Corporate report

Report on the Institute of Chartered Accountants in England & Wales complaints handling process

Published 25 June 2021

Executive Summary

The Insolvency Service has overall responsibility on behalf of the Secretary of State for Business, Energy and Industrial Strategy for ensuring that the activities of the Recognised Professional Bodies (RPBs) that authorise and license insolvency practitioners are in line with the regulatory objectives set out in Part 13 of the Insolvency Act 1986. Those objectives include having a system of regulating insolvency practitioners that secures fair treatment and ensures consistent outcomes, maximises returns to creditors, and protects and promotes the public interest.

This report presents the findings of a monitoring visit to the ICAEW’s Professional Conduct Department, which is responsible for handling complaints.

1. Background

1.1 The ICAEW is a Recognised Professional Body (RPB) as defined under s391 Insolvency Act 1986, which authorises and regulates insolvency practitioners. As at 1st January 2021, the ICAEW licensed 820 practitioners, of which 648 were authorised to take insolvency appointments.

1.2 The Insolvency Service conducted a review of the ICAEW’s complaints handling process and published a report in September 2019. This report is a review of progress against the recommendations accepted.

1.3 The visit took place between 9th February and 22nd February and consisted of 3 days of remotely reviewing a sample of 29 full case files and 6 cases which resulted in a sanction. In advance of the visit, we requested the following information:

• A complaints list, including all cases over 12 months old with the latest update on progress for each.
• A list of all open cases, split into those at assessment and investigation stages.
• A list of all cases closed in the last 12 months and at what stage they were closed.
• A list of all cases which resulted in a sanction, whether that was a caution or published sanction.
• A staff list with contact details.
• Any significant changes to the ICAEW’s rules since the last visit.

2. Overall findings

2.1 The Insolvency Service found that the ICAEW had made progress against all the recommendations made in September 2019.

2.2 The ICAEW has robust processes for the assessment and investigation of cases. Case managers draft detailed reports for the independent Investigation Committee. The Disciplinary By-Law (DBL) 9.4 process for complainants to challenge the closure of a case is used regularly, which ensures that decisions are independently scrutinised.

2.3 The total number of cases over 12 months old had reduced from 109 to 82. While progress is generally being made by the ICAEW to conclude cases in a timely manner, there was evidence of delays in some cases.

3. Progress against previous recommendations

Recommendation

Where more than one matter of complaint has been made, or more than one allegation has been identified by the case manager, all matters should require senior manager approval before closure.

Current position

Senior manager approval is now sought before each allegation on a case is closed.

Recommendation

The ICAEW should consider how to improve consistency when identifying additional matters of complaint.

Current position

Of the cases reviewed, there was evidence of additional matters being identified which were not referred by the IP Complaints Gateway.

Recommendation

The ICAEW should encourage case managers to seek legal advice, where necessary, in complex cases at an early stage to ensure that allegations are appropriate and can be made out based on the evidence gathered. This could reduce the number of times revisions are required and representations are sought.

Current position

Legal advice is being sought when a case manager identifies a need and referred to the senior manager for confirmation to seek that advice. The Head of Investigations now allocates requests for legal advice, having carried out a restructure of the legal team, the allocations will in future be made by one of two lead Counsel for conduct matters. On one case, advice was sought after representations were received by the insolvency practitioner; as those representation raised additional matters late in the case.

Recommendation

The ICAEW should feed back to the chair of the Investigation Committee, independent of the ICAEW, that explanations of departures from the Common Sanctions Guidance (CSG) should also include the rationale for how the committee arrives at a particular non-financial sanction if that differs substantially from the suggested starting point contained in the guidance.

Current position

The Investigation Committee articulates the outcome and application of the CSG in their publicity statements to the Insolvency Service. Of the cases reviewed, the rationale for any decision was clear. In one case, which was heard shortly after our last visit and before any recommendations were reviewed and implemented, the fine was reduced by 30%. This was based on an admission by the insolvency practitioner which the ICAEW has advised was unintentionally applied using incorrect sentencing guidance. There has been no reoccurrence of this error since 2019, and there was evidence that the ICAEW has applied the CSG in other cases where a sanction has resulted.

Observations/findings

4. Case progression

4.1 The number of complaints that the ICAEW had open at the date of the visit was 204 and those that were over 12 months stood at 82. We reviewed 29 cases during the visit, of which 17 were over 12 months old from the date of ICAEW receiving them. The review of these cases was focused on progress since the last monitoring visit in 2019.

4.2 Cases can take longer than 12 months to conclude for various reasons including, but not limited to, cases which have complex issues, multiple allegations, the requirement for legal advice and delays in collecting evidence and/or responses from both the complainant and insolvency practitioner.

