Insolvency Oracle

Developments in UK insolvency by Michelle Butler

Tag Archives: regulation


by Leave a comment

InsS Annual Review, part 3: less carrot, more stick?

The Insolvency Service’s September 2018 report pulled no punches in expressing dissatisfaction over some monitoring outcomes: we want fewer promises to do better and more disciplinary penalties, seemed to be the tone.  Has this message already changed the face of monitoring?

The Insolvency Service’s September 2018 Report can be found at www.gov.uk/government/publications/review-of-the-monitoring-and-regulation-of-insolvency-practitioners and its Annual Review of IP Regulation is at www.gov.uk/government/publications/insolvency-practitioner-regulation-process-review-2018.

In this article, I explore the following:

  • On average, a quarter of all IPs were visited last year
  • But is there a 3-yearly monitoring cycle any longer?
  • 2018 saw the fewest targeted visits on record
  • …but more targeted visits are expected in 2019
  • No RPB ordered any plans for improvement
  • Instead, monitoring penalties/referrals of disciplinary/investigation doubled
  • Is this a sign that the Insolvency Service’s big stick is hitting its target?
  • IPs had a 1 in 10 chance of receiving a monitoring or complaints sanction last year

 

How frequently are IPs being visited?

With the exception of the Chartered Accountants Ireland (which is not surprising given their bumper year in 2017), all RPBs visited around a quarter of their IPs last year.  It’s good to see the RPBs operating this consistently, but how does it translate into the apparent 3-yearly standard routine?

Firstly, I find it odd that coverage of ACCA-licensed IPs seems to have dropped significantly.  After receiving a fair amount of criticism from the InsS over its monitoring practices, the ACCA handed the regulating of its licensed IPs over to the IPA in October 2016.  Yet, the number of ACCA IPs visited since that time has dropped from the c.100% to 79%.

Another factor that I had overlooked in previous analyses is the effect of monitoring the volume IVA providers (“VIPs”).  At least since 2014, the Insolvency Service’s principles for monitoring VIPs has required at least annual visits to VIPs.  Drawing on TDX’s figures for the 2018 market shares in IVAs, the IPA licensed all of the IPs in the firms that fall in the InsS’ definition of a VIP.  On the assumption that each of these received an annual visit, excluding these visits would bring the IPA’s coverage over the past 3 years to 56% of the rest of their IPs.  Of course, there are many reasons why this figure could be misleading, including that I do not know how many VIP IPs any of the RPBs had licensed in 2016 or 2017.

The ICAEW’s 64% may also reflect its different approach to visits to IPs in the largest firms: the ICAEW visits the firm annually (to cover the work of some of their IPs), but, because of the large number of IPs in the firm, the gap between visits to each IP within the firm is up to 6 years.  I cannot attempt to adjust the ICAEW’s figure to exclude these less frequently visited IPs, but suffice to say that, if they were exceeded, I suspect we might see something approaching more of a standard c.3-yearly visit for all non-large firm ICAEW-licensed IPs.

These variances in the 3-year monitoring cycle standard, which cannot be calculated (by me at least) with any accuracy, mean that there is very little that can be gleaned from this graph.  Unfortunately, the average is no longer much of an indication to IPs of when they might expect to receive their next monitoring visit.

 

The IPA’s new approach to monitoring

In addition to its up-to-4-visits-per-year shift for VIPs, at its annual conference earlier this year, the IPA announced that it would also be departing from the 3-yearly norm for other IPs.

The IPA has published few details about its new approach.  All that I have seen is that the frequency of monitoring visits is on a risk-assessment basis (which, I have to say, it was in my days there, albeit that the InsS used to insist on a 3-year max. gap) and that it is a “1-6 year monitoring cycle – tailored visits to types of firm” (the IPA’s 2018/19 annual report).

In light of this vagueness, I asked a member of the IPA secretariat for some more details: was the plan only to extend the period for those in the largest firms, as the ICAEW has done, or at least only for those practices with robust in-house compliance teams with a proven track record?  The answer was no, it could apply to smaller firms.  He gave the example of a small firm IP who only does CVLs: if the IPA were happy that the IP could do CVLs well and her bond schedules showed that she wasn’t diversifying into other case types, she likely would be put on an extended monitoring cycle.  The IPA person saw remote monitoring as the key for the future; he said that there is much that can be gleaned from a review of docs filed at Companies House.  He explained, however, that IPs would not know what cycle length they had been marked up for.

While I do not wish to throw cold water on this development, as I have long supported risk-based monitoring, this does seem a peculiar move especially in these times when questions are being asked about the current regulatory regime: if a present concern is that the regulators are not adequately discouraging bad behaviour and that they are not expediting the removal of the  “bad apples”, then it is curious that the monitoring grip is being loosened now.

Also, now that I visit clients on an annual basis, I realise just how much damage can be done in a short period of time.  It only takes a few misunderstandings of the legislation, a rogue staff member or a hard-to-manage peak in activity (or an unplanned trough in staff resources) to result in some real howlers.  How much damage could be done in 6 years, especially if an IP were less than honest?  Desk-top monitoring can achieve only so much.

What this means for my analysis of the annual reports, however, is that the 3-year benchmark for monitoring visits – or one third of IPs being monitored per year – is no longer relevant ☹ But it will still be interesting to see how the averages vary in the coming years.

 

Targeted visits drop to an all-time low

Only 10 targeted visits were carried out last year – the lowest number since the InsS started reporting them – and it seems that all RPBs are avoiding them in equal measure.

But 2019 may show a different picture, as several targeted visits have been ordered from 2018 monitoring visits…

 

Are the Insolvency Service’s criticisms bearing fruit?

I was particularly alarmed by the overall tone of the Insolvency Service’s “review of the monitoring and regulation of insolvency practitioners” published in September 2018.  In several places in the report, the InsS expressed dissatisfaction over some of the outcomes of monitoring visits.

I got the feeling that the Service disliked the focus on continuous improvement that, I think, has been a strength of the monitoring regime.  Instead, the Service expected to see more investigations and disciplinary actions arising from monitoring visit findings.  The report singled out apparently poor advice to debtors and apparently unfair or unreasonable fees or disbursements as requiring a disciplinary file to be opened with the aim of remedies being ordered.  It does seem that the focus of the InsS criticisms is squarely on activity in the VIPs, but the report did worry me that the criticisms could change the face of monitoring for everyone.  

