ASIC seeks to rein in liquidators
Rogue liquidator Stuart Ariff, who was jailed for fraud late last year. Photo: Simone Depeak
SIX months after rogue New South Wales-based liquidator Stuart Ariff was jailed for defrauding a company of $1.18 million, the corporate regulator has finally provided some statistical evidence of how it monitors and disciplines the insolvency industry.
Releasing the inaugural report on its monitoring and enforcement of standards among liquidators, the Australian Securities and Investments Commission yesterday revealed it had launched eight formal investigations into liquidators in 2011 after fielding 426 complaints about possible misconduct.
But ASIC said more than half the inquiries and complaints about liquidators in 2011 stemmed from a lack of understanding about the process of insolvency.
ASIC's stated aim is to promote market confidence in the insolvency industry, but the regulator has endured intense criticism over its supervision and discipline of rogue operators in recent years.
Indeed, the report comes just a week after liquidators attending the industry's annual conference in Melbourne expressed their concerns that poor conduct among a few practitioners had smeared the industry's reputation and jeopardised creditors' confidence.
ASIC's report highlights a focus on the competence of liquidators, their independence, and what ASIC calls ''self-gain'' - issues such as fees and improper transactions.
ASIC currently has 10 investigations in train. Three focus on a perceived lack of competence by individual liquidators, two arose from concerns about fees and one was triggered by an allegation of unjust enrichment.
One investigation is looking at allegations about fraudulent ''phoenixing'' of a company, where creditors are left claiming against a shelf company while the underlying business is grafted onto a new entity.
About 78 per cent of all companies that sank into administration in 2011 employed fewer than 20 people, and 97 per cent of the insolvent companies returned less than 11¢ in the dollar to creditors.
After reviewing fees charged in 24 administrations, ASIC managed to get fees cut in two instances.
Insolvency Practitioners Association of Australia president Robyn Erskine said the IPAA now had both the power and will to investigate allegations about rogue practitioners. It can initiate its own investigations, and it plans to publicise how it strips errant liquidators and trustees of their memberships.
''The message we are sending to members is if you are not measuring up to the standards that we expect, then we think that you should not be practising,'' Ms Erskine said.