I am pleased to be soon presenting to various groups on the regulation of Australian insolvency practitioners, with some comparisons with England and New Zealand.
Co-incidentally, international IP regulators are gathering this month for their annual meeting.
Given the unique nature of the role of an IP, regulation does call for a particular and more nuanced approach.
Australia has a highly regulatory and direct approach to IP regulation, in contrast to what is usually a co-regulatory model for this type of profession.
This is perhaps indicative of some cultural attitude of the country to (over)regulation, and also to unpaid debt and transferred distrust of those who assist in resolving the problems involved. The latter is not new, with bankruptcy avoided as a distasteful area of law by 19th century lawyers, though taken up with enthusiasm by what was then a fledgling accounting profession. Early Australian law required trustees in bankruptcy to be registered as such by a judge, this being replaced only in the 1980s, at a time when English practitioners were first required to be registered at all.
Regulation has since ‘progressed’ in this century to the point where, since 2017, prospective practitioners must go through an interview process, but only if they have at least 4,000 hours of experience behind them; following which they are subject to numerous adverse regulatory provisions in the law available to the regulators, the courts and the creditors.
And it is not as if this is because insolvency work is seen as an honourable and demanding calling, needing support; rather because the government saw a need to improve confidence in practitioners’ professionalism and competence.
In its 2017 changes in the law, true co-regulation was rejected by the Australian government as an option.
Co-regulation is said to produce good results where a profession has capacity to self-regulate, but that alone is not enough, often given the nature of the industry, and public involvement is needed; where professional independence is important and where there is professional ownership and cohesion and a strong representative body with broad coverage. Advantages of co-regulation include proximity of regulation, empowerment, low cost and higher compliance; the dangers are in anti-competition, and regulatory capture: Regulation in Australia, Freiberg, 2017.
Although under review as to the detail, England has a co-regulatory model; as has, or will, New Zealand.
The Australian rejection of co-regulation
As much as the government explained it was that Australia had no professional body resourced or structured to undertake a co-regulatory role across the whole insolvency profession. It said that given the small size of the profession (685 corporate insolvency practitioners and 208 personal), the cost of infrastructure needed (ongoing “surveillance”, dispute resolution, and CPE “etcetera”) may have been “prohibitive”.
The government acknowledged that regulation can reduce the regulatory burden where stakeholders have confidence that the profession will regulate its members and “not protect them”. But,
“given the current deficiency in confidence in the (Australian) insolvency industry, allowing practitioner registration and discipline decisions to be the exclusive purview of the industry would be unlikely to receive the support necessary from other stakeholders”.
As if then offering some token support for co-regulation, the government invested ARITA, the three professional accounting bodies – CAANZ, CPA, IPA – and all law societies and bar associations in Australia, along with all federal government departments, with varied levels of whistleblowing and other participation rights in the regulation of IPs. This is perhaps meant to provide some underlying mechanism in support of ASIC’s and AFSA’s direct regulation.
All this no doubt ensures that Australia has the most diligent and honourable profession in the country.
How ASIC and AFSA, ARITA and others have put this style of regulation into effect will be the subject of my presentations, along with how each body measures the outcomes of its regulatory activities, and the consequent benefits to creditors, and reports on them.
Any comments or comparisons, international included, are welcome.