13. General
General
This section contains content published after 1 January 2020. Articles published before this date can be found on the National Archives here
We are aware that some insolvency practitioners and FCA-authorised firms have attempted to sell clients’ personal data to claims management companies (CMCs) unlawfully.
This can happen either before or after a firm has gone into administration and where it is likely that claims for compensation will be made to FSCS.
The terms, conditions and clauses within a standard contract are highly unlikely to constitute sufficient legal consent for personal data to be shared with CMCs to market their services and may not be lawful.
By passing on personal data, companies may be failing to meet their obligations under the Data Protection Act 2018 and the General Data Protection Regulation (GDPR).
Any subsequent direct marketing calls, text or emails carried out by CMCs may breach the Privacy and Electronic Communications Regulations 2003 (PECR).
CMCs are required to act honestly, fairly and professionally in line with the best interests of their customers, as required by FCA’s Handbook. CMCs using such personal data may not be acting in the customers’ interests. CMCs seeking to rely on legitimate interest grounds for processing such data are highly unlikely to meet the requirements of the GDPR.
CMCs that intend to buy and use such personal data must be able to demonstrate how they have considered the fair treatment of customers and how their actions comply with privacy laws.
Where the FCA or the ICO identify breaches of the relevant data protection legislation, or CMCOB Claims Management: Conduct of Business sourcebook, or any other relevant parts of the FCA’s Handbook, we will take appropriate action.
Consumers’ rights to compensation from FSCS
When an FCA-authorised firm enters administration, eligible consumers can bring claims to the FSCS. The FSCS will then work jointly with the insolvency practitioner to identify potential claimants.
In those circumstances, consumers should contact FSCS directly and the insolvency practitioner should contact the consumers to explain what the administration means for them.
Making a claim to the FSCS is free, and in cases where the insolvency practitioner has contacted the customer directly, we do not consider that CMCs are likely to provide significant benefit.
Any compensation to which a consumer is entitled from the FSCS may unnecessarily be reduced by the involvement of CMCs in such cases.
We continue to work together and with firms and stakeholders across the sector to ensure consumers’ interests are not compromised.
Enquiries regarding this article may be sent to: IPRegulation.Section@insolvency.gov.uk
A new Insolvency Code of Ethics was issued on 2 March 2020, with an effective date of 1 May 2020.
The code has been updated following a consultation on possible revisions and to adopt the drafting format used by the International Ethics Standards Board for Accountants (IESBA). The accountancy Recognised Professional Bodies (RPBs) use the IESBA approach in their main ethical codes.
What is different?
- The new format differentiates between requirements (identified by an R) and application material (identified by an A).
- There is an entirely new section on the insolvency practitioner as an employee, which emphasises that an insolvency practitioner is required to comply with the Insolvency Code of Ethics irrespective of their status within a firm.
- The sections on obtaining specialist advice and services, agencies and referrals, referral fees and commission and inducements have all been expanded.
- There is a new section on responding to non-compliance with laws and regulations based on IESBA material.
Although the new Insolvency Code of Ethics does look different, the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour remain as the key concepts in the code.
Enquiries regarding this article may be sent to: IPRegulation.Section@insolvency.gov.uk
The Special Manager Panel is for special manager services relating to highly complex insolvencies, following compulsory liquidation. Applicants must be able to offer market-leading insolvency expertise and services in order to support the Official Receiver in the most complex and challenging compulsory liquidations.
These are unpredictable times for the insolvency sector, and we do not know how many highly complex cases requiring special manager assistance the Official Receiver may receive. We wish to manage expectations of the industry and ensure that only those organisations capable of taking the largest appointments at short notice devote time to applying. Applicants must be able to meet and evidence eligibility criteria including mobilisation of 75+ corporate insolvencystaff across multiple UK sites, with little notice, along with prior experience of working with Government on insolvency/ restructuring.
For full eligibility criteria and further information on this opportunity, we will be running this process through the Insolvency Service’s preferred eTendering portal, Delta. Many organisations will have signed up to this portal to apply for other public sector work, however, if you do not have details, then you can register as a new supplier here. Once you have registered you will be able to see opportunities for public sector work. When the Insolvency Service releases this Special Manager Panel, it should be visible on your opportunities, and if you have signed up for them, you should be alerted to it via email. Please do keep an eye out for it regularly, bearing in mind our intended release date is 14 September 2020 and planned deadline for submissions of 30 September 2020.
Once we have started the process and you have expressed an interest in the opportunity you will be able to access the panel selection document and submit your proposal as well as raise any clarification questions via the portal.
Please note we will only respond to clarifications via the portal.
Enquiries regarding this article may be sent to:
The Official Receiver uses private debt collection agencies to collect:
- Income Payments Agreements (IPAs).
- Money owed in relation to bankruptcies and companies in liquidation.