4.3 We identified some delays in the progression of cases at various stages in the complaints process. We acknowledge that the ICAEW has had some staff changes since we last visited and a process of redistribution of cases was required. In response to the findings, the ICAEW explained that this resulted from the loss of two out of the five case managers.

4.4 A summary of the delays identified is set out below:

Case Number	Failure to update member on at least a quarterly basis	Failure to update complainant on at least a quarterly basis	Delay caused by a change in case manager	Minor delays some impact on progress
1	Yes		Yes	Yes
2	Yes	Yes		Yes
3		Yes		Yes
4		Yes
5	Yes	Yes
6			Yes	Yes
7			Yes	Yes
8			Yes

4.4 It is important, especially with complaints which have been ongoing for a longer period, that both the complainant and insolvency practitioner are kept appraised of progress. It was identified that the complainants and/or insolvency practitioner were not provided with regular (at least quarterly) updates in 5 cases as set out in the table above.

4.5 Delays resulting from a change in case manager were evident in 4 cases. It is accepted that the ICAEW must allow time for the new case manager to understand the facts of the complaint and any next steps required when taking on a new file. There must, however, be a balance achieved between that requirement and the case continuing to be progressed.

4.6 In 5 cases, there were several minor delays which in isolation did not substantially impact progress of the case, however when put together did result in the case being delayed.

4.7 Cases were at times stalled for a short period because of the case manager needing to prioritise other cases. Case managers have regular case reviews with the senior manager, where priorities are identified. Due to the nature and volume of cases, there does not appear to be any further time saving opportunities/efficiencies that the ICAEW were able to put in place to free up resource for at least the short term. The ICAEW should consider if its current resource is sufficient to ensure the timely progress of cases in future.

5. Co-operation of insolvency practitioners

5.1 Insolvency practitioners are required to co-operate with their regulatory body. When an insolvency practitioner is not fully co-operating with an investigation, or stalling the progress of a case, it is important that there is a clear and robust process to identify any non-cooperation and, if necessary, action is taken to progress the case.

5.2 The ICAEW will, where possible, try to resolve situations informally with the insolvency practitioner and has a procedure for escalation, which is completed through several chasing and warning letters.

5.3 If an insolvency practitioner fails to respond or engage with the ICAEW and has ignored a warning letter reminding them of DBL 13, then a letter is sent by the Head of Investigation providing the insolvency practitioner with 14 days in which to respond. A warning is given to the practitioner reminding them that any failure to respond and engage will result in a new complaint against them.

5.4 Where there has been some level of engagement from the insolvency practitioner, but certain outstanding information or explanations are required, it is for the ICAEW to determine whether the provision of the information / explanations required would be assisted or hindered by the threat of further disciplinary action under DBL13.

5.5 There was evidence in one case that escalation to a formal letter could have been actioned sooner, which may have secured co-operation by the insolvency practitioner.

5.6 If the insolvency practitioner fails to respond to the notice given under DBL13, a new complaint for failure to respond to the ICAEW is opened and progressed.

5.7 The ICAEW should consider whether developing a more formal process may assist in ensuring a consistent approach on cases and provide case managers with a standard procedure to engage insolvency practitioners at a more formal level.

6. Investigation Committee

6.1 The Investigation Committee considers investigation reports drafted by case managers.

6.2 In respect of cases concluded at assessment stage, where the facts of the complaint and/or the evidence provided does not demonstrate that the insolvency practitioner would be potentially liable to disciplinary action, a complainant can request that the Investigation Committee carries out an independent review of their complaint under DBL 9.4 and to determine if the matter should be fully investigated by the ICAEW.

6.3 A report, with a summary of the facts of a case and evidence provided by the complainant is drafted at the request of a complainant if they are unsatisfied by a decision of the Professional Conduct Department not to investigate after initial assessment of the case.

6.4 One DBL 9.4 report had recently returned to the Professional Conduct Department from the Investigation Committee with instructions to open an investigation and this had been actioned. This provides some assurance that the DBL9.4 process is working effectively to allow complainants the right to challenge the decisions of the Professional Conduct Department.

6.5 All Investigation Committee meetings have been held virtually during the COVID-19 pandemic and, in April 2020, a new Committee Secretary was appointed. Subsequently, during 2020, the Committees & Tribunals Team has been increased with the recruitment of an additional assistant committee secretary and a committee administrator.

