Senate
Standing Committee on Economics
ANSWERS
TO QUESTIONS ON NOTICE
Treasury
Portfolio
Budget
Estimates
31
May – 2 June 2011
Question
No: BET 10
Topic:
Complaints about liquidators
Hansard
Page: Written
Senator
Williams asked:
1.
How many complaints about liquidators are
you now getting on a monthly or even
yearly
basis from the public?
Answer:
ASIC
receives approximately 14,000 complaints and enquiries a year across
all areas of
ASIC's
remit. A relatively minor proportion (averaging 3%) of all complaints
received relate
to
insolvency practitioner conduct.
ASIC
formally assesses complaints to determine whether breaches of the
legislation may
have
occurred.
Insolvency
impacts a diverse group of stakeholders: employees, secured and
unsecured
creditors
and directors and shareholders. Many stakeholders have minimal if any
experience
with
corporate insolvency and their rights and obligations. Complaints
about director
conduct
of companies in external administration are often accompanied by
complaints
against
the appointed insolvency practitioner.
ASIC
devotes considerable resources to providing information and assisting
complainants,
which
includes an element of educating complainants about the external
administration
process.
ASIC has issued 12 information sheets providing general guidance to
assist
stakeholders
which are available on our website.
Complaints
volume trend statistics about insolvency practitioners
2006-07
2007-08 2008-09 2009-10 2010-11
To
Dec
Total/
Average
%
Total
complaints and enquiries finalised 11,455 12,514 14,543 14,002 7,779
60,293
Total
insolvency appointments 11,966 12,524 15,567 14,056 7,357 61,470
Total
complaints and enquiries against insolvency
practitioners
406
352 633 520 234 2,155
Total
complaints and enquiries against insolvency
practitioners
excluding duplicates
344
317 438 467 218 1,784
%
insolvency practitioners complaints and enquiries
of
total complaints and enquiries
3.5%
2.8% 4.4% 3.7% 3.0% 3.6%
%
insolvency practitioner complaints and enquiries of
total
appointments
3.4%
2.8% 4.1% 3.7% 3.2% 3.5%
Outcomes
of complaints/inquiries against insolvency practitioners 2006-07 to
2009-10
statistics
Outcomes
summary (subject to referral to specialists) No %
Provided
assistance to resolve the complaint or enquiry 570 32.0%
Insufficient
evidence was identified to support the alleged breach 586 32.8%
No
breach of the Corporations Act identified 282 15.8%
Referred
to a specialist team within ASIC for further review 129 7.2%
Referred
to investigation 11 0.6%
Referred
to assist existing investigation or other surveillance 28 1.6%
Action
otherwise precluded 148 8.3%
Assessments
in progress 30 1.7%
Total
1,784 100.0%
2.
What is the substance of those complaints e.g. overcharging?
Answer:
The
vast majority of insolvency practitioner complaints and enquiries
relate to procedural
issues,
such as communication between creditors and practitioners, creditors'
meetings,
administration
process delays, commercial decisions or other less serious
contraventions of
the
Act. These types of complaints are often resolved though improved
communication
between
creditors and practitioners or by ASIC assisting creditors with
information about
the
process of external administration. Relatively few complaints are
substantiated and
relate
to more serious contraventions such as lack of independence/conflicts
of interest,
excessive
remuneration, fraud and “illegal phoenix” facilitation. Those
complaints are
referred
to specialist ASIC teams for surveillance, investigation or
deterrence action.
3.
Is ASIC still sending generic responses that infuriate people, or are
you now taking the
time
and courtesy to actually speak to people about their complaints?
Answer:
ASIC
is reforming its contact procedures to ensure more personal
interaction, including
telephone
contact in relation to each report of misconduct. ASIC is committed
to
confirming
its position in writing to ensure clarity of ASIC's views in relation
to a matter. We
do
not seek to infuriate those who have reported misconduct to ASIC but
assist where
possible
and educate where necessary. Sometimes, for the reasons set out below
in
Question
5, we cannot provide the detail that we would like to.
4.
What is the timeline between when a complaint is received and when it
is actually
addressed?
Answer:
As
per ASIC's annual report, ASIC seeks to finalise the assessment of
70% of reports of
misconduct
to it within 28 days. For insolvency practitioner misconduct, this
may often take
a
small time longer (around 30 days on average) due to the nature of
the complaints. In
relation
to when they are actually addressed (which is assumed to mean when is
the report
of
misconduct prosecuted or further considered by specialist ASIC
teams), this will depend
on
the nature of the issues raised, if evidence is available, amongst
other factors.
5.
Is the complainant kept in the loop during
the investigations?
Answer:
As
mentioned by ASIC's Chairman at the last Senate Estimates (and
publicly since), ASIC is
reviewing
Regulatory Guide 47 to consider what it can and will say to the
public. In respect
of
“keeping complainants in the loop”, a number of matters
encapsulate ASIC's position and
the
restrictions upon it when keeping persons who have reported
misconduct up to date:
·
Regulatory Guide 47 – Public comment
(available on the ASIC's website) outlines
ASIC's
position in relation to making public comments. The relevant sections
have
been
detailed below.
