This is a guest post by Peter Sargent, an Insolvency Practitioner and Consultant at BHP Clough Corporate Solutions. He is a member of the IPA’s Membership & Authorisation Committee and former president of R3.
The failure of Varden Nuttall (and its holding company), a middle ground IVA bulk provider has brought into sharp relief the current system of Insolvency Practitioner (IP) regulation. That and the failure of a number of debt management providers is surely setting off alarm bells within the Insolvency Service and the Financial Conduct Authority.
Traditionally IPs owned or had a stake in the firm they worked for, and as a result traditional IP regulation always looked at the IP, not the firm, and concentrated on case and not firm management.
Now many appointment taking IPs work for IVA bulk providers and firms which provide insolvency services. They do not have a financial stake nor any role in the management of the business.
As an outsider looking in (I have never worked for an IVA bulk provider), it seems to me the best of these firms have invested heavily in both systems and staff training. They keep them under review and updated constantly and are very good at what they do. Size appears to be of no consequence, and whilst the biggest may not always be the best, good systems allow many more cases to be handled by fewer well trained people.
IVA bulk providers seem to attract referrals in many ways, but the one which concerns me the most is the referrals from work finders, sometimes called lead generators. Are these work finders regulated in any way? Even if they are, are the work finders giving best advice, or are they simply looking for a referral or fact finding fee from the IVA work provider? What happens to people who are not suitable for an IVA and who are not being put forward by the work finder?
The failure of Varden Nuttall and other debt management providers must bring into focus the need to review how IPs and the wider profession are regulated.
This topic was discussed in the “Reforming our Insolvency Regime” session at Insolvency Live! on 28 July. In my opinion this should include the following areas:
- Even though we still have a multiplicity of regulators (numbers are reducing) it is time for those regulators to develop a common approach to regulation.
- Those regulators should not just examine the IP but look at the firm, and where appropriate work finders.
- The control of case funds should remain solely with the IP appointed; the IP should have a seat on the board so as to have an input into how the firm is managed.
- Financial accounts for IP firms and those firms providing debt advice should be produced to a common standard.
- Finally it is high time serious consideration be given to a single independent regulator to pull all the strands of a diverse profession together.
For another perspective, but sharing some of the same conclusions, read Meg van Rooyen’s article: Why the FCA must regulate insolvency practitioners and lead generators.
UPDATE September 2016: I have published an article Lead generators – the case for regulation that looks at this aspect in more detail.