Under the changes introduced by the Insolvency Law Reform Act 2016, public registers of liquidators and trustees are established, on which disciplinary proceedings are to be recorded. Given a lack of transparency with the registers, the best source of information about those sort of proceedings is a public website, Sydney Insolvency News.
Publicity of the outcomes of professional discipline is important as an educative process for the person concerned and their profession, and to provide some warnings against others engaging in such misconduct.
Given that such processes are typically more informal than court proceedings, and because of the potential for reputational damage without the usual court protections, the proceedings are usually not publicised, neither their existence nor progress.
A public register of liquidators is now established by ASIC under the Corporations Act and a similar register is set up by AFSA under the Bankruptcy Act.
Apart from the routine identification and address details of each practitioner, the law requires the registers to record ‘particulars of any disciplinary action taken against the [practitioner] …’. Disciplinary action is defined to exclude a show-cause notice under s 40-40.
That appears to allow publication of the convening of a discipline committee and thereby the publication of the fact of the prior show-cause notice.
There need be no reasons given by ASIC, or AFSA, publicly or otherwise, for the convening of a committee.
The process of convening a committee through the hearing process to the final decision can take some time. The outcome may be an exoneration of the practitioner. In the meantime, their conduct and reputation is open to question.
Assuming that is a proper interpretation, and legislative intention, of the law, the question then is whether such information is in fact publicly available. In the case of liquidators, they are, but, given that only individual name searches are feasible on ASIC’s register, they are searchable in practice only if one knows the name of the liquidator. The alternative is to search each and every one of the 700 odd liquidators registered.
Again, that may be the legislative and regulatory intention, to have discipline information on the register accessible, but not too accessible.
Some do know the names, by whatever source, and Sydney Insolvency News reported what it said was the “First referral under new law”, on 23 February 2018.
There are other ASIC registers
Section 1274 of the Corporations Act requires ASIC to keep such registers as it considers necessary.
A person may inspect any document lodged with ASIC, excluding a section 20-5 application for registration as a liquidator, a s 30-1 annual liquidator return and a s 35-1 notice of significant events.
An ‘industry notice’ under s 40-100 can be lodged with ASIC by a range of ‘industry bodies’, including CAANZ, ARITA, IPA, CPA and bar associations and law societies. The notice advises ASIC of the body’s suspicion of misconduct of an insolvency practitioner, to which ASIC must respond. It is not excluded from public access by s 1274.
On what ASIC register these industry notices would appear is not clear but ASIC may publicly record on the Register of Liquidators other information if it is relevant to a liquidator’s registration or practice. Whether or not ASIC makes public an industry notice on the Register of Liquidators, the industry notice may be accessible under s 1274.
Nor is it clear what registers are established, if any, by the industry bodies and what processes they have for issuing such notices. Given that industry notices may be challenged by the practitioner (s 40-105), some transparent process is required, in particular as the law does not require notification of the practitioner by the industry body.
Many industry bodies have registers of their own discipline hearing outcomes; for example, CPA Australia. Accountants also have their on-going quality assurance reviews through their professional bodies. Insolvency practitioners who are also members of ARITA are required to provide their review report to ARITA. None of this is public unless and until it progresses to some discipline outcome.
Transparency and independence
Transparency of process is important in this area to maintain confidence in the standards of any profession, and in the fact that due process is followed; at the same time, privacy of the individual, at least during the preparatory stages, is important. Independence of the decision makers also addresses concerns about the profession looking after its own.
It could be that the first time an insolvency practitioner may know their conduct is under question is when someone who keeps an eye on the ASIC register finds it and publishes it; or word of mouth or other information reveals that some action is being taken by the regulators or the industry bodies.
Amongst all this, it seems that one reliable ‘register’ to search is that of Sydney Insolvency News.
Which is, with no disrespect, hardly satisfactory.