2018 is the first year (in the period analysed) in which no monitoring visit resulted in a plan for improvement.  On the other hand, the number of penalties/referrals for disciplinary/investigation action doubled.

Could the InsS’ report be responsible for this shift?  Ok, the report was published quite late in 2018, in September, but I am certain that the RPBs had a rough idea of what the report would contain long before then.  Or perhaps the Single Regulator debate has tempted some within the RPBs/committees to be seen to be taking a tougher line?  Or you might think that these kinds of actions are long overdue?

I think that the RPBs have tried hard over the last decade or so to overcome the negativity of the JIMU-style approach to monitoring.  In more recent years, monitoring has become constructive and there has been some commendably open and honest communication between RPB and IP.  This has helped to raise standards, to focus on how firms can improve for the future, rather than spending everyone’s time and effort analysing and accounting for the past.  It concerns me that the InsS seems to want to remove this collaborative approach and make monitoring more like a complaints process.  In my view, such a shift may result in many IPs automatically taking a more defensive stance in monitoring visits and challenging many more findings.  Such a shift will not improve standards and will take up much more time from all parties.

Getting back to the graph, of course a referral for an investigation might not result in a sanction at all, so this does not necessarily mean that the IPA has issued more sanctions as a consequence of monitoring visits.  Also, the IPA’s apparent enthusiasm for this tool may simply reflect the IPA’s (past) committee structure whereby the committee that considered monitoring reports did not have the power to issue a disciplinary penalty, but could only pass it on to the Investigation Committee.  As this was dealt with as an internal “complaint”, I suspect that any such penalty arising from this referral would have featured, not in the IPA’s monitoring visit outcomes, but in complaint outcomes.

So how do the RPBs compare as regards complaints sanctions?

 

Complaints sanctions fall by a quarter

Although the IPA issued relatively fewer sanctions last year, I suspect that the monitoring visit referrals will take some time to work their way through to sanction stage, so it is unlikely that this demonstrates that the monitoring visit referrals led to a “no case to answer”.

What this and the previous graph show quite dramatically, though, is that last year the ICAEW seemed to issue far fewer sanctions per IP than the IPA.  As mentioned in my last blog, the IPA does license a large majority of the VIP IPs and there were more complaints last year about IVAs than about all the other case types put together.  One third of the published sanctions also were found against VIP IPs.

 

Likelihood of being sanctioned is unchanged from a decade ago

In 2018, you had a 1 in c.10 chance of receiving an RPB sanction, which was the same probability as in 2008…

I find it interesting to see the IPA’s and the ACCA’s results converge, which, if it were not for the suspected VIP impact, I would expect given that the IPA deals with both RPBs’ regulatory processes.

There’s not a lot that can be surmised from the number of sanctions issued by the other two RPBs: they’re a bit spiky, but it does seem that, on the whole, the ICAEW and ICAS has issued much fewer sanctions.  It seems from this that, at least for last year, you were c.half as likely to receive a sanction if you were ICAEW- or ICAS-licensed as you were if you were IPA- or ACCA-licensed.

 

Is a Single Regulator the answer to bringing consistency?

True, these graphs do seem to indicate that different regulatory approaches are implemented by different RPBs.  However, I do think that some of that variation is due to the different make-up of their regulated populations.  There is no doubt that the IVA specialists do require a different approach.  To a lesser degree, I think that a different approach is also merited when an RPB monitors practices with robust internal compliance teams; it is so much more difficult to have your work critiqued and challenged on a daily basis when you work in a 1-2 IP practice.

Differences in approach can also be a good thing.  Seeing other RPBs do things differently can force an RPB to challenge what they themselves are doing and to innovate.  My main concern with the idea of a single regulator is the loss of this advantage of the multi-regulator structure.

Perhaps a Single Regulator could bring in more consistency, but it would never result in perfectly consistent outcomes.  I’m sure I’m not the only one who remembers an exercise a certain JIEB tutor ran: all us students were given the same exam answer to mark against the same marking guide.  The results varied wildly.  This demonstrated to me that, as long as humans are involved in the process, different outcomes will always emerge.

 


by 4 Comments

The stats of IP Regulation – Part 1: Complaints

My annual review of the Insolvency Service’s 2017 IP regulation report has thrown up the following:

  • The number of IPs drops again – the third year in a row
  • Good news: 2017 saw half as many complaints referred through the Gateway as 2015
  • This may be partly due to the Insolvency Service’s sifting process: almost half of all complaints put to the Gateway in 2017 were sifted out
  • Sadly, despite the overall reduction, there were more sifted-in complaints from creditors in 2017 than in the previous year
  • The RPBs seem to be generating more complaints sanctions: 10 years’ ago, 1 IP in 100 could receive a complaints sanction; now it is c.1 in 20

The Insolvency Service’s report can be found at: https://tinyurl.com/ycndjuxz

 

IPs leaving the profession

As the following graph shows, the number of appointment-taking IPs has fallen for the third year in a row:In ICAS’ 2017 monitoring report (https://www.icas.com/regulation/insolvency-monitoring-annual-reports), that RPB puts the decrease down to the number of IPs who have retired, which I suspect is probably the case across the board.  And we’re not seeing their number being replaced by new appointment-takers.  I can’t say I’m surprised at that either: regulatory burdens and personal risks continue to mushroom, formal insolvency cases (especially those with assets) appear more sparse and the media has nothing good to say about the profession.  Why would anyone starting out choose formal insolvency as their career choice?

Admittedly, it’s not an alarming fall… not yet… but one has to wonder how the Insolvency Service proposes to address this trend, given that one of their regulatory objectives introduced in 2015 was to encourage an independent and competitive profession.

But what is life like for current IPs?  Is there no good news?

 

Another dramatic fall in complaints

Much more striking is the fall in the numbers of complaints referred to the RPBs:No one – the Insolvency Service, RPBs or R3 – is shouting about this good news: the fact that the complaint number has halved since 2015, the first full year of the Complaints Gateway’s operation?  I would have thought that the InsS could have easily spun it into a story about the success of the Gateway or of their policing of insolvency regulation generally, no? 😉

 

Where are the rem and pre-pack complaints?

I wonder if the subject matter of the complaints is one reason why the InsS may not be keen to draw attention to complaints trends.

The following analyses the complaints put through the Gateway:If we were asked what areas of apparent misconduct we thought were the top of the InsS’s hit-list, I suspect most of us would answer: IP fees and pre-packs.  But, as you can see, these two topics have never featured large in complaints.

