Regulators continue jihad on practitioner compliance

AFSA will continue its insolvency practitioner focus

Could AFSA’s senior ranks get anymore Scottish? Gavin McCosker, currently standing in for CEO Hamish McCormick.

COMMENT

Presenting oneself as a fierce and tireless scrutiniser of insolvency practitioners is all the rage among the relevant regulators at the moment.

The view among much of the bureaucracy seems to be that these highly qualified professionals cannot be trusted and only heavy regulatory shackles will prevent them from abusing their position to the detriment of all.

It’s nonsense of course but regulation is being conducted in such a way as to give credence to this fiction.

Only last month the Australian Securities and Investments Commission (ASIC) released the results of a three year review of liquidator compliance.

An objective view of the findings would be that the overwhelming majority of practitioners were willing and able to comply with ASIC’s seemingly endless appetite for paperwork, an appetite that seems curiously misguided given the widespread view among the profession that serial wrongdoers falsify forms with impunity.

And in its public statement accompanying the release of the review, ASIC acknowledged that “registered liquidators are mostly doing the right thing when complying with their lodgement and publication obligations”. But that wasn’t what it wanted to focus upon.

ASIC Commissioner John Price claimed that: “any compliance failure can be a sign of wider systemic failure”.

Sure, if you are predisposed to look at it that way But it’s much more likely to be a sign of an understandable and forgivable human error. Those who regularly use the ASIC Registry’s overpriced services forgive the errors littering its databases all the time.

And while ASIC sinks its meagre allotment of funding into lengthy reviews of a regulated population of statutorily empowered accounting professionals, the thousands queuing up to register a company and/or be a company director are admitted with effectively zero scrutiny as to their suitability. As long as they can pay, they’re in, no questions asked. Does that sound like a balanced and effective approach?

Now the Australian Financial Security Authority (AFSA) has gotten in on the act, yesterday announcing the launch of its Personal Insolvency Compliance Program 2018-19.

While creditor and debtor compliance is to be a focus the bulk of the announcement dealt with how AFSA would herd that other bunch of cats with ADD, bankruptcy trustees.

“In 2018-19, practitioner remuneration; effective administration; compliance with law reforms; and ensuring that practitioners provide full, accurate and timely information to enable those experiencing unmanageable debt to make informed decisions, are key areas of interest,” acting chief executive and Inspector-General in Bankruptcy, Gavin McCosker said.

Sound familiar? Compliance reviews for trustees in bankruptcy are to continue in other words, something that cannot but seem contradictory when read in conjunction with McCosker’s claim in the same press statement that “Our goal is to simplify compliance, so we can spend our time stamping out bad behaviour”.

Surely from the perspective of a regulator, you won’t detect more bad behaviour by making compliance easier?

More ominous though is the bankruptcy boss’s “unwavering commitment to dealing with non-compliance and risks in the personal insolvency system” and his declaration that “We will always work with others who share that goal.”

That sounds perfectly reasonable but focussing on non-compliance risks destroying the effective working relationship the regulators must have with insolvency practitioners if genuine misconduct is to be exposed and its perpetrators dealt with.

Seemingly, the regulators are deaf to the burden they are imposing on the overwhelming majority or practitioners who do the right thing, a burden that makes it harder to to comply which in turn delivers more instances of non-compliance thereby justifying the regulators’ argument for a greater focus on compliance.

Maybe it’s time for Monash University’s financial boffins to measure the cost of over-regulation and compare it with the price our economy pays for the illegal phoenix activity that flourishes barely checked while those best place to identify it labour under a cloud of unjustifiable suspicion?

A confronting headline number might be just the thing to convince the regulators’ political paymasters that it’s time to adequately fund their minions and finally we can be done with this embarrassing facade that the regulators are in any way appropriately equipped to effectively enforce the law.

Disclaimer: The above represented the views of Insolvency News Online and is not to be treated as a statement on behalf of or supported by insolvency practitioners.

