What obligations do insolvency practitioners have when it comes to professional conduct and compliance? Caroline Clark explains.

The Oxford English dictionary defines compliance as 'the action or fact of complying with a wish or command'. But compliance for someone with a professional qualification is more complex, and more important, than that.

With expertise comes responsibility

People with a professional qualification have typically studied to pass demanding exams in order to gain detailed knowledge and understanding about specialist subjects.

Passing the exams and obtaining the relevant qualification means that people who need advice about the specialist subject will seek the advice of the qualified professional. Those who are seeking this advice will not have the specialist knowledge to be able to assess the accuracy of the advice they receive, and as a result, are vulnerable to professionals giving poor advice.

How organisations ensure compliance

Professional organisations regulate their members accordingly, assessing the compliance and standard of the advice or service provided. Members of professional organisations who fail the regulatory inspection are likely to be fined or, in extreme cases, may lose their professional qualification.

Members of professional organisations are expected to carry out work of a high standard that is appropriate for the circumstances of the client, and which complies with relevant legislation, professional guidance and ethical codes. The person with the professional qualification must avoid conflicts of interest.

Compliance means all aspects of doing a good job, and the above definitions of professional compliance would apply to professions including medicine, the law, accountancy and my own profession, insolvency.

What does compliance mean for insolvency practitioners?

Unless insolvency practitioners (IPs) can demonstrate compliance, they may be subject to disciplinary action or, in the worst case, the renewal of their practising licences may be at risk.

Compliance must therefore imply more than the mere fact of complying with a wish or command. It must also include the management systems and processes put in place to ensure that all those who are involved in insolvency casework produce high-quality work, and comply with the legislation.

Compliance is not just an add-on tool to be thought about after the event, when there is a problem, or in the stressful six weeks before a regulatory visit. It is the consideration and resulting action taken, before any task is carried out, of the legislation and rules and other issues involved in the process concerned, and how these will be fully complied with.

IP remuneration

The remuneration of IPs is something that is always considered in detail by the regulators, even though a recent Insolvency Service presentation indicated that there are actually very few complaints about IP remuneration. Although this indicates that the regulation of IPs has been successful, remuneration is still something that should be considered in detail.

Major creditors and regulators have indicated that they expect more from IPs who are seeking approval for remuneration than a matrix of hours charged to the case and a list of standard tasks. Statement of Insolvency Practice 9 (SIP 9) requires narrative explanations to be provided to support any numerical information supplied about the office-holding IP's work and remuneration.

No one-size-fits-all approach 

Much is said in professional conduct debates about the need for a professional person to give due care in providing advice that is relevant for the client's needs. Care should accordingly be taken if standard letters or template reports are used, particularly if they are bought from a provider who has sold the same standards and templates to other firms.

Compliance is achieved when skilled and motivated professionals apply their knowledge to the facts of each situation, asking for necessary information, following systems to ensure that all matters are considered, and making decisions and advising clients based on the professional work carried out.

Cultivate a culture of compliance

Many firms do have a culture of compliance, in which all members of the team automatically give the highest priority to complying with statute and regulation. This approach is likely to result in high-quality work and will reduce the amount of time spent dealing with complaints, correcting errors, and trying to alter systems that are not fit for purpose.

About the author

Caroline Clark is director of RMCSC, a fellow of the Insolvency Practitioners Association and R3, and has an MBA. She established RMCSC in 2013, providing compliance consultancy advice for insolvency practitioners.