There is insufficient regulation in New Zealand to protect investors and business owners against inexperienced insolvency practitioners, says KPMG NZ.
The Insolvency Practitioners Bill (“IPB”) as it stands currently allows for totally inexperienced individuals to take up the role of an insolvency practitioner, as long as they are 18 years of age or over, not mentally incapacitated and not disqualified through relationship criteria (which is proposed to be widened to non-immediate family members and the like). Also, the IPB currently allows anyone overseas to take insolvency appointments.
Shaun Adams, KPMG Head of Restructuring and Insolvency says, “Every profession needs a code of conduct and eligibility criteria to safeguard the innocent customer or end user. For instance, we wouldn’t allow an 18 year old fresh out of school to practice medicine, why then do we allow inexperienced individuals to play with the financial wellbeing of companies, which in many cases run to the millions of dollars.”
He says that the Commerce Select Committee’s second draft of the IPB released on 9 May 2011 is woefully short in providing any real enhancement to the existing legislation and it also fails to incorporate any “fit and proper” test to determine eligibility criteria for practitioners.
“While the Bill and its amendments may be a step in the right direction, it is vital that the Commerce Select Committee moves to close the loop-holes that currently exist to protect innocent individuals from inexperienced or rogue practitioners, including ensuring that all office-holders have to be New Zealand resident,” he says.
KPMG believes that individuals should have to demonstrate that they have the relevant training, experience and competence to undertake appointments, and a third party test or endorsement to validate the individual as being of sound mind and character.
Honourable Simon Power, current Minister of Commerce has made significant strides in addressing the needs of investor confidence, summarised on 11 May 2011 in his address to the board of Institute of Finance Professionals New Zealand (“INFINZ”), which included the following comment: “We worked to deliver a regime that would provide investors with information to make the right investment decisions and to ensure that those in the financial system are acting with integrity and competence.”
Mr Adams says that with some minor amendments to the scope of the proposed secondary legislation, the revised Bill could prove highly effective by ensuring that a fit and proper test is carried out by the Registrar at the time of transition from the existing regime, and thereafter.
“We hope that one of his final acts as Minister will be to ensure that the other end of the regulatory framework is appropriately regulated and controlled. Investor rights and those of general trade creditors of other business entities (of whatever scale or size) should be assured that the protection, realisation and distribution of any entities assets by way of restructuring, receivership or liquidation, is being properly administered by practitioners with ‘integrity and competence.’ Anything less would remain a fundamental flaw in New Zealand’s regulatory and financial system,” says Mr Adams.
For an interview, please contact Shaun Adams after 2 pm today on 021-243-4053
Alternatively, please contact Sneha Paul Gray on 021-243-8997