Comments from ACCA to the Insolvency Service
21 February 2014
ACCA is an RPB under the Insolvency Act 1986 and licences and regulates over 160 practitioners.
While we accept that the proposed partial licensing regime affords some benefits our primary concern about the proposed change is whether the interests of consumers are likely to be satisfied by its introduction. We have previously maintained that in many insolvency situations, especially those involving corporate entities, an advising practitioner will be faced with a succession of insolvency issues, both of a corporate and personal nature, and best advice will invariably require knowledge and experience of both types of insolvency. Under the proposed regime appointers of insolvency practitioners will find themselves in a position whereby holders of partial licences will be qualified to take on appointments in one or other of the two fields but may not be able to deal satisfactorily with interlocking issues. Consumers may not always understand the restricted scope of practitioners’ authorisation, and even if they do they may struggle to understand why it is that the system has authorised individuals to provide insolvency services when they do not have the rounded skill set that has been routinely provided to the market until now.
The consultation letter states that the introduction of partial licensing will have three beneficial consequences:
We accept that for those IPs who only do personal insolvency work, and do not anticipate ever doing corporate work, there is likely to be a market for partial licences. Firms that operate as ‘IVA factories’ will therefore be able to train trainees only to do personal work and conduct internal quality assurance work in respect only of that area of work. One can anticipate some economies in this context.
Whether the introduction of partial licensing for personal work will result overall in greater competition for insolvency appointments is less certain in our view. If the IVA factories are able to make efficiency savings as a result of the reform, then it must be doubtful whether general practitioners who are new to the market will be able to compete with those established firms on either price or experience. Further, smaller practising firms are unlikely to be able to anticipate attracting sufficient business away from the factories to justify the investment in training to acquire a partial licence in the first place. Such firms, if they have an interest in insolvency at all, will almost certainly be minded to retain full licence capacity in order to maximise the chances of accessing insolvency work. The outcome of the reform is accordingly more likely, in our view, to be a reinforcement of the dominant position of the factories than an opening up of the market to new entrants.
In terms of our position as a regulator, we will be faced with making a decision as to whether we should acquire the right under the amended Act to issue partial licences. If we choose to do so it will be because we believe that our members should be given the opportunity to take advantage of the rule change through their own professional body. We would inevitably incur some costs as a result of doing so, given that we would have to operate two or three processes where we currently operate only one. That notwithstanding we do not foresee that the additional costs and workload would be material given the relatively small number of individuals we license and regulate and are likely to do so in future. We would need to introduce new procedures to govern the application and licensing processes: these new procedures would require incorporation in our rulebook, which would result in some legal and transactional costs. Monitoring costs would be negligible since we are presently resourced to assess members’ competence in both personal and corporate work.
Overall our view is that the proposed reform could make some positive difference to the mass IVA providers but would not result in any material increase in the number of practitioners and firms entering the market overall. We maintain our view that the interests of the consumer would be best served by insolvency professionals having a wide understanding of insolvency rules and practices.