Despite the fees regime becoming more and more complex and involving the delivery of more information and rights to creditors to question or challenge fees, you can see that the complaints about fees have dropped: there were 19 in 2014 and only one last year.  And last year, there were no complaints about pre-packs.

This graph demonstrates what might be behind the drop in complaint numbers: there is a marked decrease in complaints about SIP3 and communication breakdowns.  I think that’s certainly good news to shout about.

So in what areas could we perhaps try harder to avoid attracting complaints?

 

Complaint danger zones?

The following analysis supports the perception that IVAs are attracting fewer complaints than in recent years, although IVAs are still number one.  In fact, it demonstrates that all insolvency proceedings are attracting fewer complaints.However, when looked at as a percentage of complaints received…… it would seem that complaints about ADMs and PTDs aren’t dropping quite as quickly as those for other processes.  Putting the two analyses together leads me to wonder whether ethics-related complaints involving ADMs now form a disproportionately large category of complaints, particularly in view of the relatively small number of ADMs compared with IVAs and LIQs.  Press coverage would also appear to support this area as a growing concern.

 

Creditors are lodging more complaints

The following graph gives us a little more insight into the origin of complaints:This shows that creditors are the only category of complainant that has seen an increase in the number of complaints lodged over the past year.  Could the profession do more to help creditors understand insolvency processes and especially ethics?

The Insolvency Service has reported for a few years now that the Insolvency Code of Ethics has been under review.  As we know, the JIC/RPBs launched a consultation on a draft Code last year – the consultation closure date has almost hit its anniversary!  The InsS 2017 review reported that a revised Insolvency Code of Ethics “is expected to be issued later this year”.  It seems to me that a fresh and clear revised Code could help us address the number of complaints lodged.

 

Not every complaint is a complaint

I highlighted last year that it seemed the InsS had been sifting out a greater number of complaints as not meeting the criteria for referring over to the relevant RPB.  This shows how that trend has developed:Wow!  So for the first time, the InsS rejected more complaints that it referred: almost half of all complaints were rejected (48%) and only 41% were referred.  Compare this to the first few months of the Gateway’s operation when only 25% were rejected and 72% were referred.  Nevertheless, setting aside the number of rejected complaints, it is good to see that even the trend for the number of complaints received is a nice downwards slope.  And in case you’re wondering, I suspect that the remaining 11% of complaints received are still being processed by the IS – a fair old number, but pleasingly a lot less than existed at the end of 2016.

Of course, the Gateway is still relatively young and it is good to read that the InsS is continually refining its sifting processes, as can be seen from the following graph:This indicates that a large part of the increase in rejected complaints is because more complainants have not responded to the Insolvency Service’s requests for further information.

For 2017, the Insolvency Service added a new category of rejections: complaints that were about the effect of an insolvency procedure.  Although there will always be some creditors and debtors who complain about the fairness of insolvency processes, perhaps an unintended benefit of the Complaints Gateway is that the InsS receives first-hand expressions of dissatisfaction about the design of the insolvency process… although let’s hope the InsS considers using such intelligence to amend legislation where sensible, rather than try to force IPs to fudge legislative flaws via Dear IPs and the like.

You might expect that, as the Insolvency Service rejects more complaints, so the percentage of sanctions arising from complaints that make it past the sifting process should increase.

 

Roughly one complaint out of every five results in a sanction

Well, you’d be right.The trendline here suggests that a complaint was twice as likely to end up in a sanction in 2017 as it was 10 years’ ago.

You might be wondering what is going on with ACCA-licensed IPs: how can over half of their complaints result in a sanction compared to an average elsewhere of around 10-20%?!

I agree that the figures are odd.  However, it should be remembered that complaints are not always closed in the year that they are opened.  And in this respect, the ACCA’s stats appear particularly odd.  For example, in last year’s InsS report, it was stated that the ACCA had only one 2013 complaint remaining open, but in this year’s report, apparently there are now thirteen 2013 open complaints against ACCA-licensed IPs!  The ACCA went through some enormous changes last year, as their complaints-handling and monitoring functions were taken over by the IPA with effect from 1 January 2017.  Could this structural change be behind the unusual stats?  Or perhaps the ACCA had been handling some particularly sticky complaints in 2014 and 2015, when their sanctions were low, and those investigations have now come to fruition.

The same effect of sanction clustering could be operating within the other RPBs in view of the spiky lines above.  Therefore, perhaps it would be wise to avoid drawing conclusions about apparent inconsistencies between RPBs’ complaints processes based on 2017’s figures alone.  However, averaging out the figures over the past three years, we can see that 23% of complaints against IPA-licensed IPs resulted in a sanction, whereas only 5% of complaints against ICAEW-licensed IPs did so.  I believe that the IPA licenses more than its fair share of IVA-specialists, so this might account for at least some of the difference.

 

Increased sanctions are not just a Gateway-sifting effect

But what about my suggestion above: that the increased number of sifted-out complaints has led to a larger proportion of complaints allowed through the Gateway leading to a sanction?

That’s not the whole story:This shows that the number of complaints sanctions per IP has also been on an upward trend: around 1 in 100 IPs received a sanction in 2008, whereas this figure was closer to 1 in 20 in 2017.

What is behind this trend?  I really don’t believe that it’s because more IPs now conduct themselves in ways meriting sanctions (or because there are a few IPs who behave badly more often).  And as we’ve seen, the number of complaints lodged doesn’t support a theory that more people complain now.

It must be because expectations have been raised, don’t you think?  Or perhaps because the increased prescription in rules and SIPs has led to more traps?

Hidden measuring-sticks?

For example, the InsS report describes one IP’s disciplinary order, stating that the IP had breached SIP16 “by failing to provide a statement as to whether the connected party had been made aware of their ability to approach the pre-pack pool and/or had approached the pre-pack pool and whether a viability statement had been requested from the connected party but not provided”.  Firstly, SIP16 doesn’t strictly require IPs to state whether connected parties have been made aware of the pool.  Secondly, SIP16 states that the SIP16 Statement should include “one of” two listed statements, only one being whether the pool had been approached.  Yes, I’ll accept that it seems the IP did not provide information on the existence of a viability statement, although I would have thought that, if a copy of a viability statement were not provided with the SIP16 Statement, then surely the likelihood is that the IP was not provided with one.  I appreciate I am splitting hairs here, but if a SIP is not crystal-clear on what is required of IPs, is it any wonder that slip-ups will be made?  And if a disciplinary consent order were generated every time an IP had omitted to meet every last letter of the SIPs and Rules, then I suspect no IP would be found entirely blameless.  Ok yes, there exists a mysterious fanaticism around SIP16 compliance and we would do well to check, check and check again that SIP16 Statements are complete (and hang the cost?).  However, I think this demonstrates how standards have changed: 10 years’ ago, would an IP have been fined £2,500 and have his name in lights for omitting one line from a report (hint: SIP16 began life in 2009)?

