Senate Standing Committee on Economics
ANSWERS TO QUESTIONS ON NOTICE
Treasury Portfolio
Budget Estimates
31 May – 2 June 2011
Question No: BET 10
Topic: Complaints about liquidators
Hansard Page: Written
Senator Williams asked:
1. How many complaints about liquidators are you now getting on a monthly or even
yearly basis from the public?
Answer:
ASIC receives approximately 14,000 complaints and enquiries a year across all areas of
ASIC's remit. A relatively minor proportion (averaging 3%) of all complaints received relate
to insolvency practitioner conduct.
ASIC formally assesses complaints to determine whether breaches of the legislation may
have occurred.
Insolvency impacts a diverse group of stakeholders: employees, secured and unsecured
creditors and directors and shareholders. Many stakeholders have minimal if any experience
with corporate insolvency and their rights and obligations. Complaints about director
conduct of companies in external administration are often accompanied by complaints
against the appointed insolvency practitioner.
ASIC devotes considerable resources to providing information and assisting complainants,
which includes an element of educating complainants about the external administration
process. ASIC has issued 12 information sheets providing general guidance to assist
stakeholders which are available on our website.
Complaints volume trend statistics about insolvency practitioners
2006-07 2007-08 2008-09 2009-10 2010-11
To Dec
Total/
Average %
Total complaints and enquiries finalised 11,455 12,514 14,543 14,002 7,779 60,293
Total insolvency appointments 11,966 12,524 15,567 14,056 7,357 61,470
Total complaints and enquiries against insolvency
practitioners
406 352 633 520 234 2,155
Total complaints and enquiries against insolvency
practitioners excluding duplicates
344 317 438 467 218 1,784
% insolvency practitioners complaints and enquiries
of total complaints and enquiries
3.5% 2.8% 4.4% 3.7% 3.0% 3.6%
% insolvency practitioner complaints and enquiries of
total appointments
3.4% 2.8% 4.1% 3.7% 3.2% 3.5%
Outcomes of complaints/inquiries against insolvency practitioners 2006-07 to 2009-10
statistics
Outcomes summary (subject to referral to specialists) No %
Provided assistance to resolve the complaint or enquiry 570 32.0%
Insufficient evidence was identified to support the alleged breach 586 32.8%
No breach of the Corporations Act identified 282 15.8%
Referred to a specialist team within ASIC for further review 129 7.2%
Referred to investigation 11 0.6%
Referred to assist existing investigation or other surveillance 28 1.6%
Action otherwise precluded 148 8.3%
Assessments in progress 30 1.7%
Total 1,784 100.0%
2. What is the substance of those complaints e.g. overcharging?
Answer:
The vast majority of insolvency practitioner complaints and enquiries relate to procedural
issues, such as communication between creditors and practitioners, creditors' meetings,
administration process delays, commercial decisions or other less serious contraventions of
the Act. These types of complaints are often resolved though improved communication
between creditors and practitioners or by ASIC assisting creditors with information about
the process of external administration. Relatively few complaints are substantiated and
relate to more serious contraventions such as lack of independence/conflicts of interest,
excessive remuneration, fraud and “illegal phoenix” facilitation. Those complaints are
referred to specialist ASIC teams for surveillance, investigation or deterrence action.
3. Is ASIC still sending generic responses that infuriate people, or are you now taking the
time and courtesy to actually speak to people about their complaints?
Answer:
ASIC is reforming its contact procedures to ensure more personal interaction, including
telephone contact in relation to each report of misconduct. ASIC is committed to
confirming its position in writing to ensure clarity of ASIC's views in relation to a matter. We
do not seek to infuriate those who have reported misconduct to ASIC but assist where
possible and educate where necessary. Sometimes, for the reasons set out below in
Question 5, we cannot provide the detail that we would like to.
4. What is the timeline between when a complaint is received and when it is actually
addressed?
Answer:
As per ASIC's annual report, ASIC seeks to finalise the assessment of 70% of reports of
misconduct to it within 28 days. For insolvency practitioner misconduct, this may often take
a small time longer (around 30 days on average) due to the nature of the complaints. In
relation to when they are actually addressed (which is assumed to mean when is the report
of misconduct prosecuted or further considered by specialist ASIC teams), this will depend
on the nature of the issues raised, if evidence is available, amongst other factors.
5. Is the complainant kept in the loop during the investigations?
Answer:
As mentioned by ASIC's Chairman at the last Senate Estimates (and publicly since), ASIC is
reviewing Regulatory Guide 47 to consider what it can and will say to the public. In respect
of “keeping complainants in the loop”, a number of matters encapsulate ASIC's position and
the restrictions upon it when keeping persons who have reported misconduct up to date:
· Regulatory Guide 47 – Public comment (available on the ASIC's website) outlines
ASIC's position in relation to making public comments. The relevant sections have
been detailed below.
