ARITA brands ASIC “hypocritical” over IFM

In the wake of the release last month of ASIC’s latest Cost Recovery Implementation Statement (CRIS) it’s clear that ARITA’s opposition to the liquidator levy has not waned in the face of the COVID 19 pandemic, and having burrowed through the CRIS iNO can but conclude that the hostility’s warranted.

“Given the high levels of disclosure which are required of registered liquidators when seeking approval of their remuneration from creditors or the Court, it is highly unfortunate that ASIC is not able to provide more detailed information, on a specific sub-sector basis, of the manner in which its costs are allocated and charged.” From the Australian Restructuring, Insolvency and Turnaround Association’s response.

In a response to the CRIS published last week the peak national body representing insolvency, restructuring and turnaround professionals lambasted the regulator for hypocrisy, accusing the regulator of penalising liquidators when they fail to meet deadlines whilst routinely failing to meet its own.

“The release date of the draft CRIS continues to drift with release dates moving from October 2017 for the 2017/18 CRIS, to 23 July for the 2020/21 CRIS,” ARITA said in its August 12 CRIS Feedback statement.

“The final CRIS for 2019/20 was published on 4 March 2021, the same month that invoices were issued to regulated populations for payment.

“In the 2019/20 final CRIS at section R Key events and dates stated that the 2020/21 CRIS for feedback would be provided in April 2021 – it was provided at the end of July 2021.

“We find it hypocritical that ASIC cannot meet its deadlines and yet penalises its regulated populations when they don’t.”

Quoting research by Deloitte for July 2021 showing external administrations are down 7,515 (compared to the base line 10 year average) ARITA also attacked the rise in the notifiable event cost from $79.16 to $127.00 and a rise in the ASIC cost base to $7.552 million, an increase of more than $1.4 million from the $6.139 million in 2019/20.

“We consider it completely unacceptable that the draft CRIS providing estimates for the 2020- 21 financial years was not provided for consultation until 23 July – 23 days after the end of the financial year that it relates to,” ARITA said.

“How is any business meant to budget for and manage this uncertainty – heightened by the current economic times with the Coronavirus crisis?”

ARITA also branded the regulator hypocritical in respect of the lack of transparency in terms of the costs incurred that the levy purports to recover.

According to table 15 of the CRIS (See below) while enforcement costs fell from the $2.371 million in the 2019/2020 CRIS to $1.812 million in 2019/2020, certain indirect costs under categories like “Property and corporate services” inexplicably rose, from $845,000 to $1.032 million.

Did ASIC pay more rent at a time when landlords have been offering discounts to prevent tenants relocating? Maybe not, but how would the public know? There’s no explanation.

There was also a significant rise in the costs ASIC incurred for “Governance, Central Strategy and Legal” – from $937,000 to $1.052 million – but again, no explanation as to who might have benefitted from those costs, a want of disclosure that ARITA was only too happy to highlight.

“There is a lack of transparency in the manner of allocation of costs across subsectors and exactly what are included in direct and indirect costs,” ARITA said.

This lack of transparency in accounting is particularly galling for insolvency practitioners where remuneration is a focus for ASIC (refer Table 14).

“That ASIC are unable to display more than a few budget line items for some $7.5 million of charges levied to the insolvency profession is hypocritical and fails to follow the same standard it demands of the regulated population.”

The charge of hypocrisy is not something ASIC can dismiss as sour grapes from vested interests.

The principles contained within the Model Litigant provisions ASIC’s bound by shouldn’t apply only in respect of how ASIC conducts legal proceedings. ‘

A statutory authority that cannot meet standards of practice it’s charged to hold others to cannot be respected. And with contempt comes impunity.

The relevant tables for 2019/2020 and 2020/2021 are set out blow. Download CRIS 2019/2020 and CRIS 2020/2021.