 

In my next blog, I’ll explore the RPB statistics on monitoring visits.


by Leave a comment

Is the IP regulation system fair?

IMGP0038 (2)

The Insolvency Service’s 2015 review of IP regulation was released in March and, as usual, I’ve dug around the statistics in comparison with previous years.

They indicate that complaint sanctions have increased (despite complaint numbers dropping), but monitoring sanctions have fallen. Why is this?  And why was one RPB alone responsible for 93% of all complaints sanctions?

The Insolvency Service’s report can be found at https://goo.gl/HlATlf.

I honestly had no idea that the R3 member survey issued earlier today was going to ask about the effectiveness of the regulatory system. I would encourage R3 members to respond to the survey (but don’t let this blog post influence you!).

IP number falls to 6-year low

I guess it was inevitable: no IP welcomes the hassle of switching authorising body and word on the street has always been that being authorised by the SoS is a far different experience to being licensed by an RPB. Therefore, I think that the withdrawal from authorising by the SoS (even with a run-off period) courtesy of the Deregulation Act 2015 and the Law Societies was likely to affect the IP numbers.

Here is how the landscape has shifted:

Graph1

As you can see, the remaining RPBs have not gained all that the SoS and Law Societies have lost and ACCA’s and CARB’s numbers have dropped since last year. It is also a shame to note that, not only has the IP number fallen for the first time in 4 years, it has also dropped to below the 2010 total.

Personally, I expect the number to drop further during 2016: I am sure that the prospect of having to adapt to the new Insolvency Rules 2016 along with the enduring fatigue of struggling to get in new (fee-paying) work and of taking the continual flak from regulators and government will persuade some to hang up their boots. I also don’t see that the industry is attracting sufficient new joiners who are willing and able to take up the responsibility, regardless of the government’s partial licence initiative that has finally got off the ground.

Maybe this next graph will make us feel a bit better…

Number of regulatory sanctions fall

Graph2

Although the numbers are spiky, I guess there is some comfort to be had in seeing that the regulatory bodies issued fewer sanctions against IPs in 2015. [To try to put 2010’s numbers into context, you’ll remember that 1 January 2009 was the start of the Insolvency Service’s monitoring of the revised SIP16, which led to a number of referrals to the RPBs, although I cannot be certain that this was behind the unusual 2010 peak in sanctions.]

But what interests me is that the number of sanctions in 2015 arising from complaints far outstripped those arising from monitoring visits, which seems quite a departure from the picture of previous years. What is behind this?  Is it simply a consequence of our growing complaint-focussed society?

Complaints on the decrease

Graph3

Well actually, as you can see here, it seems that fewer complaints were registered last year… by quite a margin.

I confess that some of these years are not like-for-like comparisons: before the Complaints Gateway, the RPBs were responsible for reporting to the Insolvency Service how many complaints they had received and it is very likely that they incorporated some kind of filter – as the Service does – to deal with communications received that were not truly complaints. However, it cannot be said for certain that the RPBs’ pre-Gateway filters worked in the same way as the Service’s does now.  Nevertheless, what this graph does show is that 2015’s complaints referred to the regulatory bodies were less than 2014’s (which was c.half a Gateway year – the “Gateway (adj.)” column represents a pro rata’d full 12 months of Gateway operation based on the partial 2014 Gateway number).

It is also noteworthy that the Insolvency Service is chalking up a similar year-on-year percentage of complaints filtered out: in 2014, this ran at 24.5% of the complaints received, and in 2015, it was 26.5%.

So, if there were fewer complaints lodged, then why have complaints sanctions increased?

How long does it take to process complaints?

The correlation between complaints lodged and complaint sanctions is an interesting one:

Graph4

Is it too great a stretch of the imagination to suggest that complaint sanctions take somewhere around 2 years to emerge? I suggest this because, as you can see, the 2010/11 sanction peak coincided with a complaints-lodged trough and the 2013 sanctions trough coincided with a complaints lodged peak – the pattern seems to show a 2-year shift, doesn’t it..?

I am conscious, however, that this could simply be a coincidence: why should sanctions form a constant percentage of all complaints?  Perhaps the sanctions simply have formed a bit of a random cluster in otherwise quiet years.

Could there be another reason for the increased complaints sanctions in 2015?

One RPB breaks away from the pack

Graph5

How strange! Why has the IPA issued so many complaints sanctions when compared with the other RPBs?

I have heard more than one IP suggest that the IPA licenses more than its fair share of IPs who fall short of acceptable standards of practice. Personally, I don’t buy this.  Also more sanctions don’t necessarily mean there are more sanctionable offences going on.  It reminds me of the debates that often surround the statistics on crime: does an increase in convictions mean that there are more crimes being committed or does it mean that the police are getting better at dealing with them?

Nevertheless, the suggestion that the IPA’s licensed population is different might help explain the IPA peak in sanctions, mightn’t it? To test this out, perhaps we should compare the number of complaints received by each RPB.

Graph6

Ok, so yes, IPA-licensed IPs have received more complaints than other RPBs (although SoS-authorised IPs came out on top again this past year).  If the complaints were shared evenly, then 58% of all IPA-licensed IPs would have received a complaint last year, compared to only 43% of those licensed by the other three largest RPBs.  I hasten to add that, personally, I don’t think this indicates differing standards of practice depending on an IP’s licensing body: it could indicate that IPA-licensed (and perhaps also SoS-authorised) IPs work in a more complaints-heavy environment, as I mention further below.

Nevertheless, let’s see how these complaints-received numbers would flow through to sanctions, if there were a direct correlation. For simplicity’s sake, I will assume that a complaint lodged in 2013 concluded in 2015 – although I think this is highly unlikely to be the average, I think it could well be so for the tricky complaints that lead to sanctions.  This would mean that, across all the RPBs (excluding the Insolvency Service, which has no power to sanction SoS-authorised IPs in respect of complaints), 12% of all complaints led to sanctions.  On this basis, the IPA might be expected to issue 36 complaint-led sanctions, so this doesn’t get us much closer to explaining the 76 sanctions issued by the IPA.

