In this article, I examine the following:<\/p>\n
- \n
- On average, a quarter of all IPs were visited last year<\/li>\n
- But is there a 3-yearly monitoring cycle any longer?<\/li>\n
- 2018 saw the fewest targeted visits on record<\/li>\n
- \u2026but more targeted visits are expected in 2019<\/li>\n
- No RPB ordered any plans for improvement<\/li>\n
- Instead, monitoring penalties\/referrals of disciplinary\/investigation doubled<\/li>\n
- Is this a sign that the Insolvency Service\u2019s big stick is hitting its target?<\/li>\n
- IPs had a 1 in 10 chance of receiving a monitoring or complaints sanction last year<\/li>\n<\/ul>\n
\u00a0<\/strong><\/p>\n
How frequently are IPs being visited?<\/strong><\/span><\/p>\n
![\"1810\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1810.jpg\")
<\/a><\/p>\nWith 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.\u00a0 It\u2019s good to see the RPBs operating this consistently, but how does it translate into the apparent 3-yearly standard routine?<\/p>\n
![\"1811a\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1811a.png\")
<\/a><\/p>\nFirstly, I find it odd that coverage of ACCA-licensed IPs seems to have dropped significantly.\u00a0 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.\u00a0 Yet, the number of ACCA IPs visited since that time has dropped from the c.100% to 79%.<\/p>\n
Another factor that I had overlooked in previous analyses is the effect of monitoring the volume IVA providers (\u201cVIPs\u201d).\u00a0 At least since 2014, the Insolvency Service\u2019s principles for monitoring VIPs has required at least annual visits to VIPs.\u00a0 Drawing on TDX\u2019s figures for the 2018 market shares in IVAs, the IPA licensed all of the IPs in the firms that fall in the InsS\u2019 definition of a VIP.\u00a0 On the assumption that each of these received an annual visit, excluding these visits would bring the IPA\u2019s coverage over the past 3 years to 56% of the rest of their IPs.\u00a0 Of course, there are many reasons why this figure could be misleading, including that I do not know how many VIP IPs any<\/em> of the RPBs had licensed in 2016 or 2017.<\/p>\n
The ICAEW\u2019s 64% may also reflect its different approach to visits to IPs in the largest firms: the ICAEW visits the firm <\/em>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<\/em> the firm is up to 6 years.\u00a0 I cannot attempt to adjust the ICAEW\u2019s 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.<\/p>\n
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.\u00a0 Unfortunately, the average is no longer much of an indication to IPs of when they might expect to receive their next monitoring visit.<\/p>\n
\u00a0<\/strong><\/p>\n
The IPA\u2019s new approach to monitoring<\/strong><\/span><\/p>\n
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.<\/p>\n
The IPA has published few details about its new approach.\u00a0 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 \u201c1-6 year monitoring cycle \u2013 tailored visits to types of firm\u201d (the IPA\u2019s 2018\/19 annual report).<\/p>\n
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?\u00a0 The answer was no, it could apply to smaller firms.\u00a0 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\u2019t diversifying into other case types, she likely would be put on an extended monitoring cycle.\u00a0 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.\u00a0 He explained, however, that IPs would not know what cycle length they had been marked up for.<\/p>\n
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\u00a0 \u201cbad apples\u201d, then it is curious that the monitoring grip is being loosened now.<\/p>\n
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.\u00a0 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.\u00a0 How much damage could be done in 6 years, especially if an IP were less than honest?\u00a0 Desk-top monitoring can achieve only so much.<\/p>\n
What this means for my analysis of the annual reports, however, is that the 3-year benchmark for monitoring visits \u2013 or one third of IPs being monitored per year \u2013 is no longer relevant \u2639 But it will still be interesting to see how the averages vary in the coming years.<\/p>\n
<\/p>\n
Targeted visits drop to an all-time low<\/strong><\/span><\/p>\n
Only 10 targeted visits were carried out last year \u2013 the lowest number since the InsS started reporting them \u2013 and it seems that all RPBs are avoiding them in equal measure.<\/p>\n
![\"1812\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1812.jpg\")
<\/a><\/p>\nBut 2019 may show a different picture, as several targeted visits have been ordered from 2018 monitoring visits\u2026<\/p>\n
<\/p>\n
Are the Insolvency Service\u2019s criticisms bearing fruit?<\/strong><\/span><\/p>\n
I was particularly alarmed by the overall tone of the Insolvency Service\u2019s \u201creview of the monitoring and regulation of insolvency practitioners\u201d published in September 2018.\u00a0 In several places in the report, the InsS expressed dissatisfaction over some of the outcomes of monitoring visits.<\/p>\n