· ASIC is restricted from releasing information on a number of grounds, including: legal
restrictions under the Corporations Act 2001 (Cth) (Corporations Act) and Australian
Securities & Investments Commission Act (Cth) (ASIC Act); and some policy and
pragmatic restrictions. Each of these has been outlined in detail below.
Policy restrictions
· Policy matters arise in maintaining the confidentiality that ASIC puts on complaints it
receives from the public and in-confidence material received from other parties.
Without maintaining this confidentiality, releasing too much information would
impair the full and frank reporting of misconduct or provision of material to ASIC
from concerned and involved parties. Public interest policy issues are also to be
taken into account here (as covered in RG 47), and ASIC may make the decision that
public comment is within the public interest (see ASIC’s public information regarding
its activities in relation to Storm).
· Further, certainly in the case of listed entities, if made public that ASIC is reviewing,
discussing, considering or merely conversing with a company, this can have an effect
on share prices, where possibly no wrong doing is alleged or at issue. In addition,
where ASIC and some external parties do appreciate the difference between liaison,
discussion, fact finding, surveillance and investigation, the public often doesn’t
appreciate these nuances, which can lead to misunderstanding, misinterpretation or
mistakes as to what should or should not be read into a matter. For example, often
some of ASIC’s activities are characterised as “an investigation by ASIC”, although
ASIC may not have commenced a formal investigation (under s.13 of the ASIC Act)
and may only be conducting a routine review of industry conduct. These
misunderstandings can lead to unintended, unwarranted or undesirable effects and
may give rise to complaints about unnecessary wounding or impairment of
commercial reputations and financial impacts. ASIC deals with such claims from
those who are subject to prosecution and the focus of media releases by ASIC, but
also from parties (quite understandably) concerned to protect their reputation.
Pragmatic restrictions
· Declaring what ASIC is doing may impede a review or investigation by, amongst
other things, eliminating an element of surprise (often necessary in investigations).
Also, by confirming ASIC’s review or investigation, a complainant or affected party
may use this information to its advantage over others (for example in the
circumstances of impending corporate collapse or investors seeking to exit illegal
schemes etc - “squeaky wheel syndrome”). Often complainants to ASIC are seeking
to exact some revenge or consequence on a related party, director, competitor or
employer. Indeed, what the complainant seeks (and often the target of the
complaint reciprocates in kind) is a pressure to be brought upon the other party for
commercial or financial reasons.
6. I put it to you that because liquidators are registered but not licensed, Mr Paul Pattison
could have resisted your attempts to seek orders, and in fact could have kept practising
while he took legal action. However, if the liquidator was licensed as recommended by
the Senate inquiry, that license could be suspended even though he could still go to the
courts. In other words, the alleged problems would have continued for years, just as in the
Stuart Ariff case?
Answer:
An application was made to the court under section 536 on 7 February 2011 and the court
made orders on 28 February 2011. The effect of which means Mr Pattison can no longer
practice as a liquidator unless he attends to the matters in the court order.
In June 2011, the Australian Government issued an Options Paper canvassing options for
improving the regulation of both the personal and corporate insolvency professions.
The Paper discusses features of the current regulatory framework and seeks views on a
number of issues including the registration and monitoring of insolvency practitioners and
what should be the appropriate standards of entry into the profession.
7. The Government has sat on its hands on the Senate report, but isn’t this a compelling
case for reform of the insolvency industry as recommended by the Senate inquiry,
including licensing?
Answer:
The Options Paper released by the Government in June 2011 considers the areas for reform
identified by the Senate Committee and seeks public comment to inform and help
Government respond to the recommendations of the Senate committee's report. One of
the areas canvassed is the registration of liquidators.
8. It is intriguing that ASIC would move against a liquidator in Melbourne following
concerns about his capacity to adequately and properly carry out his duties, yet ITSA
cannot seem to take action against the same person as a bankruptcy trustee. It hardly
gives people confidence in the system. Would you like to see uniform laws in this regard?
Answer:
ITSA has recently made an announcement concerning Mr Pattison's registration as a trustee.
As to uniform law, we note that an important stated objective of the Options Paper issued
by the Government in June 2011 is to seek input from interested parties to determine
whether it is appropriate that an aligned set of provisions be adopted for both the corporate
and personal insolvency regimes to inform the development of future reforms that will
ensure the maintenance of public confidence in the insolvency
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