The number of misconduct claims made against Australian liquidators has fallen, a report published yesterday by the corporate watchdog has revealed.
The Australian Securities and Investments Commission’s annual report into the supervision of registered liquidators found reports of alleged misconduct about registered liquidators has dropped from 539 in 2011 to 446 in 2013, showing a positive downward trend.
The ASIC report found 61% of reports of alleged misconduct against registered liquidators resulted in educative outcomes for those making the report.
ASIC completed more than 250 reviews covering practitioner independence, competence and remuneration. This is up from close to 200 reviews in 2012.
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More than 70% of all independence declarations reviewed by the watchdog in 2013 were adequate, compared to less than 50% in 2012.
ASIC commissioner John Price said the regulator will take strong action against liquidators who neglect their responsibilities and obligations.
“Liquidators who did not adhere to their obligations have been removed from the industry,” he said.
This follows formal investigations or enforcement action against 19 registered liquidators including the registration cancellation of Mark Levi and Avitus Fernandez.
ASIC accepted an enforceable undertaking from Ian Struthers to cancel his registration for a minimum of three years and following an application by the watchdog, the Federal Court prohibited Andrew Dunner from registering as a liquidator for five years.
JP Downey and Co principal Jim Downey told SmartCompany it was good to hear the number of misconduct claims had fallen but the figures could still improve further.
“It doesn’t surprise me, I think they’ve weeded out a few people from the insolvency field that would have attracted more statistics than the rest of us,” he says.
Downey says ASIC’s emphasis on an educative approach mirrors the strategy of the Australian Financial Security Authority which also regulates the sector.
“AFSA has had this educative approach for a number of years and it has worked very well,” he says.
“It’s a case of educating the public in a lot of cases, there’s a lot of shooting of the messenger that happens in this sort of game.”
Downey says liquidators regularly have to tackle misconceptions of what their role is in a business collapse.
He says bodies like the Australian Restructuring Insolvency and Turnaround Association field a lot of calls and anecdotally in a large percentage of the calls which involve a complaint about the conduct of a liquidator do not in the end involve fault on the part of the liquidator, just a lack of understanding of the liquidator’s role.
“The ongoing development of the code of professional practice continues to tighten up the world of an insolvency practitioner to make us more accountable,” Downey says.
“That is probably contributing to there being less misunderstanding with clients.”