Since March 2020, new IPA and book debt cases have been handled by Advantis Credit Ltd and BPO Collections Ltd under a framework agreement. Most existing IPAs currently with Clarke Willmott are being changed to Advantis Credit Ltd from September/October 2020, though some will be collected in-house by the Insolvency Service.
Where an insolvency practitioner is appointed as office holder of a case where Clarke Willmott have been acting as collection agents for the Official Receiver, these cases will not be transferred to Advantis. The office holder therefore may need to make their own collection arrangements if they do not wish to retain Clarke Wilmott.
Clarke Willmott have confirmed that where they are already acting for an insolvency practitioner they will continue to do so on the agreed terms.
Where Advantis or BPO Collections are acting for the Official Receiver and an insolvency practitioner is subsequently appointed as office holder, the DCA will be dis-instructed by the Official Receiver. The office holder will therefore need to make their own collection arrangements. It is not possible for the case to remain with the DCA under the framework agreement once an insolvency practitioner is appointed.
Basic information about the use of debt collection agencies is available by searching www.gov.uk for ‘official receiver debt collection’ and at: www.gov.uk/government/publications/official-receiver-insolvency-service-use-of-debt-collection-agencies/official-receiver-insolvency-service-use-of-debt-collection-agencies
Enquiries regarding this article may be sent to: SOR.Operations@insolvency.gov.uk
Many businesses involved in international trade hold customs authorisations. This article is being issued to assist insolvency practitioners in their understanding of the customs activities of a business when they are appointed.
Here are some of the Customs Authorisations that a business may hold:
- Inward Processing
- Outward Processing
- End-Use
- Customs Warehousing
- Customs Freight Simplified Procedures (CFSP)
- Authorised Economic Operator (AEO).
Insolvency practitioners, when they are appointed, become responsible for the correct operation of the authorisations, and for compliance of the conditions and obligations associated with any authorisation. The incorrect discharge or handling of goods can result in the creation of a customs debt.
Insolvency practitioners need to do the following upon appointment:
- Identify if the insolvent entity holds any customs authorisations
- Identify the goods currently held under those authorisations
- Notify the supervising office (stated on the authorisation) that the business is insolvent
- Ensure that any goods held under a customs authorisation/special procedure are correctly disposed of.
These conditions and obligations are detailed in the:
- Authorisation itself
- Union Customs Code (UCC)
- Implementing and Delegated Act to the UCC.
Following the end of the EU Transition period the conditions and obligations will be reflected in UK legislation.
Businesses may also hold other customs facilities such as a Duty Deferment Account (identified through a Duty Deferment Account Number or DAN) and a Comprehensive Customs Guarantee (CCG).
To establish the status of any Duty Deferment Account, and to resolve any issues around Deferment debts, please contact the HMRC Duty Deferment Team at cdoenquiries@hmrc.gov.uk.
All customs authorisations require the supervising office to be notified of any changes that may affect the operation of the authorisation. For example, when a business enters insolvency, the supervising office must be notified. Details of the supervising office will be shown on the authorisation.
In some circumstances it is possible that goods may be held under a special procedure, without the possession of a written authorisation. These goods will have entered the special procedure through authorisation by declaration. The goods will still need to be disposed of in accordance with the procedure.
In these cases practitioners should contact the National Import Reliefs Unit (NIRU) as well as the usual Customs and International Trade contact point for the business if one exists.
It is important to note that authorisations cannot be transferred between legal persons.
On 1 October the ORS Operating Model was introduced as a new way to manage the work of ORS.
The Operating Model aims to streamline processes and prevent duplication, as well as empowering colleagues to take responsibility for their own area of work, to make decisions within the parameters of their responsibilities and to work collaboratively to meet the objectives of their office and of ORS.
This means that ORS will deal with the component parts of cases in parallel to reduce the overall lifespan of cases and produce outputs sooner. ORS has set up various centralised teams, who will be dealing with asset realisations and distributions, relationship management of service providers and aftercare enquiries.
Stakeholders should note that cases will no longer be allocated solely to individuals; component parts of cases will be allocated to the relevant team working on specific areas until those components are concluded.
The Operating Model allows flexibility to deal with changes in demand for ORS services. Bankruptcies and compulsory liquidations are running at a significantly reduced level compared to this time last year, and ORS is not able to judge what the impact of changing the COVID-19 support measures, including the extension of measures introduced in the Corporate Insolvency and Governance Act 2020, will be. The Operating Model facilitates ORS' ability to generate additional capacity if insolvencies increase.
Reduced case numbers are allowing ORS colleagues time to work together to drive improvements to the Operating Model using their knowledge, skill and innovation.
