Insolvency compliance; SIP 1 and the Ethics Code

Insolvency practitioners are authorised and regulated by recognised professional bodies (RPBs) under S391 Insolvency Act 1986 (IA1986). The Joint Insolvency Monitoring Unit (JIMU) was established in 1994 to carry out the reviews necessary to provide information to the RPBs so that they could carry out the regulatory process. These reviews are of course now carried out by the ICAEW and the IPA, themselves regulated by the Insolvency Service.

I worked as a JIMU inspector between 1994 and 1997. The concept of regulation and the idea that independent reviews would be carried out of an insolvency practitioner’s work were at that time very new to the insolvency profession. There was a great deal of concern that JIMU inspectors would just look at whether documents had been filed correctly and focus on bureaucratic detail, overlooking the professional consideration and judgement that is very much part of the work of an officeholding insolvency practitioner and that is more likely to impact on outcomes to creditors than the timing of the filing of a statutory return.

S391 IA1986 requires the RPBs to secure that their members are fit and proper persons to act as insolvency practitioners, something that extends beyond the ability to file a document on time, although compliance with all aspects of insolvency legislation is of course extremely important.

Reference should now also be made to SIP 1 (not available in its current format in 1986) and the Ethics Code.

SIP 1 requires an insolvency practitioner to ‘act diligently and in accordance with applicable technical and professional standards’, to ‘conduct themselves with … consideration towards all with whom they come into contact’ and to ‘ensure that their acts, dealings and decision making processes are transparent, understandable ….’.

The Ethics Code, as well as giving detailed information about the definition of various threats of conflicts of interest and how to identify and manage them, requires insolvency practitioners to ‘act diligently and in accordance with applicable technical standards when providing professional services’. Compliance with SIP 1 and the Ethics Code is mandatory for all insolvency practitioners.

If there was still any doubt, the RPBs will consider compliance with S391 IA1986, SIP 1 and the Ethics Code when carrying out their monitoring reviews and there is substantially more to the regulatory work of the RPBs than checking that documents have been filed on time. It is to the credit of JIMU and RPB inspectors that in the last 24 years of insolvency regulation there has been a shift away from the concern that regulation would just focus on bureaucracy. Insolvency regulation does recognise that there is more to insolvency work than completing a checklist.

At RMCSC we provide insolvency compliance consultancy services, including compliance reviews and reports, action plans to assist change, advice regarding complaints and the review of manuals, documents and reports. We do not supply document packs or checklists, avoiding any potential conflict of interest that might arise if RMCSC supplied a document pack and was then asked to review it in operation as part of a compliance review.

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