About the Author

Peter Gosnell
Insolvency News Online illuminates the practice of insolvency Australia-wide, highlighting the triumphs and travails of the nation’s registered practitioners and the accounting and legal professionals who work with them. INO is produced by Peter Gosnell, former business editor and senior business reporter at The Daily Telegraph newspaper. During a decade-long career, your correspondent reported on such notable corporate collapses as HIH, One.Tel, Westpoint and Fincorp as well as some of the nation's highest profile bankruptcies and the investigations and prosecutions arising from Australia's most notorious instances of white-collar crime.

8 Comments on "Regulators continue jihad on practitioner compliance"

  1. Ron Sunset | 6 July 2018 at 9:35 am | Reply

    In my experience, most AFSA and ASIC personnel only have a basic commerce or business degree, and some are lucky to have had a couple of years in an insolvency practice. I am yet to meet any who have done the ARITA course or even are CA or CPA members.

  2. Terry Smith | 6 July 2018 at 9:56 am | Reply

    Disclaimer: The above represented the views of Insolvency News Online and is not to be treated as a statement on behalf of or supported by insolvency practitioners.

    The fact that you felt the need to distance yourself as supporting insolvency practitioners is a telling indictment on the failure of the profession to sell its value. Its like you are afraid of consorting with criminals as opposed to a group of professionals just trying to have a crack in what was once aspirational Australia.

  3. Jim Johnson | 6 July 2018 at 10:23 am | Reply

    The vast majority of insolvency practitioners are conscientious and diligent – working in an environment of continued criticism and cost pressures.

    There is a place for continuing education which ARITA and the other non government regulators work hard on.

    There is also a need for review – solicitors have had that in place for many years.

    The review process will pick up abuses – which can always occur, but also indicate areas where further repair may be need.

    At present practitioners are confronted with a myriad of changes to bankruptcy and corporate insolvency laws – many of which are cosmetic and most of which are confusing. If that applies to practitioners what are the public to do.

    The regulators also have to be careful about approaching things and saying do as I say not as I do and continually monitor their own performance. There is a phrase about “glass houses”

  4. Cliff Sanderson | 6 July 2018 at 10:33 am | Reply

    Cracka of an article Peter.
    And as for your Disclaimer:The above represented the views of Insolvency News Online and is not to be treated as a statement on behalf of or supported by insolvency practitioners.
    Can we vote on that …. I think you’ll be deluged with “Yes” votes.

  5. As a former investigator of serious non-compliance in a past life, an experienced colleague of mine at the time once counselled me…”Mate, in any allegation of incompetence or conspiracy it’s usually the former”. Yes, it seems plain that the ‘over-regulation’, as it is characterised above, is targeted at all for the purpose of changing the behaviour of the few. However it seems to me that the plaintive bleating we as a profession continue to exhort on this issue serves only to raise the level of derision, if not ire, of senior bureaucrats and their political masters towards the industry. We all can, and should, aspire to be better – it’s only by setting and continually demonstrating a higher standard that we will in any way hope to raise the level of compliance in the profession – or at a minimum shine a glaring spotlight on the chasm between those who chose to comply and those that openly do not. That same sage former colleague also said “Mate…just get on with it!” Prescient advice.

  6. Susan Jeeves | 6 July 2018 at 4:26 pm | Reply

    Judging by the pro-ASIC (and unfortunately the inherent anti-practitioner) vibe of the majority of the above comments, one can conclude the ASIC (or AFSA) staff read this website. Perhaps whilst on their scheduled 15 minute tea-break or a rostered day off.

  7. Brian Dunphy | 6 July 2018 at 11:12 pm | Reply

    I think that this comment from SIN sums up the dilemma in the industry:
    Maybe it’s time for Monash University’s financial boffins to measure the cost of over-regulation and compare it with the price our economy pays for the illegal phoenix activity that flourishes barely checked while those best place to identify it labour under a cloud of unjustifiable suspicion?
    I got out because of it and those of you who know me will attest that a truer arrow was never fired. We have all identified crooks but never had the support of ASIC to prosecute them while they waste countless thousands to go after the high profile criminals who can fund their defence.

  8. Interesting article, though lodgement of prerequisite’s hardly makes one hollier than thou. As for my dear friends at ASIC one only need remember that they generate approximately 700 million in fees with an operational budget of 300, add the impending levies on IP’s and it is abundantly clear is that ASIC’s role has changed to one of revenue collection in lieu of oversight and enforcement.

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