I can suggest some factors that might be behind the increase in the number of complaints sanctions granted by the IPA:

  • The IPA licenses the majority of IVA-specialising IPs, which do seem to have attracted more than the average number of sanctions: last year, two IPs alone were issued with seven reprimands for IVA/debtor issues.
  • The IPA’s process is that matters identified on a monitoring visit that are considered worthy of disciplinary action are passed from the Membership & Authorisation Committee to the Investigation Committee as internal complaints. Therefore, I think this may lead to some IPA “complaint” sanctions actually originating from monitoring visits. However, analysis of the sanctions arising from monitoring visits (which I will cover in another blog) indicates that the IPA sits in the middle of the RPB pack, so it doesn’t look like this is a material factor.
  • Connected to the above, the IPA’s policy is that any incidence of unauthorised remuneration spotted on monitoring visits is referred to the Investigation Committee for consideration for disciplinary action. Given that it seems that such incidences include failures that have already been rectified (as explained in the IPA’s September 2015 newsletter) and that unauthorised remuneration can arise from a vast range of seemingly inconspicuous technical faults, I would not be surprised if this practice were to result in more than a few unpublished warnings and undertakings.

But this cannot be the whole story, can it? The IPA issued 93% of all complaints sanctions last year, despite only licensing 35% of all appointment-takers.  The previous year followed a similar pattern: the IPA issued 82% of all complaints sanctions.

To put it another way, over the past two years the IPA issued 111 complaints sanctions, whilst all the other RPBs put together issued only 14 sanctions.

What is going on? It is difficult to tell from the outside, because the vast majority of the sanctions are not published.  Don’t get me wrong, I’m not complaining about that.  If the sanctions were evenly-spread, I could not believe that c.16% of all IPA-licensed IPs conducted themselves so improperly that they merited the punitive publicity that .gov.uk metes out on IPs (what other individual professionals are flogged so publicly?!).

The Regulators’ objective to ensure fairness

This incongruence, however, makes me question the fairness of the RPBs’ processes.  It cannot be fair for IPs to endure different treatment depending on their licensing body.

You might say: what’s the damage, when the majority of sanctions went unpublished? I have witnessed the anguish that IPs go through when a disciplinary committee is considering their case, especially if that process takes years to conclude.  It lingered like a Damocles Sword over many of my conversations with the IPs.  The apparent disparity in treatment also does not help those (myself included) that argue that a multiple regulator system can work well.

One of the new regulatory objectives introduced by the Small Business Enterprise & Employment Act 2015 was to secure “fair treatment for persons affected by [IPs’] acts and omissions”, but what about fair treatment for IPs?  In addition, isn’t it possible that any unfair treatment on IPs will trickle down to those affected by their acts and omissions?

The Insolvency Service has sight of all the RPBs’ activities and conducts monitoring visits on them regularly. Therefore, it seems to me that the Service is best placed to explore what’s going on and to ensure that the RPBs’ processes achieve consistent and fair outcomes.

 

In my next blog, I will examine the Service’s monitoring of the RPBs as well as take a closer look at the 2015 statistics on the RPBs’ monitoring of IPs.

 

 

 

 

 

 


by Leave a comment

And now for a qualitative review of the IP Regulation Report

19Picture 704low res

Having explored the statistics, I thought I’d turn to the Insolvency Service’s 2013 IP regulation report’s hints at issues currently at the top of the regulators’ hit list:

• Ethical issues;
• Consultation with employees;
• SIP16; and
• Dodgy introducers;

All the Service’s regulatory reviews can be found at http://www.bis.gov.uk/insolvency/insolvency-profession/Regulation/review-of-IP-regulation-annual-regulation-reports.

Ethical Issues

The Insolvency Service has “asked that regulators make ethical issues one of their top priorities in the coming year, following concerns arising from both our own investigations and elsewhere” (Dr Judge’s foreword). What might this mean for IPs? Personally, I find it difficult to say, as the report is a bit cloudy on the details.

The report focuses on the fact that 35% of the complaints lodged in 2013 have been categorised as ethics-related. On the face of it, it does appear that ethics-categorised complaints have been creeping up: they were running at between 10% and 20% from 2008 to 2011, and in 2012 they were 24%. Without running a full analysis of the figures, I cannot see immediately which categories have correspondingly improved over the years: “other” complaints have been running fairly consistently between 30% and 40% (which does make me wonder at the value of the current system of categorising complaints!) and the other major categories – communication breakdown, sale of assets, and remuneration – have been bouncing along fairly steadily. The only sense I get is that, generally, complaints were far more scattered across the categories than they were in 2013, so I am pleased that the Insolvency Service reports an intention to refine its categorisation to better understand the true nature of complaints made about ethical issues. Now that the Service is categorising complaints as they pass through the Gateway, they are better-placed than ever to explore whether there are any trends.

In one way, I think that this ethics category peak is not all bad news: I would worry if some of the other categories – e.g. remuneration, mishandling of employee claims, misconduct/irregularity at creditors’ meetings – recorded high numbers of complaints.

Do the complaints findings give us any clues as to what these ethical issues might be about? Briefly, the findings listed in the report involved:

• Failing to conduct adequate ethical checks and a SIP16 failure;
• Failing to pay a dividend after issuing a Notice of Intended Dividend or retract the notice (How many times does this happen, I wonder!) and a SIP3 failure regarding providing a full explanation in a creditors’ report;
• Three separate instances (involving different IPs) of SIP16 failures;

Unfortunately, the report does not describe all founded complaints, but it appears to me that few ethics-categorised complaints convert into sanctions. However, it is interesting to see that some of these complaints don’t seem to go away: two of the complaints lodged with the Service about the RPBs, and which are still under investigation, involve allegations of conflict of interest, so it is perhaps not surprising that the Service’s interest has been piqued. The report describes a matter “of wider significance which we will take forward with all authorising bodies”, that of “concerns around the perceived independence of complaints handling, where the RPB also acts in a representative role for its members” (page 6). Noisy assumptions that RPBs won’t bite the hands that feed them have always been with us, but there were some very good reasons why complaints-handling was not taken away from the RPBs as a consequence of the 2011 regulatory reform consultation and I would be very surprised if the situation has worsened since then.

