Insolvency practitioners and missing moneys – on-line regulation required

The sentencing hearing in relation to former liquidator Mr Peter Amos was mentioned on 17 June 2024 and was then adjourned for a day’s hearing on 5 August 2024. See “Thousands and thousands of pounds have been lost …” – Murrays Legal

According to ASIC, Amos held various insolvency appointments which rendered him an “officer” of the relevant companies for the purposes of s 184 of the Corporations Act from which funds were taken.  Amos’ offences are therefore subject to the penalty provisions in the Corporations Act. 

ASIC says that in relation to offences committed prior to 13 March 2019, the maximum applicable penalty is a fine of 2000 penalty units, or imprisonment for five years, or both. For offences occurring after 13 March 2019, the maximum penalty is 15 years imprisonment. A penalty unit is presently $313 and is a lesser amount in the past depending on when the offence was committed. 

Higher penalties – such as the 15 years – were introduced by the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 which commenced on 13 March 2019.  That was in response to a Report of the ASIC Enforcement Review Taskforce of 18 December 2017 which recommended a wholesale increase in corporate law penalties.  For example, the 15 year penalty applies to breaches of director’s duties, false or misleading disclosure and dishonest conduct.

The limited relevance of these reforms to corporate insolvency is explained by Professor Christopher Symes in Ratcheting up corporate law penalties and the “bystander” impact on insolvency — (2019) 20(4&5) INSLB 77 who saw them as having some impact even though tougher penalties for misconduct were not necessarily high on the insolvency reform agenda, and in any event, tougher penalties weren’t enough without active enforcement.

Hence whatever penalty is imposed on Amos, the larger issue is how he was able to, as alleged by ASIC, take close to $2.5 million from liquidations and deeds of company arrangement administrations over a period of more than 6 years.  A simple answer is that as administrator or liquidator, he had total control of those moneys, as does any insolvency practitioner.  A more complex answer requires consideration of the degree of scrutiny of his ASIC lodgements and ASIC’s oversight generally and its regulatory approach, and the oversight of creditors and their advisers, and of industry bodies of which he was a member. 

It can’t quite be said to be fortuitous, but the alleged defalcation by a bankruptcy trustee, Paul Leroy, in broadly comparable circumstances, does allow a comparison of regulatory approaches taken by each of ASIC and AFSA, and of the operation of the respective laws – something in the nature of competitive regulation.   The bankruptcy trustee and missing funds, continuing – Murrays Legal

Both cases also raise the question of the need for desktop, on-line or like access by regulators to the tens of thousands of IP administration files maintained across firms at any given time, and for artificial intelligence to be applied.

In The impact of artificial intelligence on the insolvency profession — (2017) 18(7) INSLB 149 – Dickfos, Brown and Smith rightly highlight the potential for artificial intelligence to assist practitioners in their insolvency practice.  They might also have added the potential for computer-based online processes and artificial intelligence to assist regulators in the regulation of insolvency practitioners: see TIP – The Insolvency Portal – Murrays Legal

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