Insolvency regulation – of the practitioners, and the regulators?

Revised 17.7.26

Insolvency practitioner regulation has had its annual review in the UK under a co-regulatory regime that Australia thought not viable here.  We have direct government regulation with an impressive looking but not quite so effective array of quasi-regulators; still split between corporate and personal.  While having two regulators should have allowed a comparison of their respective costs of regulation, changes in numbers of matters per practitioner allow some assessment to be made.

The government did not seem to see the need for the 5 year review of IP regulation foreshadowed when the ILRA 2016 began.  And thus far the Productivity Commission has not seen the differing regulatory approaches of ASIC and AFSA, and of the 15 industry bodies, as raising any barriers to business dynamism. 

The UK Insolvency Service has released its Annual Review of Insolvency Practitioner Regulation 2025, 7 July 2026. Annual Review of Insolvency Practitioner Regulation 2025 – GOV.UK.

The big difference there is that the regulation of practitioners is delegated to three recognised professional bodies (RPBs) – IPA, ICAEW and ICAS (Scotland) – that each supervise their particular members and account to the Insolvency Service for having done so. Hence the Review is of the regulation of IPs by those bodies and the processes and methods they each adopt.  The Review is a detailed account of the regulatory approaches, and outcomes.  Significant fines are imposed, for defaults such as delays in filings or in resolving matters, and other such efficiency and productivity issues, and a number involve breaches of the AML laws.

Australia

In Australia that co-regulation approach was contemplated at the time when the Insolvency Law Reform Act 2016 was being prepared but as the Explanatory Memorandum said at [9.150]:

“there is no professional body or industry association that is resourced or structured to undertake this type of a role across the whole insolvency industry. The professional body or industry association willing to undertake these obligations would need to be substantially reformed”.

Funding would be required and given the small size of the industry (685 liquidators and 208 trustees), the cost per industry participant may be prohibitive.

Bodies everywhere

Instead a layer of regulation was imposed comprising 15 industry bodies named as having the authority to refer matters to each of AFSA or ASIC depending on the practitioner – ARITA; CPA Australia; Chartered Accountants ANZ; the Institute of Public Accountants; the NSW Bar Association; the Law Society of NSW; the Victorian Legal Services Commissioner; the Victorian Legal Services Board; the Bar Association of Queensland; the Queensland Law Society; the Legal Practice Board of WA; the Law Society of SA; the Legal Profession Conduct Commissioner of SA; the Law Society of Tasmania; the Law Society of the ACT; and the Law Society NT. 

See Bodies everywhere — the role of professional bodies in regulating insolvency practitioners — (2018) 19(5) INSLB 94.

How that came about is somewhat of a mystery because that regime is not referred to in the explanatory memorandum, or elsewhere. No doubt each body was consulted by the Commonwealth at the time and given guidance as to their role.

The memorandum did say that a review of the process would be undertaken within five years but that never occurred.

It therefore remains that ASIC and AFSA regulate their own registered practitioners. This means that the one practitioner registered as both will be separately regulated.  ASIC and AFSA are to cooperate with each other, but only when the one IP is involved. 

Practitioners are regulated separately by their accounting bodies – CPA Australia, CAANZ and IPA. There are also NOCLAR responsibilities imposed on accountants under APES 330 and in NSW at least responsibility for reporting criminal conduct.

That complex arrangement itself might suggest concerns regarding regulatory consistency, and a barrier to efficient regulation.  

ASIC and AFSA

For all the layers of oversight, and need for transparency, we don’t know how two practitioners made off with large amounts of money and what measures are available to prevent that recurring.

In the case of Mr Amos, those measures include the oversight of ASIC, the industry bodies, and any others aware of his misconduct.  It seems no-one was aware and the case is closed.  Amos’ offending conduct commenced in 2016, with ASIC starting to investigate his non-filing of accounts in 2021. R v Amos [2024] NSWDC 687.

With Mr Leroy, his stealing of moneys occurred over 2022-2023 and his registration was cancelled by AFSA in February 2024. An action against him is pending, set down for hearing on 14 December 2026 – VID1535/2025: see Micheletto (Trustee) v Leroy, in the matter of Jackson (Bankrupt) [2025] FCA 1466.

But as the Judge in R v Amos said, offences in the nature of misappropriation of moneys “are hard to detect because so much of what [practitioners] do depends on trust”: [115]. 

As to that, AFSA sees a need for more rigorous oversight of moneys held by trustees. It has released its Regulatory Action Statement for 2026–27, focusing on the need to address what it calls the “highest risk harms” in order to strengthen trust in Australia’s insolvency system, invoking “everyday Australians”.

It also focuses on Part X personal insolvency proposals. High-profile cases, including Beau Hartnett and Jon Adgemis, are said to have

“revealed manipulation of creditor processes and returns as low as 0.15 cents in the dollar”.

AFSA is reported, although only in a newspaper story, to have served trustees “show cause” notices.  

Shocking

This is not new, the 2004 reforms being based on concerns about ‘friendly’ creditors, the quality of reports by controlling trustees, purchase of proxies, rates of return to creditors, and more.  In one matter, a Federal Court Judge was prompted to say that 

“in the absence of complete agreement by creditors… there is something which, if not shocking, is at least something which takes one aback about a suggestion that somebody who owes almost 5.5 million dollars can offer $15,000 and walk away without there being any appropriate investigation of his affairs”.  See Bankrupt Law (1998) 7(1) New Directions in Bankruptcy 3. 

There is in fact an investigation process under Part X, and there can be voidable recovery proceedings available if creditors so chose: section 188A(4).  But the reality is that there are rarely any voidable transaction recoveries in Part X matters.

Productivity

There does not appear to be any process for review of the productivity of the insolvency regime, as to the prompt completion of estates, comparative rates of return, and costs. 

For example, there may be a reason why Part X dividends averaged only 3.7c/$ in 2024-2025, down from 10.36c/$ in 2022-23: https://murrayslegal.com.au/blog/2023/12/30/insolvency-statistics/

An assessment of the comparative regulatory efficiency of the two insolvency regimes by ASIC and AFSA would be useful. 

Numbers

In that respect, as to the costs of regulating IPs, it is interesting to compare these numbers over ten years.  

Apart from the regulatory processes, we could usefully have some assessment of the comparative efficiency of the two insolvency regimes, necessarily allowing for the costs of addressing the rights of those impacted by the insolvency. 

Comments are welcome.