So, as a profession, we seem to be encountering a significant number of ethics-related complaints, few of which lead to any sanctions. This suggests to me that behaviour that people on the “outside” feel is unethical is somehow seen as justified when viewed from the “inside”. It cannot be simply an issue of communicating unsuccessfully, because wouldn’t that in itself be a breach of the ethical principle of transparency that might lead to a sanction? The Service seems to be focussing on the Code of Ethics: “we are working with the insolvency profession to establish whether the current ethical guidance and its application is sufficiently robust or whether any changes are needed to further protect all those with an interest in insolvency outcomes” (page 4). Personally, I struggle to see that the Code of Ethics is somehow deficient; it cannot endorse practices that deviate from the widely-accepted ethical norm, because it sets as the standard the view of “a reasonable and informed third party, having knowledge of all the relevant information”. I guess whether or not disciplinary committees are applying this standard successfully is another question, which, of course, the Service may be justified in asking. However, I do hope that (largely, I confess, because I shared the pain of many who were involved in the years spent revising the Guide) the outcome doesn’t involve tinkering with the Code, which I believe is an extremely carefully-written, all-encompassing, timeless and elevated, set of principles.

Consultation with employees

This topic pops up only briefly in relation to the Service’s monitoring visits to RPBs. It is another matter “of wider significance which we will take forward with all authorising bodies”: “regulation in relation to legal requirements to consult with employees where there are collective redundancies” (page 4).

Although I’ve been conscious of the concern over employee consultation over the years – I recall the MP’s letter to all IPs a few years’ ago – I was still surprised at the number of “reminders” published in Dear IP when I had a quick scroll down Chapter 11. On review, I thought that the most recent Article, number 44 (first issued in October 2010), was fairly well-written, although it pre-dated the decision in AEI Cables Limited v GMB, which acknowledged that it may be simply not possible to give the full consultation period where pressures to cease trading are felt (see, e.g., my blog post at http://wp.me/p2FU2Z-3i), and it all seems so impractical in so many cases – to engage in an “effective and meaningful consultation”, including ways of avoiding or reducing the number of redundancies – but then it wouldn’t be the first futile thing IPs have been instructed to do…

If this is a regulator hot topic going forward, then it may be beneficial to have a quick review of standards and procedures to ensure that you’re protecting yourself from any obvious criticism. For example, do your engagement letters cover off the consultation requirements adequately? Does staff consultation appear high up the list of day one priorities? If any staff are retained post-appointment, do you always document well the commencement of consultation, ensuring that discussions address (and contemporaneous notes evidence the addressing of) the matters required by the legislation?

SIP16

Oh dear, yes, SIP16-monitoring is still with us! It seems that 2012’s move away from monitoring strict compliance with the checklist of information in SIP16 to taking a bigger picture look at the pre-pack stories for hints of potential abuse has been abandoned. It seems that the Service’s idea of “enhanced” monitoring simply was to scrutinise all SIP16 disclosures, instead of just a sample. In addition, unlike previous reports, the 2013 report does not describe what intelligence has come to the Service via its pre-pack hotline, nor does it mention what resulted from any previous years’ ongoing investigations. Oh well.

I guess it was too much to ask that the release of a revised SIP16 on 1 November 2013 might herald a change in approach to any pre-pack monitoring by the Service. Nope, they’re still examining strict compliance, although at least there has been some progress in that the Service is now writing to all IPs where it identifies minor SIP16 disclosure non-compliances (with the serious breaches being passed to the authorising body concerned). I really cannot get excited by the news that the Service considered that 89% of all SIP16 disclosures, issued after the new SIP16 came into force, were fully compliant. Where does that take us? Will IPs continue to be monitored (and clobbered) until we achieve 100%? What will be the reaction, if the percentage compliant falls next time around?

Dodgy Introducers

The Service has achieved a lot of mileage – in some respects, quite rightly so – from the winding up, in the public interest, of eight companies that were “wrongly promoting pre-packaged administrations as an easy way for directors to escape their responsibilities”. Consequently, I found this sentence in the report interesting: “We have also noted that current monitoring by the regulators has not picked up on the insolvency practitioner activities that were linked to the winding up of a number of ‘introducer’ companies, and are in discussions with the authorising bodies over how this might be addressed in the coming year” (page 6). Does this refer specifically to the six IPs with links to the wound-up companies who have been referred to their authorising bodies? Or does this mean that the Service will be looking at how the regulators target (if at all) IPs’/introducers’ representations as regards the pre-pack process on IP monitoring visits?

Having heard last week a presentation by Caroline Sumner, IPA, at the R3 SPG Technical Review, it would seem to me that regulators are, not only on the look-out for introducers of dodgy pre-packs, but also of dodgy packaged CVLs where an IP has little, if any, involvement with the insolvent company/directors until the S98 meeting. Generally, IPs are vocal in their outrage and frustration at unregulated advisers who seek to persuade insolvent company directors that they need to follow the direction of someone looking out for their personal interests, but someone must be picking up the formal appointments…

.
Unfortunately, the Insolvency Service’s report has left me with a general sense that it’s all rather cryptic. The report seems to be full of breathed threats but nothing concrete and, having sat on the outside of the inner circle of regulatory goings-on for almost two years now, I appreciate so much more how inactive that arena all seems. It’s a shame, because I know from experience that a great deal of work goes on between the regulators, but it simply takes too long for any message to escape their clutches. It seems that practices don’t have to move at the pace of a bolting horse to evade an effective regulatory reaction.


by Leave a comment

IP Fees Consultation: a case of failing to see the wood for the trees..?

1525 Sequoia

Unfortunately, my case law reviews have become a bit log-jammed, so I’m afraid all I can offer at present is my response to the Insolvency Service’s IP fees and regulation consultation: MB IP fees response Mar-14

Normal service will be resumed as soon as possible.


by 3 Comments

Who knew the Insolvency Service had a sense of humour?

0434 Santa Fe

Well, if I didn’t laugh, I’d cry!

I am conscious that my top ten jokes below make this a fairly destructive, not constructive, post about the Insolvency Service’s “Strengthening the regulatory regime and fee structure for insolvency practitioners” consultation. In addition, I do not cover many of the common concerns about the proposals, nor do I suggest here any real solutions. Nevertheless, I do think that it’s important, not to dismiss the proposals out of hand, but to think seriously about what might work. Our own ideas may not be what the Service has in mind, but we become the joke, if we plough on claiming that we see no ships (even if, yes I know, it may look as though that’s what I’m saying below… but rarely does public opinion concern itself with facts).

