIC, such as market supervision from the Australian Securities Exchange.

ASIC has acknowledged the need to lift its game in the insolvency space – it’s allocated more resources to the division. Despite the increase in its regulatory activities over practitioners, this response has drawn yet more criticism - increased activity without improved quality. We don't share these criticisms but we believe it is important to get the right balance in approach to driving improved quality of services, particularly in the co-regulatory environment.

The current laws and regulatory framework can be improved and the insolvency profession, like all professions, should be subject to continual review, be clearly accountable and respond to the changing conditions in the business environment.

What are your thoughts on the regulation of insolvency practitioners?