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12-101MR ASIC’s forward plan for insolvency industry
ASIC today issued its first annual report into its supervision of registered liquidators using it to highlight its areas of focus.
ASIC Deputy Chairman Belinda Gibson said, if a company experiences financial difficulty and goes into external administration, creditors are entitled to expect the business is wound up in an orderly and fair way so they can secure the maximum return of their money possible.
‘The role of registered liquidators in this process cannot be overstated,’ Ms Gibson said. ‘Liquidators are entrusted with creditors’ funds and have considerable discretionary power over assets earmarked for creditors.’
ASIC has undertaken significant work in recent years to sharpen its focus on the insolvency industry in order to promote confidence in the market. This includes ensuring creditors have confidence in the administration of insolvent companies and in ASIC’s supervision of the insolvency practitioner industry. ‘Creditors need to believe that they will get the maximum return possible,’ Ms Gibson said. ‘Clearly, there will be costs in winding up a business but the charges need to be reasonable and reported in a way which allows creditors to make an informed decision to approve or not approve.’
Ms Gibson said the community expects liquidators to execute their professional duties with honesty and integrity, and in accordance with the law. ‘Registered liquidators must be competent and efficient. They cannot use the opportunity to put their interests ahead of their creditors’ interests. They must bring an independent mind to their task,’ Ms Gibson said.
ASIC will continue to draw on its insolvency practitioner dedicated staff, supported by expert resources in other parts of ASIC, with the aim of better regulating practitioners and providing greater communication and monitoring power to creditors.
‘Moving forward, ASIC will focus on lifting our surveillance intensity as we have the extra resources to do so; enforcement outcomes where surveillance identifies unacceptable conduct; providing guidance to the industry about our expectations; and directing creditors toward more “self-help” assistance to ensure they understand and exercise their rights and powers to oversee the liquidation process to best protect their own interests,’ Ms Gibson said.
‘These principles underpin ASIC’s supervision of the sector.’
Ms Gibson’s comments follow ASIC releasing its first annual report into its supervision of the registered liquidators insolvency industry, detailing surveillance and enforcement outcomes in 2011. Issues of competence, independence and inappropriate self gain underpinned ASIC’s supervisory activity.
For the calendar year 2011, ASIC opened eight new formal investigations into registered liquidators, resulting in ASIC cancelling the registration as an official liquidator of John Lord (refer: 11-184MR) and reaching agreement with Peter Ngan that he would not practice as a registered liquidator for two-and-a-half years (refer: 12-04MR). Further, ASIC obtained an undertaking from Atle Crowe-Maxwell (refer: 11-184MR) to ensure compliance with independence requirements when consenting to act as official liquidator.
In June 2011, the Companies Auditors and Liquidators Disciplinary Board (CALDB) cancelled the registration of David Mark Anderson for failing to lodge annual returns with ASIC.
[This media release was amended on 14 August 2020 in accordance with ASIC policy - see INFO 152.]
Ms Gibson said: ‘Deterrence is one regulatory tool available to ASIC in pursuing our priorities and holding gatekeepers to account.'
At the end of 2011, ASIC was conducting 10 investigations into registered liquidators.
Report 287 ASIC regulation of registered liquidators: January to December 2011 ( REP 287) also shows ASIC completed more than 200 reviews examining issues including practitioner independence, competence and remuneration.
ASIC has a program of compliance visits for registered liquidators based on risk assessment and market intelligence. This includes complaints and information from the public and the profession itself.
ASIC also conducted project work, including checking compliance with independence declarations, remuneration disclosure and insurance requirements.
‘We have built resources in our insolvency practitioners group allowing us to increase surveillance of practitioners,’ Ms Gibson said.
‘Where practitioners do not meet their obligations, we will not hesitate to take action.’
In 2011, ASIC received 426 reports of alleged misconduct concerning registered liquidators, in some instances about the same external administration. Many of these reports (51%) required educative outcomes for the complainants due to, for example, creditors not fully appreciating a liquidator's duties and obligations or the insolvency process.
Key statistics from REP 287:
ASIC opened eight formal investigations into registered liquidators. At year end it had 10 open investigations.
ASIC received and analysed 426 reports of alleged misconduct concerning registered liquidators.
Reports of alleged misconduct and enquiries against registered liquidators average 3.5% of the total 75,951 reports and enquiries ASIC received across all its areas over the five and a half years to 31 December 2011.
ASIC completed more than 200 reviews examining issues including practitioner independence, competence and remuneration.
At the end of 2011, there were 671 registered liquidators (of which 523 were also official liquidators).
The release of REP 287 is part of ASIC’s commitment to improving transparency, and follows on from the release of Information Sheet 151 ASIC’s approach to enforcement (INFO 151), Information Sheet 152 Public comment (INFO 152), Regulatory Guide 100 Enforceable undertakings (RG 100), and Report 281 ASIC enforcement outcomes: July to December 2011(REP 281).