New consultation—strengthening the regulatory regime and fee structure for insolvency practitioners

New consultation—strengthening the regulatory regime and fee structure for insolvency practitioners
 
New consultation from the Insolvency Service is looking at how to strengthen the regulatory regime and fee structure for insolvency practitioners. What are the implications for the industry?

What has happened?

Insolvency Minister, Jenny Willott, has today launched a consultation on strengthening the regulatory framework and fee structure for Insolvency Practitioners (IPs). This consultation follows two independent reports commissioned by the government that identified both a failing in the regulatory system (2010 OFT market study into corporate insolvency) and a market failure when unsecured creditors are in control of an IP’s remuneration (Professor Elaine Kempson’s review of IP fees, published in July 2013).

The consultation paper sets out proposals to:

  1. strengthen the regulatory framework through the introduction of clear regulatory objectives
  2. give the oversight regulator more appropriate powers to deal with poor performance, misconduct and abuse
  3. take a backstop power to introduce a single regulator for the insolvency profession
  4. change the way that IP fees are set to ensure better returns for unsecured creditors

Strengthening the regulatory regime

The current authorisation and regulation of the insolvency profession is mainly self-regulating by eight different professional bodies overseen by the Insolvency Service. The two independent reports found that:

  1. the Insolvency Service lacks proportionate powers with which to monitor the professional bodies and address poor performance by the bodies, and
  2. the regulatory system suffers from a lack of clear regulatory objectives against which the Insolvency Service can hold the regulators to account

Regulatory objectives

The consultation considers 'the introduction of regulatory objectives will provide regulators with a clear enhanced framework within which to carry out their activities'. Regulatory objectives will enable consistency of approach and provide a reference point for discussion between IPs and their professional bodies, and between the professional bodies and the Insolvency Service as their regulator. The proposed regulatory objectives include:

  1. protecting and promo

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