While ASIC is currently taking submissions on its proposed funding charges for the regulation of Australian liquidators, and other groups – see Cost recovery implementation statement – 2019-20, CRIS – a similar process is happening in New Zealand in relation to the commencement of the new co-regulatory regime for its insolvency practitioners on 1 September 2020.[1]
New Zealand’s scheme has been covered in several articles on this website.
In brief, there is to be a co-regulatory regime whereby the “frontline” regulation of IPs is to be conducted by the particular professional body to which the IP belongs – RITANZ, CAANZ or CPA. The Registrar of Companies will oversee the regulatory performance of those professional bodies. This is the UK model of IP regulation.
NZ – Cost Recovery Impact Statement (CRIS)
There are around 110 IPs in NZ licensed under the existing private scheme of RITANZ/CAANZ.
The NZ government’s CRIS estimates the annual cost to the Registrar of maintaining the insolvency practitioner regulation scheme at NZ$622,167.
Draft regulations have now been issued setting a fee of $165 for application for a person to apply to be licensed.
A fee of $105 per member is proposed for the professional bodies’ annual fee.
Levies are to be imposed of NZ$1.00 on each company registration and each annual return to part fund this role of the Registrar. Some will remember that this type of levy was a recommendation of the 1988 Harmer Report in Australia.
In comparing ASIC’s estimated of A$7.76m to regulate Australia’s 600+ liquidators, for which liquidators are levied upwards A$10,000 pa – one has to add in the cost of the NZ professional bodies in regulating their members, and what fees they will impose.
Benchmarking
Generally, a positive feature of direct professional co-regulation is its comparative lower cost overall not only to government but also, once established, to those regulated[2] which on any arithmetic comparison should be evident here.
Australia and NZ comparison?
Benchmarking between the Australian corporate insolvency regulation scheme and New Zealand’s new regime would be a useful exercise, even though, in rejecting co-regulation for Australia, the government acknowledged that lower costs both to government and those regulated were an item in its favour.[3]
ASIC and AFSA comparison?
Benchmarking ASIC’s $7.76m estimate of costs of regulation of Australia’s 600+ liquidators against AFSA’s separate regulation of our 200 bankruptcy trustees, who are largely the same cohort, is not readily available, with AFSA not reporting that as a separate cost. That would be a more useful exercise. AFSA is part funded by levies of 7% on the monetary amount of realised assets, ie on creditors, not on trustees.
That 7% has remained since 2015. While AFSA reviews its CRIS annually, it advises that over the last five years it has not been necessary to adjust its pricing and indeed will not increase its fees for the 2020-21 financial year.
Understandably, the implications of COVID-19 on the personal insolvency sector are yet to be fully assessed and will be having an impact on AFSA pricing; one example being the limitations on creditors having a bankruptcy notice issued, for which AFSA charges $470.
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[1] Insolvency Practitioners Regulations 2020 (NZ)
[2] Regulation in Australia, Freiberg, 2107, p 120
[3] Explanatory Memorandum to the Insolvency Law Reform Act 2015 at Option 1.3 – co-regulation, [9.149]-[9.150].
