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Redrafting The Insolvency Ethics Code - Time To Have Your Say

Earlier this year insolvency practitioners were told that the Insolvency Ethics Code is to be revised and rewritten. The importance of the views of insolvency practitioners about the Ethics Code is such that there is an ongoing consultation period about this now, before the Ethics Code is rewritten, to allow insolvency practitioners to make their views known.

The opinions and comments of insolvency practitioners are particularly important on the sections of the Ethics Code regarding fees and remuneration, obtaining specialist advice and obtaining insolvency appointments.  RPBs advise that 'It is felt that this is of such fundamental importance that specific consultation on stakeholder views should be undertaken prior to deciding on whether the Ethics Code should be revised in these areas'.

In a fantastic article regarding the Ethics Code and what this means for pre-appointment payments to third parties, please see Caroline Clark’s article, here:

It has long been fundamental to insolvency ethics that no payment should be made for the introduction of insolvency appointments. I have always understood that this is because insolvency procedures have such enormous and potentially negative implications that advice leading to an insolvency appointment had to be, and be seen to be, completely objective and without influence of any kind.

Insolvency lead generators now advertise freely on the internet. A Google search on 'insolvency lead generators' produced a number of different companies claiming to deliver 'packaged' bankruptcies and individual voluntary arrangements - and an article about why the FCA should now regulate insolvency practitioners and lead generators.

It seems that lead generators, who are neither qualified nor regulated, effectively decide whether an insolvency procedure is appropriate for an individual with financial difficulties, and then sell the 'packaged' insolvency case to an insolvency practitioner. There is a lot of uncertainty as to whether the insolvency advice given and decisions made by the lead generators are correct, and on the face of it this process also results in a insolvency practitioner making a payment for an insolvency appointment.

Lead generators and IVA factories did not exist when the Ethics Code was originally written, and this is an opportunity for the profession to take control of what is widely recognised to be an unacceptable situation. If the Joint Insolvency Committee does not do this then this could be a chance for the FCA to take control of another aspect of insolvency. This would surely be to the detriment of the insolvency profession as well as debtors and creditors who should be able to rely on the integrity of the insolvency profession for effective regulation.  

The existing Ethics Code allows payments to be made to employees whose remuneration is based on introductions obtained for an insolvency practitioner. This could be expanded in the new Ethics Code to specify when a payment may be made to a lead generator for an introduction - very different from a packaged individual voluntary arrangement sold to an insolvency practitioner who effectively just signs a consent to act. If some of the issues arising with lead generators cannot be dealt with adequately in the Ethics Code, could these be the subject of another SIP?

Many insolvency practitioners have expressed concern about aspects of the Ethics Code and lead generators and this is our opportunity to make our views known. You can find out more from the following website:-


The consultation will be open until 25 July 2017.

Ethics and integrity have been for me very important to me throughout my insolvency career. At RMCSC we aim to provide a high quality compliance consultancy service to insolvency practitioners and for us compliance is much more than an 'add-on' to professional work in order to appease regulators. Compliance means doing a good job, efficiently, according to the relevant legislation and ensuring the best outcome for creditors.

Posted: 30.06.2017
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