Contacting Us
The Insolvency Service’s aim is to develop a consistent and streamlined approach to the call handling process. Most telephone calls will now be taken by the Customer Services Team (CST) who will answer a wide range of enquiries. However, for urgent calls that require intervention by official receiver staff, CST will send a call back request to the relevant official receiver office. This will mean that urgent queries will be dealt with promptly by the team rather than by a single individual.
Customer services can be contacted:
By telephone 0300 6780016 or;
Online by completion of an enquiry form
Official receivers can also be contacted by email and the contact details are on gov.uk
Enquiries regarding this article may be sent to:
This article is being issued to remind insolvency practitioners of their obligations under the Insolvency Code of Ethics when considering taking a new appointment; including in relation to advertisements, marketing and also their responsibilities for advertising by introducers/ debt packagers/ lead generators. Regulators have agreed guidance for the Recognised Professional Bodies (“RPBs”) in this area and practitioners should be aware of the implications of recent rulings by the Advertising Standards Authority in relation to misleading advertising aimed at those in debt.
Insolvency practitioners must be satisfied, and be able to demonstrate to their RPB on inspection, that any advertising, marketing or other form of promotional activity which leads to an insolvency appointment is:
- Fair and not misleading.
- Has avoided unsubstantiated or disparaging statements.
- Has complied with relevant codes of practice and guidance in relation to advertising.
- Has been clearly distinguishable as advertising or marketing material and has been and has been legal, decent, honest and truthful.
Where an insolvency practitioner intends to obtain an appointment via a third party, or a third party conducts the marketing activities on behalf of the insolvency practitioner, that practitioner remains responsible for that advertisement and marketing and its compliance with the ethical code.
The Insolvency Service, RPBs, the Financial Conduct Authority (FCA) and the Advertising Standards Authority (ASA) have worked collaboratively to develop guidance to support the regulation of insolvency practitioners and information-sharing between the regulators. This guidance covers both advertisement practices and the provision of debt advice.
The ASA recently published two rulings involving commercial debt advice companies (National Direct Service and Fidelitas Group Ltd) who had made misleading claims in paid-for internet search advertisements and on their websites.
The Insolvency Service considers any breaches of the ethical code and/or advertising standards to be serious matters and will continue to refer any potential breaches to the ASA, FCA and the RPBs.
It is extremely disappointing that similar advertisements, including seemingly impersonating debt advice charities, continue to be found online. The insolvency regulators, the FCA and the ASA are also aware of similar advertising campaigns targeting the users of social media sites and any instances will be reported to relevant regulators for action.
Enquiries regarding this article may be sent to: IPRegualtion.section@insolvency.gov.uk
Yesterday the Government published its response to the Debt Relief Order (DRO) consultation on raising the threshold for the three monetary eligibility requirements that an individual must meet before being able to obtain a DRO. The consultation closed on the 26 February 2021 and over 140 responses were received.
Having taken account of all views expressed, the Government intends to lay legislation in Parliament at the beginning of June, to commence at the end of June, that will:
- Increase the threshold on the value of assets that a debtor can hold and be eligible to enter into a DRO from £1,000 to £2,000.
- Increase the value of a single motor vehicle that can be disregarded from the total value of assets from £1,000 to £2,000.
- Increase the level of surplus income received by the debtor before payments should be made to creditors from £50 to £75 per month.
- Increase the total debt allowable for a DRO from £20,000 to £30,000.
Most responses recommended that DROs should not be looked at in isolation and consideration should be given as to whether changes are needed to the wider personal insolvency framework. The response document therefore highlights that the Government will be looking to issue a Call for Evidence on the whole personal insolvency landscape, in due course.
These changes will apply to England and Wales only as personal insolvency is devolved to Scotland and Northern Ireland.
Any enquiries regarding this article should be directed towards email: policy.unit@insolvency.gov.uk
The FCA has published its finalised guidance for Insolvency Practitioners (IPs) on how to approach insolvencies of regulated firms (FG21/4). The guidance aims to achieve better outcomes on firm failures, by helping IPs to understand how to deal with regulated firms in line with the FCA’s expectations.
If an IP is appointed in relation to a regulated firm, the IP takes control of the firm, which continues to have regulatory requirements and responsibilities. The new guidance is designed to help IPs ensure regulated firms meet their ongoing regulatory obligations following appointment. This includes treating customers fairly, returning client assets and customer funds, and facilitating redress claims for consumers.
The guidance is aimed at IPs appointed, or looking to be appointed, in relation to firms that are solely authorised or registered by the FCA. The guidance may also be relevant from the perspective of conduct regulation for IPs appointed over firms that are jointly regulated by the FCA and PRA.
The FCA has engaged with the Insolvency Service, recognised professional bodies and other authorities on this guidance.
The guidance took effect from 12 May 2021 and can be accessed via the link below:
N.B. This article supplements Chapter 13 Articles 71 and 94.
