ASIC has issued revised guidance on insolvency practitioner offence reporting obligations – RG 16 External administrators and controllers: Reporting of possible offences and misconduct, September 2024.
2023 PJC Report on Corporate Insolvency recommendation 19
As I fully explained in April 2024 – ASIC’s review of offence reporting – RG 16 – Murrays Legal, this review is in response to the 2023 PJC Recommendation 19 that the government and ASIC consider whether any timely changes can be made to the existing reporting requirements, and ASIC’s response to IP reports. This was in the context of a broader recommendation that any comprehensive review of insolvency law consider whether the current reporting obligations are best serving the integrity, efficiency, and efficacy of the Australian corporate insolvency framework, including the ability of ASIC to appropriately process, use and respond to these reports with its current resources; and the appropriateness of existing reporting thresholds, having regard to their regulatory value as well as the burden imposed on IPs.
ASIC has quite promptly attended to that interim recommendation, although it was well overdue, replacing guidance of 2008. While the statutory provisions have not changed, there has been case law comment and the PJC Report itself provided feedback.
Some thematic changes from the former 2008 guidance are:
- There is now a dedicated contact point for IPs to raise questions with ASIC in relation to the preparation and lodgment of reports of misconduct. This appears to copy the long-standing pre-offence referral offered by AFSA.
- IPs may now, in the view of ASIC, use their professional judgment in relation to the extent of inquiries required in the particular circumstances. ASIC says its guidance is now focused on the minimum steps required to comply with the reporting obligations, and hence ASIC has not included prescriptive guidance through checklists or examples for that reason.
While the revised RG 16 will be useful, it is an interim response to the many issues raised by the PJC Report concerning the roles of IPs. See Insolvency practitioner offence reporting – a need for reform – Murrays Legal
It also follows the recent report of the Senate Economics References Committee report – Australian Securities and Investments Commission Investigation and Enforcement, of July 2024: Australian Securities and Investments Commission investigation and enforcement (aph.gov.au). That report was critical of ASIC’s enforcement record, that while ASIC receives “tens of thousands of misconduct reports each year”, its investigation of a limited number of cases of alleged corporate misconduct is “deeply problematic”. That is in the context of the 11,000 companies ending up in external administration each year, out of the 3.4 million registered companies in Australia.
These inquiries and reports tend to overlap. For a longer perspective, my April 2024 article looked at the history of the reporting role: Offence reporting by insolvency practitioners — (2019) 20(4&5) INSLB 88 (1). I have also suggested these committee reports are being a little disingenuous in their criticism of ASIC, given the many regulatory mechanisms available against corporate and related misconduct that are waiting to be adopted or reformed in Australia – fully effective anti-money laundering laws; a beneficial ownership register; trust, insolvency and tax laws; public director IDs; quality insolvency statistics; overly complex corporate law; and corporate illegality and misconduct seemingly at a high level, let alone misconduct in the areas of tax, competition and insurance, under the control of other regulators.
In the context of insolvency, one benchmark comparison is that of offence referrals by bankruptcy trustees to AFSA, and its criteria for action: Practitioner Surveillance, Enforcement and Compliance statistics | Australian Financial Security Authority (afsa.gov.au). In that respect, ASIC also says it is reviewing its “internal processes for ingesting, screening, analysing and, where required, acting on the reports” it receives.
RG 16
ASIC’s RG 16 will be useful interim guidance but any complete corporate and personal insolvency law review by the government recommended by the PJC – where data can be gathered and the costs and benefits can be examined, and who pays for these investigations – will be more useful.
The government is yet to respond to the 2023 PJC Report.
