Regulatory scythe is out for the grim reapers of business world, IRENE CHAPPLE reports
The grim reapers of the finance world are likely to face much closer scrutiny of how they swing their scythes under a proposed regulatory regime.
At present, almost any adult - except undischarged bankrupts, banned directors and people subject to a compulsory mental health treatment order - can be an insolvency practitioner.
There is no requirement for academic qualifications or practical experience and there are no ethical guidelines.
But, as part of its insolvency law review, the Ministry of Economic Development has produced three options to tighten regulation of the industry.
The courts can at present ban insolvency practitioners for up to five years if they are seen to be incompetent or acting against the interests of the creditors.
However that power, regulated by the Companies Act, has never been used.
The bulk of practitioners are also members of the Institute of Chartered Accountants (ICANZ), and are bound by the organisation's rules. The institute has pulled rank on insolvency practitioners: In 2002, for example, former Auckland accountant Ronald Evans' practising certificate was cancelled after he was found to have acted incompetently.
Anecdotal evidence is that New Zealand still has active "cowboys" - practitioners who cosy up to directors and discard the best interests of creditors.
The three options are: To strengthen existing statutory measures, introduce a mandatory licensing regime or introduce a voluntary accreditation regime.
Under the first option, the Companies Office would have wider powers and there would be new remedies for a breach of a liquidator's duties.
A licensing regime, the second option, would require minimum levels of education and experience.
The third option would give accredited practitioners an exclusive right to operate under such a title.
The ministry's discussion document says the lack of regulation can cause problems for creditors and harm perceptions of New Zealand's credit market.
John Vague, of McDonald Vague, who says there are an active group of cowboys in the Auckland market, believes New Zealand must regulate the industry.
Says Vague: "It would appear [practitioners] can be insane so long as they are not legally committed and can be insolvent so long as they are not bankrupt."
He says the need for registration is "overwhelming".
Others are more critical of the idea, suggesting cowboys can operate even if they are licensed and querying the value of setting up such a regime.
David Pickens, the Institute of Chartered Accountants' director of Government relations and strategic projects, says registration can feed a false sense of security.
"All you are doing is giving the cowboys a licence. At the moment the courts can remove the cowboys."
The three options are detailed in a discussion document out last week. Submissions close June 11.
Tighter rein on insolvency work
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