I got the feeling that the Service disliked the focus on continuous improvement that, I think, has been a strength of the monitoring regime.\u00a0 Instead, the Service expected to see more investigations and disciplinary actions arising from monitoring visit findings.\u00a0 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.\u00a0 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.<\/p>\n
![\"1813\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1813.jpg\")
<\/a><\/p>\n2018 is the first year (in the period analysed) in which no monitoring visit resulted in a plan for improvement.\u00a0 On the other hand, the number of penalties\/referrals for disciplinary\/investigation action doubled.<\/p>\n
Could the InsS\u2019 report be responsible for this shift?\u00a0 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.\u00a0 Or perhaps the Single Regulator debate has tempted some within the RPBs\/committees to be seen to be taking a tougher line?\u00a0 Or you might think that these kinds of actions are long overdue?<\/p>\n
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.\u00a0 In more recent years, monitoring has become constructive and there has been some commendably open and honest communication between RPB and IP.\u00a0 This has helped to raise standards, to focus on how firms can improve for the future, rather than spending everyone\u2019s time and effort analysing and accounting for the past.\u00a0 It concerns me that the InsS seems to want to remove this collaborative approach and make monitoring more like a complaints process.\u00a0 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.\u00a0 Such a shift will not improve standards and will take up much more time from all parties.<\/p>\n
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.\u00a0 Also, the IPA\u2019s apparent enthusiasm for this tool may simply reflect the IPA\u2019s (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.\u00a0 As this was dealt with as an internal \u201ccomplaint\u201d, I suspect that any such penalty arising from this referral would have featured, not in the IPA\u2019s monitoring visit outcomes, but in complaint outcomes.<\/p>\n
So how do the RPBs compare as regards complaints sanctions?<\/p>\n
<\/p>\n
Complaints sanctions fall by a quarter<\/strong><\/span><\/p>\n
![\"1814\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1814.jpg\")
<\/a><\/p>\nAlthough 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 \u201cno case to answer\u201d.<\/p>\n
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.\u00a0 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.\u00a0 One third of the published sanctions also were found against VIP IPs.<\/p>\n
<\/p>\n
Likelihood of being sanctioned is unchanged from a decade ago<\/strong><\/span><\/p>\n
In 2018, you had a 1 in c.10 chance of receiving an RPB sanction, which was the same probability as in 2008\u2026<\/p>\n
![\"1815\"](\"https:\/\/thecompliancealliance.co.uk\/blog\/wp-content\/uploads\/2019\/09\/1815.jpg\")
<\/a><\/p>\nI find it interesting to see the IPA\u2019s and the ACCA\u2019s results converge, which, if it were not for the suspected VIP impact, I would expect given that the IPA deals with both RPBs\u2019 regulatory processes.<\/p>\n
There\u2019s not a lot that can be surmised from the number of sanctions issued by the other two RPBs: they\u2019re a bit spiky, but it does seem that, on the whole, the ICAEW and ICAS has issued much fewer sanctions.\u00a0 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.<\/p>\n
<\/p>\n
Is a Single Regulator the answer to bringing consistency?<\/strong><\/span><\/p>\n
True, these graphs do seem to indicate that different regulatory approaches are implemented by different RPBs.\u00a0 However, I do think that some of that variation is due to the different make-up of their regulated populations.\u00a0 There is no doubt that the IVA specialists do require a different approach.\u00a0 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.<\/p>\n
Differences in approach can also be a good thing.\u00a0 Seeing other RPBs do things differently can force an RPB to challenge what they themselves are doing and to innovate.\u00a0 My main concern with the idea of a single regulator is the loss of this advantage of the multi-regulator structure.<\/p>\n
Perhaps a Single Regulator could <\/em>bring in more <\/em>consistency, but it would never result in perfectly consistent outcomes.\u00a0 I\u2019m sure I\u2019m 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.\u00a0 The results varied wildly.\u00a0 This demonstrated to me that, as long as humans are involved in the process, different outcomes will always emerge.<\/p>\n
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The Insolvency Service\u2019s 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.\u00a0 Has this message already changed the face of … Continue reading