Most of ICAEW’s Quality Assurance Department (QAD) monitoring visits to IPs since March 2020 have been carried out remotely. But since September this year, onsite visits have resumed. “One of the real benefits to you, and to us, is that onsite reviews are much more likely to be contained in a set timeframe,” says Allison Broad, senior manager, QAD, and lead for ICAEW's insolvency monitoring team.
Where visits are back on site, this is subject to the agreement of the IP and to carrying out a risk assessment. Not all future visits will be on site, however. Some will continue to be remote, particularly where IPs are using soft systems, or where, logistically, a remote visit is more appropriate and efficient. “We’re not going back to the old normal; we’re taking a flexible approach based on what we’ve all learned over the past 18 months,” explains Broad.
Areas of concern
Monitoring visits generally tend to flag up common issues, and the last year has been no exception. Many of the issues reviewers are coming across are nothing new, and pre-date the pandemic and its associated upheavals. So, what should IPs be looking out for and how can they avoid some of the pitfalls?
One of the biggest issues continues to be money-related: specifically fees, fee estimates and approvals. “We want you to be paid for the great work you do,” stresses Alison Morgan, manager in QAD. “But if fees or expenses are drawn without the correct approval or if they appear unfair or unreasonable, you will be expected to repay the unapproved or unreasonable elements. Also, any fees or expenses issues can be referred to the insolvency licensing committee (which deals with the output from monitoring visits) or even the professional conduct department (which deals with disciplinary issues).”
Case progression is another perennial issue. “Something is still going awry,” Morgan says. “Even though it’s almost six years since the regulatory objective was introduced which promotes maximising the value of returns to creditors and promptness in making those returns.”
“We know that during lockdown periods there were greater challenges in making sure cases progressed efficiently and in a timely manner,” she acknowledges. “But COVID-19, or staff being furloughed, isn’t automatically going to justify delays.”
She has even come across examples of cases that could have been closed before the pandemic even started. Yet, the IP continues to blame COVID for delays, and isn’t recognising the root cause of the delay.
“We know some IPs have had to implement altered or additional processes and procedures to make sure case matters don’t stagnate,” Morgan adds. “But it remains disappointing that we’re still seeing unjustifiable delays in closing cases. Almost half of our monitoring visits closed so far this year required some follow up, and a fair few of those related to case progression issues.”
SIP 16 statements are another area where IPs are falling down. “These issues are still cropping up,” she says. “And we are now starting to refer many more for consideration of whether a regulatory penalty or consent order for the breaches is appropriate.” ICAEW has produced a webinar looking in more detail at how to avoid SIP 16 pitfalls.
More widely, there are several other key areas IPs need to keep an eye on. “We’re still coming across some IPs and firms that haven’t yet provided staff with training on the Insolvency Code of Ethics, which was issued in May 2020,” notes Broad. “This is something we’re going to be taking a much harder line on.”
“We also continue to see a number of IPs who have failed to carry out an insolvency compliance review (ICR) in a particular calendar year,” she says. “We do believe these are a really effective way of helping you to maintain standards, making sure you are up-to-date with technical information and that your processes are working.” SIP 11 also requires a SIP 11 review every year. “You have to document your SIP 11 review, and bear in mind it isn’t automatically part of your ICR. That will very much depend on how you structure the review” she notes.
Licence fee bands can be another problem. “When you’re renewing your licence, you make an estimate of your fee income for the forthcoming year,” Broad explains. This is an estimate, so sometimes the actual fee income exceeds the forecast. “But you need to keep an eye on that during the year unless you’re in the top fee band,” she warns, “and you need to contact us if your regulated insolvency income exceeds your band.”
In the IVA sector, the hot topics mainly relate to misleading advertising and marketing, poor due diligence on work referrers, and late Secretary of State registrations. “The Insolvency Service has advised of over 800 late registrations across a range of IPs,” notes Broad. “So we urge anyone dealing with IVA work to review their processes for submitting registrations – this is an area of continued Insolvency Service scrutiny.”
Lastly, Broad urges all IPs to be aware of potential issues with their Professional Indemnity Insurance (PII). “At an insolvency visit earlier this year, we found that the PII insurer had specifically excluded some of an IP’s insolvency appointments,” she says. “PII does seem to be current hot topic, so please watch that.” Broad clarified that If your PII insurer has excluded some cases, you need to remedy that, either through your current insurer or by getting cover through another insurer.
A timely reminder
“All this may seem like a reminder of some basic things,” concludes Broad. “But these are all issues we see throughout our visits. So they are really important points for IPs to bear in mind.”
Despite the challenges of the last 18 months, reviewers will be expecting IPs to maintain the highest standards.
They need to be checking their policies and procedures to make sure they are compliant and recognise that while COVID might be a mitigating factor in some circumstances, reviewers will be making those judgments on a case-by-case basis.
To find out more about the key issues arising during monitoring visits, including some tips on how to avoid making the same mistakes, watch the following webinars:
Both webinars are available for free to members of the Restructuring and Insolvency community.
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