·
ASIC is restricted from releasing
information on a number of grounds, including: legal
restrictions
under the Corporations Act 2001 (Cth)
(Corporations Act) and Australian
Securities
& Investments Commission Act (Cth) (ASIC
Act); and some policy and
pragmatic
restrictions. Each of these has been outlined in detail below.
Policy
restrictions
·
Policy matters arise in maintaining the
confidentiality that ASIC puts on complaints it
receives
from the public and in-confidence material received from other
parties.
Without
maintaining this confidentiality, releasing too much information
would
impair
the full and frank reporting of misconduct or provision of material
to ASIC
from
concerned and involved parties. Public interest policy issues are
also to be
taken
into account here (as covered in RG 47), and ASIC may make the
decision that
public
comment is within the public interest (see ASIC’s public
information regarding
its
activities in relation to Storm).
·
Further, certainly in the case of listed
entities, if made public that ASIC is reviewing,
discussing,
considering or merely conversing with a company, this can have an
effect
on
share prices, where possibly no wrong doing is alleged or at issue.
In addition,
where
ASIC and some external parties do appreciate the difference between
liaison,
discussion,
fact finding, surveillance and investigation, the public often
doesn’t
appreciate
these nuances, which can lead to misunderstanding, misinterpretation
or
mistakes
as to what should or should not be read into a matter. For example,
often
some
of ASIC’s activities are characterised as “an investigation by
ASIC”, although
ASIC
may not have commenced a formal investigation (under s.13 of the ASIC
Act)
and
may only be conducting a routine review of industry conduct. These
misunderstandings
can lead to unintended, unwarranted or undesirable effects and
may
give rise to complaints about unnecessary wounding or impairment of
commercial
reputations and financial impacts. ASIC deals with such claims from
those
who are subject to prosecution and the focus of media releases by
ASIC, but
also
from parties (quite understandably) concerned to protect their
reputation.
Pragmatic
restrictions
·
Declaring what ASIC is doing may impede a
review or investigation by, amongst
other
things, eliminating an element of surprise (often necessary in
investigations).
Also,
by confirming ASIC’s review or investigation, a complainant or
affected party
may
use this information to its advantage over others (for example in the
circumstances
of impending corporate collapse or investors seeking to exit illegal
schemes
etc - “squeaky wheel syndrome”). Often complainants to ASIC are
seeking
to
exact some revenge or consequence on a related party, director,
competitor or
employer.
Indeed, what the complainant seeks (and often the target of the
complaint
reciprocates in kind) is a pressure to be brought upon the other
party for
commercial
or financial reasons.
6.
I put it to you that because liquidators are registered but not
licensed, Mr Paul Pattison
could
have resisted your attempts to seek orders, and in fact could have
kept practising
while
he took legal action. However, if the liquidator was licensed as
recommended by
the
Senate inquiry, that license could be suspended even though he could
still go to the
courts.
In other words, the alleged problems would have continued for years,
just as in the
Stuart
Ariff case?
Answer:
An
application was made to the court under section 536 on 7 February
2011 and the court
made
orders on 28 February 2011. The effect of which means Mr Pattison can
no longer
practice
as a liquidator unless he attends to the matters in the court order.
In
June 2011, the Australian Government issued an Options Paper
canvassing options for
improving
the regulation of both the personal and corporate insolvency
professions.
The
Paper discusses features of the current regulatory framework and
seeks views on a
number
of issues including the registration and monitoring of insolvency
practitioners and
what
should be the appropriate standards of entry into the profession.
7.
The Government has sat on its hands on the Senate report, but isn’t
this a compelling
case
for reform of the insolvency industry as recommended by the Senate
inquiry,
including
licensing?
Answer:
The
Options Paper released by the Government in June 2011 considers the
areas for reform
identified
by the Senate Committee and seeks public comment to inform and help
Government
respond to the recommendations of the Senate committee's report. One
of
the
areas canvassed is the registration of liquidators.
8.
It is intriguing that ASIC would move against a liquidator in
Melbourne following
concerns
about his capacity to adequately and properly carry out his duties,
yet ITSA
cannot
seem to take action against the same person as a bankruptcy trustee.
It hardly
gives
people confidence in the system. Would you like to see uniform laws
in this regard?
Answer:
ITSA
has recently made an announcement concerning Mr Pattison's
registration as a trustee.
As
to uniform law, we note that an important stated objective of the
Options Paper issued
by
the Government in June 2011 is to seek input from interested parties
to determine
whether
it is appropriate that an aligned set of provisions be adopted for
both the corporate
and
personal insolvency regimes to inform the development of future
reforms that will
ensure
the maintenance of public confidence in the insolvency regime
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