The insolvency industry has welcomed a new report from the corporate regulator that says the agency will ramp up its surveillance of the sector, revealing the watchdog started eight formal investigations last year as the number of corporate collapses continues to rise.
Insolvency experts have also backed the passage of a new bill in Federal Parliament that will attempt to crack down on phoenix activity, while also establishing a new website for all insolvency notices in an attempt to save businesses millions over the next four years.
“It’s a big factor of convenience,” TressCox senior associate Guy Moloney told SmartCompany this morning.
The Australian Securities and Investment Commission released its new report yesterday – the first of its kind – and said it received 426 reports of alleged misconduct concerning registered liquidators last year. It opened eight formal investigations during 2011 and at the end of the year had eight active investigations.
“Reports of alleged misconduct and enquiries against registered liquidators average 3.5% of the total 75,951 reports and enquiries ASIC received across all its areas over the five-and-a-half years to December 31, 2011.”
The investigations come as insolvencies have reached a record high, as businesses continue to collapse in the wake of financial turmoil and wary consumers.
Deputy chairman Belinda Gibson said in a statement that ASIC had been working to “sharpen its focus” on the insolvency industry over the past few years, and added that it will further target dodgy practitioners.
“ASIC will focus on lifting our surveillance intensity as we have the extra resources to do so; enforcement outcomes where surveillance identifies unacceptable conduct; providing guidance to the industry about our expectations; and directing creditors toward more ‘self-help’ assistance to ensure they understand and exercise their rights and powers to oversee the liquidation process to best protect their own interests,” she said.
The report into the industry comes just six months after liquidator Stuart Ariff was jailed for six years on mismanagement charges, while Gibson pointed out a number of liquidators targeted last year including Peter Ngan, who was banned from practising as a regulator for two years from 2011.
Denise North, chief executive of the Insolvency Practitioners Association, told SmartCompany the report was “not surprising”.
“ASIC has been talking about increasing surveillance activity for some time, and they’ve been informing us along the way of the projects they’ve been running.
“It’s good to see a summarised annual report about activity, because it’s the first time we’ve seen this.
“We think the increased surveillance is a very good thing, and it’s something we welcome.”
Meanwhile, financial practitioners have also welcomed the passage of a new bill that will attempt to crack down on phoenix activity.
The legislation will help employees access unpaid entitlements quicker, but it will also attempt to stop business owners from using the names of other failed businesses, or names that could be interpreted as similar.
The legislation will also set up a website from July 1, operated by ASIC, which will bring together all public notices of corporate external administration appointments. Moloney says this will help creditors by reducing current compliance costs.
“When a company goes into administration you’re obliged to lodge with ASIC notice of the fact you have done so, and that notice gets published in a newspaper with a circulation close to the area in which the business carries on its work.”
Moloney says the reduction in costs will come from not requiring businesses to comply with current obligations, as well as relieving them of having to monitor numerous websites for the relevant notifications.
“It’s more the convenience factor that will result in cost savings,” he says.