6.6 During the first 3 months of lockdown due to Covid-19, the Professional Conduct Department experienced a sudden drop in the number of new complaints received and an ‘Aged Complaints Project’ was started by the Executive Director to re-focus staff on progressing longstanding complaints to the Investigation Committee. This resulted, by mid-year, in a surge of reports being finalised. This has caused delays in getting investigation reports and DBL 9.4 reports onto the agenda for review by the Investigation Committee. Priority was given to older investigations and those cases where serious misconduct had been identified. This resulted in a backlog of reports from newer investigations and reports prepared under DBL 9.4 which needed to be heard by the committee. During the final 3 months of 2020, the Investigation Committee sat twice a month to reduce the backlog. The committee is now up to date with hearing cases.

6.8 When reviewing some of the cases awaiting allocation to an Investigation Committee agenda in 2020, it was not clear that the complainant and/or the insolvency practitioner were kept up to date with the reason for their case awaiting a committee hearing date. Although the case managers had handed over responsibility of those cases to the Committee and Tribunals team, the ICAEW needs to ensure that the two teams work collaboratively to keep all parties appraised of progress.

Recommendations

1. The ICAEW should consider developing a policy for uncooperative insolvency practitioners and how case managers should utilise the INV11 (which is a standard ‘chasing’ letter that forms part of the schedule if a response has not been received) letter in preparation for the formal INV12 (which is a reminder to the insolvency practitioner of their obligation to comply with DBL13). This will mean that a consistent approach is adopted when practitioners delay the progression of a case.

2. The ICAEW should carry out a review of whether resource efficiencies can be made by making use of additional administrative support for the case managers to enable them to focus their expertise on the investigation of insolvency cases.

3. Where a report has been passed to the Investigation Committee for consideration, the ICAEW should ensure that the complainant and insolvency practitioner are both kept informed of progress. Providing relevant contact details for the Committee and Tribunals team when a case is handed over would assist parties in directing any enquiries to the appropriate team and ensure such enquiries can be dealt with efficiently.

The ICAEW response to recommendations

Recommendation 1

The ICAEW already has in place a formal process of chasing insolvency practitioners for outstanding information which is then followed up by a warning of DBL 13. If the insolvency practitioner still fails to respond with the information and explanations required, they are issued with formal notice of DBL 13 by the Head of Investigation.

During the regular review meetings held between the case managers and the senior manager, discussions take place to consider where there has been a delay in a response or a complete failure to respond to requests for information and explanations and whether there should be any deviation from the standard process. The ICAEW already carefully considers the engagement received to date and whether the threat of further disciplinary action under DBL13 would result in the requested information being provided or whether the insolvency practitioner would then fail to engage at all. If the ICAEW proceeds with a DBL13 case, the underlying matters will inevitably be delayed because it cannot be progressed without the information sought in the DBL13. That is why sometimes it is better to keep encouraging what engagement there is.

During the pandemic, it has been harder for a small number of insolvency practitioners to obtain the required information to respond to requests from ICAEW, particularly where the investigation relates to older insolvencies when access to their offices has been restricted. When reasonable requests are made, the ICAEW has allowed additional time for responses from insolvency practitioners as it has also done for complainants who have encountered similar issues.

The ICAEW sees no need to change the formal process already in place and will continue to consider the correct time to issue a formal notice under DBL 13 on a case-by case basis.

Recommendation 2

The ICAEW lost two of its case managers during the Summer of 2020, who rejoined practice due to concerns around job security arising out of the Review of IP Regulation, which is ongoing. The ICAEW was successful in recruiting one case manager who joined in September 2020, but significant difficulties were encountered in finding a second replacement case manager which the ICAEW believes was due to continuing questions over job security in the shadow of the much-postponed review of IP Regulation.

The ICAEW has now been successful in recruiting an additional case manager to join the team, which will reduce the number of cases that each case manager is dealing with.

During the last 18 months, there has been a significant increase in the number of complainants requesting that a report is prepared under DBL 9.4 and/or a no prima facie case investigation report for consideration by the Investigation Committee. This has resulted in not only an increase in reports, but also the length of time a case remains open.

The support staff within the ICAEW are available to assist the team as and when required. However, the use of the support team to chase insolvency practitioners or complainants would have to be carefully managed and would not free up a substantial amount of time.

Recommendation 3

The ICAEW agrees that in a small number of cases it took a longer period of time to get the matter heard by the Investigation Committee. This was due to the volume of reports prepared by the Professional Conduct Department, along with the volume of complainants who insist that their complaint is considered by the committee under the DBL 9.4 process, or where the investigation does not demonstrate misconduct.

The 3 additional investigation committee meetings held cleared the backlog of cases and prior to this visit we had amended the process for reports prepared under DBL 9.4 and this will mean the complainant is more informed when the matter is passed to the Investigation Committee secretary for allocation to an agenda.

If there are future pressures on the allocation of cases to an Investigation Committee agenda, the ICAEW will put into place a process for updating the relevant parties.