I have one week left to chew over my own suggestions before setting pen to paper in my formal response. Therefore, in the meantime, here are my top ten jokes told by the Service in its consultation document and two impact assessments (“IA”), which can be found at: https://www.gov.uk/government/consultations/insolvency-practitioner-regulation-and-fee-structure.

1. “Each year IPs realise approximately £5bn worth of assets from corporate insolvency processes, and in doing so charge about £1bn in fees, distributing some £4bn to creditors” (paragraph 88 of the consultation document)

The Insolvency Service has repeated this most absurd statement from the OFT’s market study. So, I ask myself, who is paying the solicitors’ fees, the agents’ fees, all the necessary costs of insolvencies such as insurance, advertising, bond premiums etc., and finally what about the Insolvency Service’s own fees that are payable from the assets in all (bankruptcies and) compulsory liquidations in priority to everything else? This statement just cannot be true!

It also grossly distorts the position and perception of IP fees: are we really talking about £1bn of IP fees here or costs on insolvent estates? The OFT’s explanation of how they came up with the £1bn (footnote 11 at http://www.oft.gov.uk/shared_oft/reports/Insolvency/oft1245) mixes up fees and costs, so it is difficult to be sure. However, as this debate has built up momentum, few seem bothered any longer about the facts behind the fees “problem”.

2. “Cases where secured creditors will not be paid in full and so remain in control of fees. The market works well in this instance so we do not want to interfere with the ability for secured creditors to successfully negotiate down fees” (paragraph 113 of the consultation document)

Both Professor Kempson’s report and the OFT market study drew conclusions about the effectiveness of secured creditors’ control. However, the OFT’s study looked only at Administrations and Para 83 CVLs (which are so not S98s) and Professor Kempson built on this study and therefore concentrated on the effect of IPs obtaining appointments via bank panels. And, from this relatively narrow focus, we end up with the conclusion above that the Service proposes to apply to all insolvencies (except, it is proposed, for VAs and MVLs, where it is suggested other fees controls work well… so maybe those cases have a different lesson for us about the level of engagement of those responsible for authorising the fees..?).

But, I ask myself, what about other cases involving secured creditors? What about less significant liquidations or even bankruptcies where the mortgaged home is in negative equity? Do the secured creditors really control the level of fees in these cases? It seems highly unlikely, when you remember that the bases of liquidators’ and trustees’ fees are fixed by resolutions of the unsecured creditors. And let’s not worry too much about the effectiveness (or not) of non-bank secured creditors…

Some might react: let it lie. If the Service wants to leave well alone all cases where secured creditors will not be paid in full – regardless of whether or not, in practice, they control fees – why make a fuss? The same could be said about my next point…

3. “The basis of remuneration must be fixed in accordance with paragraph (4) where… there is likely to be property to enable a distribution to be made to unsecured creditors…” (draft Rule 17.14(2)(b))

This is supposed to be the way the objective mentioned in 2 above is achieved, i.e. that fees may only be fixed on the bases described in “paragraph (4)” (i.e. percentage or set amount, but not time costs) where secured creditors are not in control of fees (plus in some other circumstances).

I am sure it has taken you less than a millisecond to work it out: “where a distribution to unsecured creditors is likely” is patently not the same as “where secured creditors do not remain in control of fees”. What about the vast majority of liquidations, which must represent by far the greatest proportion in number of insolvencies, where the asset realisations are not enough to cover all the costs (including IPs’ time costs)? In these cases, the Service’s proposal is that they would like the IP’s fees to be on a percentage or set amount, but in fact the draft Rules would entitle the liquidator to seek approval on a time cost basis. That must be a joke!

The problem for me in leaving these flaws alone is that IPs could be lumbered with Rules that do not implement the Government’s policy objectives, which may result in the Service/RPBs pressing for behaviours and approaches that are not supported by the statutory framework, which will do no one any good.

4. The use of the Schedule 6 scale rate for fees “ensures that there are funds available for distribution and not all realisations are swallowed up in fees and remuneration” (paragraph 117 of the consultation document)

Firstly, I object to “swallowed up”. It seems to me an emotive phrase, generating the image of an enormous whale greedily scooping up trillions of helpless krill in its distended maw. In fact, this image – and the reference to “excessive” fees/fee-charging, even though the consultation document acknowledges at one point that Professor Kempson did not interpret over-charging as deliberate but as largely related to inefficiencies – seems a constant throughout.

Secondly, and more fundamentally, as explained in (1) above, simply reverting to office holder fees being charged as a percentage, even the relatively low percentages of Schedule 6, will not ensure there are funds available for distribution. But this objective seems to be the raison d’etre of the fees proposals (and not just the Schedule 6 default), as Ms Willott MP explains in her foreword: “[The consultation document] also includes proposals to amend the way in which an insolvency practitioner can charge fees for his or her services, which should ensure that there will be funds available to make a payment to creditors” (page 2). This can only feed into some creditors’ misconceived expectations, not only about the post-new Rules world, but also about the insolvency process in general. If every insolvency were required to result in a distribution, there would be far more work for the OR and far fewer IPs in the country.

5. “The transfer of returns from IPs to unsecured creditors has the potential to deliver a more efficient dynamic economic allocation of resources as these creditors are more likely to reinvest these resources in growth driving activities” (paragraph 17 of the IP fees IA)

Actually, this isn’t funny; it’s just insulting. Even if you imagined a typical IP as a beer-bellied pin-striped man smoking a cigar of £50 notes, with more spilling out unnoticed from his pockets (which was the image in an Insolvency Service presentation to IPs last year), his ill-gotten gains are still going be passed on to the home sauna builders or the Michelin Star restaurants, aren’t they? But, of course, that’s beside the point; as someone who has worked decades in the insolvency profession, I take exception to the suggestion that the UK would be better off if my wages were paid to unsecured creditors.

6. “The OFT report states that some unsecured creditors say that if their recovery rate from insolvency increased, they would extend more credit. While this effect is likely to be slight, even a small increase in the £80bn of unsecured credit extended by SME’s will amount to many millions of pounds” (paragraph 56 of the IP fees IA)

How much better-off does the IA suggest unsecured creditors will be if the alleged “excessive fee charging” is passed to them? At the top end, 0.1p in the £ (paragraph 52) – will they even feel it..? Talk about a “slight” effect!

