‘The Insolvency Practitioners Bill’ does little to address the existing inadequacies, especially to protect the economy from incompetent and rogue practitioners, an insolvency expert has said.
According to KPMG Head of Restructuring and Insolvency Shaun Adams, the Bill allows anyone who is mentally able and above 18 years of age to be called, ‘An Insolvency Specialist.’
“Every profession needs a code of conduct and eligibility criteria to safeguard the innocent customer or end user. We would not allow an 18 year-old fresh out of school to practice medicine,” he said and asked, “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?”
Describing the Bill in its current form as “insufficient,” Mr Adams said it does not protect businesses against inexperienced insolvency practitioners.
Apart from allowing anyone overseas to take insolvency appointments, the Second Draft of the Bill, released by the Commerce Select Committee on May 9, 2011, fell short in providing any real enhancement to the existing legislation and failed to incorporate proper tests to determine eligibility criteria for practitioners, he said.
“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,” Mr Adam said.
He said individuals must demonstrate that they have the relevant training, experience and competence to undertake appointments.
There should also be a third party test or endorsement to validate the individual as being of sound mind and character, he said.
Commerce Minister Simon Power told the Board of the Institute of Financial Professionals on May 11 that his Government had put in place a regime that provided investors with information to make the right decisions.
“We are also ensuring that those in the financial system are acting with integrity and competence,” he said.
According to Mr Adams, the Insolvency Practitioners Bill could be highly effective, provided it incorporated some minor amendments.
“The Bill will be highly effective if it ensures 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 Mr Power’s final acts as Minister will be to ensure that the other end of the regulatory framework is appropriately regulated and controlled,” he said.
