AFSA judging trustees’ referrers for worthiness

Has any insolvency practitioner ever said: there’s never been a better time to be a gatekeeper of the financial system?

If so, they are probably long since retired.

In this day and age, regulators are at risk of turning the gatekeepers into turnkeys, if not inmates.

For the source of our cynicism, we refer to the contents of a letter, dredged from the toxic silts of anonymity.

Authored by AFSA’s Assistant Director, Regulation and Enforcement John Maloney the February 6, 2019 letter is addressed to an unknown recipient.

We do not know if the letter is a form letter being sent to many or to few.

What we do know is that as part of AFSA’s Insolvency Practitioner Compliance Program 2018-19, the personal insolvency regulator is cracking down on untrustworthy advisors and the threats such unsavoury operatives pose to practitioner independence.

The implications for trustees are clear.

Using undisclosed sources of intelligence, AFSA is shinning the black light on referral networks and reaching for the bleach when it detects a stain.

And as outlined by Maloney below, gatekeepers suspected of blemish must aid and abet their own inquisition.

“To enable AFSA to test practitioner compliance with the standards expected of trustees, you are requested to provide copies of any agreements, contracts or other documents evidencing arrangements in place between you and/or your firm and any other party, whether a related
party or not, concerning referral of personal insolvency work, (whether that work relates to a bankruptcy, personal insolvency agreement or debt agreement), including any arrangements for those parties to conduct work on your behalf during a personal insolvency administration,” Maloney told the unidentified trustee.

“Where you have undocumented or informal arrangements in place with other parties concerning referral of personal insolvency work, AFSA requests a written summary detailing those arrangements.

“AFSA further requests that you indicate whether any party with whom you have arrangements in place has referred personal insolvency business to you or your firm between 1 February 2018 and 31 January 2019, and to provide details of the nature of those referrals.

“If you choose not to provide this information voluntarily, we reserve the right to use the Inspector-General’s statutory information gathering powers in section 12 of the Bankruptcy Act 1966,” Maloney concluded.

It would be tempting to think that maybe this trustee had it coming and while that may turn out to be the case the depressing reality is that both ASIC and AFSA seem to have adopted the witches-are-the-ones-that-don’t-drown approach to the detection of miscreants.

Its difficult to believe that this program won’t require many respectable trustees to incur unnecessary time and expense proving their innocence.

Registered liquidators can perhaps breath easier given ASIC seems to be refraining from applying similar scrutiny to registered liquidators’ referral networks, at least for now.

4 Comments on "AFSA judging trustees’ referrers for worthiness"

  1. AFSA would be far, far better of in gaining the respect of trustees and creditors if they investigated material and genuine cases of illegal conduct by bankrupts. However, AFSA seems only interested in ‘slam dunk’ prosecutions which are often of trite matters, and even then there is hardly a guarantee the DPP will get a win.
    Second point – AFSA does 80% of bankruptcy administrations. Their files are adequate at best. Very rarely will they conduct asset searches and their creditor reports seem to never inform creditors what (if any) investigations have been undertaken into antecedent transactions. I can’t imagine AFSA paying hundreds of dollars to get bank statements re-issued, but that is exactly what privately registered trustees do time and time again as part of their investigations.

  2. “witches-are-the-ones-that-don’t-drown”. Absolute Gold. Never has the regulators’ mission statement been so eloquently encapsulated. You should write professionally. As an aside, post Hayne and whilst the boots are out for ASIC, as a group we should be pushing to have the regulators rolled up into one beast. At least we would be only dealing with one department of numpties.

  3. The sad reality is that you can only crack down on those that are regulated e.g Liquidators and Trustees. The unregulated have a field day and find plenty of willing victims because IP\’s continue to see pre-insolveny as a dirty word. Solution? Only let those that are qualified to give \”insolvency advice\” practice in this area. Similar to superannuation – only those qualified should be permitted to practice. On this note, there are plenty of lawyers and accountants who are \”qualified\” but have no experience or skills in insolvency. They dish out half baked advice on how to defeat creditors as much as those without qualifications. ARITA\’s views are conflicted in this area because they have too many vested professional interests inside their tent.

  4. There have been for some time issues concerning “referrers” to insolvency practitioners and the circumstances of this vis a vis possible interference with the necessary independence of the insolvency practitioner needs monitoring continuously. That is not to say that insolvency practitioners in general do not act otherwise than in accordance with standards. It is quite often perception rather than reality – a good reason for monitoring or arrangement. It is only occasionally that referral arrangements create problems and it is important in those circumstances that they are addressed sooner rather than later so that the integrity of all insolvency partitioners is preserved

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