7. “We would estimate that familiarisation would take up to 1.5 hours of an IP’s time based on the assumption that this change is not complex to understand and would only need to be understood once before being applied… IPs are already required to seek the approval of creditors for the basis on which their remuneration is taken and it is anticipated that at the same time they will seek agreement to the percentage they are proposing to take. We do not therefore anticipate any additional costs associated with this” (paragraphs 35 and 43 of the IP fees IA)

1.5 hours once and nothing more? Ha ha!

For IPs to switch to a percentage basis (but only in certain circumstances/cases) will require days – weeks, perhaps months – of organising changes to systems, procedures and templates and a greater time burden per case. The challenges for systems, procedures and staff will include:

• Assessing a fair percentage of estimated future realisations to reflect the value of work done. This seems an almost impossible task on Day One. For example, book debts: will the money just fall in or will it be a tough job, involving scrutinising and collating records and re-buffing objections and procrastinations? How much do you allow for the SIP2 investigations, what if you need to follow a lead? So many questions…

• Ongoing monitoring to check if/when fees can no longer be fixed on a time cost basis. You’d think this would be relatively easy, until you read how the draft Rules deal with the tipping point for a dividend: a time cost basis falls away when “the office holder becomes aware or ought to have become aware that there is likely to be property to enable a distribution to be made to unsecured creditors” (draft R17.19(1)(b)). Hours of fun!

• Reverting to creditors when a revised fee basis needs to be sought, whether that be because the time costs basis is no longer available or because the case hasn’t progressed as originally anticipated or potential new assets are identified during a case, thus warranting a change in the percentage or set amount, with the potential for court applications if creditors don’t approve the revision.

• Calculating fees on a percentage basis. Again, it sounds easy, but… what about VAT refunds (will the use (or not) of VAT control accounts make it easier or more difficult?), trading-on sales (which are excluded under the draft Rules’ statutory scale), “the value of the property with which the administrator has to deal” (per the draft Rules)?

• Dealing with creditors’ committees, which the consultation document suggests will be encouraged under the proposed regime.

• More complex practice management to ensure that percentages are pitched correctly and potentially greater lock-up issues where IPs do not have the security of realisations in hand to fund ongoing efforts.

But these measures are intended to reduce IPs’ fees..?

8. Professor Kempson “highlights that the starting point for reforms in this area should be on providing greater oversight, therefore reducing the numbers of complaints and challenges relating to fees… Currently there are very few fee related complaints handled by the RPBs… Complaints about the insolvency profession are relatively low given the nature of insolvency, the number of creditors (and other stakeholders) involved in cases and the extent of financial losses that can be incurred” (paragraphs 29 and 46 of the IP fees IA and 1.60 of the regulation IA).

To be fair, I should put paragraph 46 in context: “Currently there are very few fee related complaints handled by the RPBs, but this is likely to be a result of RPBs stating publicly that they do not consider fee-related complaints and does not reflect the current level of concern around fees. In the past 6 months 23% of all IP related ministerial correspondence has been in relation to fees”, which admittedly does put a different colour on things.

The difficulty as I see it is: if an aim is to reduce the number of fees complaints and challenges, but the IA estimates 300 (new) fee complaints per annum and 50 appeals post-implementation of the proposals. Would such an outcome mean that the measures are hailed as a success or a failure?

9. Not taking the steps proposed by the Insolvency Service as regards regulatory objectives and oversight powers proposals “would not address concerns around an ineffective tick-box prescriptive type of regulation… The same prescriptive type of regulation would continue to exist whereas the intention is to move to a principles and objectives based regulatory system as suggested by the OFT report” (paragraphs 1.49 and 1.51 of the regulation IA)

Ooh, I could relate some stories from my time at the IPA about who was usually at the forefront in driving tick-box regulation! There were times when I had to be dragged kicking and screaming down that road. Still I should stay positive: maybe this signifies a new commitment to Better Regulation – after all, the draft regulatory objectives do not refer to ensuring that IPs meet prescriptive statutory requirements that do not contribute to delivering a quality service or maximising returns to creditors, and if value for money is an objective..?

The Service puts it this way: “As an example, rather than targeting regulatory activity to where there may be only potentially small losses to creditors from any regulatory breach, the regulators will focus attention on areas where creditors are likely to suffer larger losses” (paragraph 1.71). Oh well, that’ll put me out of a job! 🙂

10. “We do recognise that giving the RPBs a regulatory role in monitoring fees will increase the burden on them when dealing with complaints around the quantum of fees and have therefore included the estimated cost of this” (paragraph 100 of the consultation document)

Since when was “monitoring” all about dealing with complaints? The IAs provide nothing for the additional costs to RPBs of dealing with anything but complaints.

It would seem that a typical monitoring visit in the eyes of the Service would have the objective of aiming “to ensure that fees charged by IPs represent value for money and are ‘fair’ and valid for the work undertaken, by requiring the RPBs to provide a check and balance against the level of fees charged… The regulators will be expected to take a full role in assessing the fairness of an IP’s fees, including the way in which they are set, the manner in which they are drawn and that they represent value for money for the work done. This would be done via the usual monitoring visits and complaint handling processes” (paragraph 101). The Service believes that this is possible as the RPBs have “access to panels with the relevant experience, to adjudicate on fees” (paragraph 102).

Are they serious?! Do they have any idea how impossible it would be to achieve this practically, not least within the confines of the current visit timetable? And how are the “panels”, presumably the Service means committee members, going to engage in this process: is the Service really expecting them to adjudicate on fees? You might as well forget about the rest of the Act/Rules, SIPs and Ethics Code: the inspectors’/monitors’ time will be spent entirely looking at fees and RPBs’ committees/secretariat will be hard-pushed to make any adverse findings stick.

Oh, it’s alright for the Service, though; they’ve incorporated the cost of two new people in-house to handle their enhanced RPB supervisory functions. But they don’t think that this will add to RPBs’ costs in dealing with the Service’s queries, monitoring visits, demands for information on regulatory actions in general and in specific cases (apparently)?

The biggest joke of all is: where will all these costs land? In IPs’ laps, when their levies and licence fees increase. Remind me, what was the key objective of these proposals..?

Although the Service doesn’t mince words about its/the Government’s sincerity on these issues – e.g. “given the clear evidence of harm suffered by unsecured creditors, the Government feels strongly that reforms are required in order to address the market failure” (paragraph 93 of the consultation document) – I can’t help but hope that I’ll wake up a couple of days after the consultation has closed to a new announcement from the Insolvency Service: “April fool!”