A sanction of a New Zealand liquidator for the poor handling of his matters provides an illustration of New Zealand’s relatively new licensing and co-regulation regime for insolvency practitioners, which contrasts with direct government regulation in Australia. The NZ regime is one of co-regulation, through NZICA, CAANZ, RITANZ and the Registrar of Companies, under the Insolvency Practitioners Regulation Act 2019 which commenced in September 2020.
The matter of Thomas
David Thomas is a member of RITANZ but not of NZICA. His is the first occasion where a non-NZICA licensed insolvency practitioner has come before NZICA’s Disciplinary Tribunal since the compulsory licensing regime commenced in 2020. His conduct in a number of insolvency appointments was found to be poor and had been the subject of a number of complaints.
In terms of disciplinary process, the resolution of the matter, as revealed in the reasons for decision of the Disciplinary Tribunal, was good, in explaining the misconduct, and the impact, the explanations from the practitioner, and the resolution, taking into account a range of issues on penalty. The Tribunal comprised two senior accountants and was chaired by a senior barrister.
It seems to have been a close decision in that Mr Thomas was allowed to continue to practise but under close initial supervision. The Tribunal said that
“The nature and extent of the failings by Mr Thomas to understand and follow fundamental duties and tasks of an insolvency practitioner have given the Tribunal serious concerns about his competence and suitability to practice in that area. Given his background, including his years of practice in this field, it is disconcerting that he appears not to have acquired the proficiency and expertise required, particularly for someone in sole practice”.
It went on to explain that
“40. While the prospect of rehabilitation is a factor to be considered, the primary concern is the protection of the public from unprofessional and incompetent practitioners. But for the supervision and practice review arrangements proposed by Mr Thomas and his counsel, it is likely that the Tribunal would have ordered the suspension or cancellation of Mr Thomas’ licence”.
The Tribunal therefore imposed strict arrangements whereby a nominated IP would undertake close supervision of Mr Thomas for an initial period of 6 months during which they will meet weekly, and the IP will report monthly to the PCC. The IP is to regularly review his documentation and compliance, and the progress on files that have been open for some time.
After 6 months of this supervision, and no later than 9 months, a further Practice Review will be undertaken by the PCC at Mr Thomas’ cost. The supervision arrangements should continue until this review is completed.
No financial penalty was imposed but Mr Thomas was ordered to pay costs of $38,847.
The NZ regime
Under the Insolvency Practitioners Regulation Act 2019, NZICA is an accredited body to issue insolvency practitioner licences and carry out the frontline regulation of insolvency practitioners. The Registrar of Companies has responsibility for oversight of NZICA as an accredited body.
CAANZ members resident in NZ are required to abide by the NZICA Rules and Code of Ethics and IPs by the Engagement Standard for Insolvency Engagements (IES).
Non-CAANZ member may be licensed if they are a member of RITANZ and enter into a Licensed Insolvency Practitioner Compliance Agreement with NZICA, binding them to the Code of Ethics and Rules and Engagement Standard.
Under NZICA’s professional conduct process, its Professional Conduct Committee carries out the first stage of investigating a complaint and may be able to make a final ruling on it. The PCC is made up of a pool of senior members of the accounting profession and experienced lay members.
The Disciplinary Tribunal considers more serious complaints referred by the PCC, including criminal convictions, conduct unbecoming and professional negligence or incompetence. It acts more in the nature of a court in that the PCC acts as prosecutor through legal counsel to present the PCC’s case, the member can have a lawyer or other representative at the hearing, the hearing is generally open to the public, witnesses can be called, and evidence is given under oath. The Tribunal has its own legal assessor, who is present during the hearing and may advise the Tribunal on matters of law, procedure and evidence.
Registration – hours
As to registration, CAANZ members need to have completed at least 1,000 hours of practical experience in insolvency and five years’ experience in insolvency or similar. Other applicants, such as RITANZ members, need at least 2,000 hours/5 years. Those without such experience, but who are otherwise competent to act as an insolvency practitioner, can also be registered.
Australia’s regime is weighted towards government regulation, whereby the regulators – ASIC and AFSA – may refer alleged misconduct to a 3 person statutory committee comprising government and industry representatives. Detailed process rules apply including as to the need to provide natural justice. Reasons may be published but need not be.
The only co-regulatory aspects include the right of ARITA to choose an experienced IP to sit on the discipline committee, and the rights of ARITA, CAANZ, CPA and law societies to refer claims of misconduct and share in confidential misconduct information. Each of ARITA and the relevant accounting bodies then have their own internal discipline processes for their members.
There remains the option of a claim of misconduct being referred to the court.
Registration as a liquidator or trustee in bankruptcy generally requires 4,000 hours of prior experience.
While the UK had been inclined to adopt a regulatory regime like that of Australia, it has recently decided to keep its existing co-regulatory regime similar to that of NZ. It requires 600 hours of prior experience
When NZ was deciding on its regime, it opted for the UK co-regulatory model rather than that of Australia, including for reasons of cost.
 Of 15 September 2023 Disciplinary hearing decisions | CA ANZ (charteredaccountantsanz.com)