Please note that with effect from 1 April 2019, the Financial Conduct Authority (FCA) took over regulation of Claims Management Companies from the Claims Management Regulator (CMR). Where the CMR is referenced in articles issued before 1 April 2019, therefore, the FCA should now be substituted.
Since taking over the regulation of Claims Management Companies (CMCs) from the Claims Management Regulator, the Financial Conduct Authority (FCA) has identified some Insolvency Practitioners who have carried out regulated activities without authorisation.
Insolvency Practitioners are reminded that engaging in a regulated activity whilst neither authorised nor an exempt person is a criminal offence under section 23 of the Financial Services and Markets Act 2000 (FSMA).
Insolvency Practitioners are responsible for ensuring they comply with the relevant legislation and should carefully check the Claims Management Activity Order 2018 and the FCA Handbook to determine whether any aspect of their activities is a regulated activity and that they have the required permissions. Where there is any doubt as to the position, independent legal advice should be sought.
Some specific points to note are as follows:
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Before carrying out an activity, Insolvency Practitioners are responsible for considering whether there are any applicable exclusions (for example, 89P(a) Regulated Activities Order 2011); if not, the appropriate FCA permission will be required.
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If an Insolvency Practitioner is charging a fee for any single aspect of advising, representing or investigating a financial service or financial product claim, it is likely that this is a regulated activity, even if there is no further involvement.
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Similarly, each individual element of lead generation activities – which covers seeking out, referral and identification of claims and potential claims - also requires authorisation. If a lead generation activity is carried out before an individual voluntary arrangement is in place, the Insolvency Practitioner cannot benefit from the exclusion.
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Please note: There is no exemption from FCA authorisation under Part XX FMSA for CMC activities, which are specifically excluded under section 327(9) FSMA.
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CMCs are required to carry out due diligence on any Insolvency Practitioner passing on or selling client data to them, even if the practitioner benefits from an exclusion. The CMC must ensure the data they pass on is processed in compliance with relevant data protection legislation, including the General Data Protection Regulation (GDPR) and the Privacy and Electronic Communications Regulations (PECR).
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CMCs are also required to notify the FCA if a lead generator is not authorised. The FCA published a joint statement in February 2020 with the Information Commissioners Office and the Financial Services Compensation scheme in relation to Insolvency Practitioners and FCA-authorised firms attempting to sell client data unlawfully (see also Dear IP Chapter 13, Article 102).
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Where a CMC is ceasing its regulated claims management activities, it is required to comply with wind down rules. If the CMC handled client money which the Insolvency Practitioner has an agreement to reconcile, the client money rules for CMCs must be complied with.
The FCA would also like to draw Insolvency Practitioners' attention to its Claims Management portfolio letter from October 2020, which sets out its view of the main risks of harm in that area, the action expected of firms, and its own actions to reduce the level of harm in the sector.
Any queries regarding authorisation or exempt status should be addressed to the FCA: https://www.fca.org.uk/contact
General enquiries regarding this article may be sent to: IPRegulation.Section@insolvency.gov.uk
Background
Research released earlier this year by the UK Government has revealed the impact of cyber security breaches for UK businesses. The key points the insolvency profession may be interested to know are:
- Four in ten businesses (39%) reported having cyber security breaches or attacks in the last 12 months.
- Of those 39%, one in five ended up losing money, data or other assets.
- The average cost of a cyber security breach for a small business was £8,460.
- The average cost for a medium/large business was £13,400.
IBM has also produced a report on the costs of security incidents. IBM carried out 3,500 interviews across 17 sectors. All costs are in US dollars, but similarly apply across the globe.
- The average cost of a successful destructive attack (such as ransomware) was $4.62 million.
- The average cost of a data breach (where between 2,000 and 100,000 personal data records were lost) was $4.24 million.
- The average cost of a single lost record is $161.
What you can do
We have identified that a handful of members of the IP community have experienced a compromise of their email systems.
We strongly recommend that Insolvency Practitioners take advantage of guidance from the National Cyber Security Centre (NCSC). The Insolvency Service, as with the rest of HM Government, follows the NCSC’s advice. It is based on evidence, research and experience. It is often written in plain English, is proportional and pragmatic. We advocate its use because doing so can potentially reduce the number of incidents we are collectively exposed to.
You may wish to read the advice from the NCSC about how you can help your business be cyber secure. A great example of the NCSC’s guidance is the widely used 10 steps to cyber security, which is designed to help businesses address common technical and organisational vulnerabilities.
Further considerations
There is also specific advice for self-employed/sole traders, small and medium organisations, or for large ones. There is even advice for families – a rich resource for discussions with those about to take their first steps on the internet.
Once you have read the advice, it may be worthwhile understanding which of the NCSC’s recommendations your organisation has or does not have in place. Doing so can help you identify the costs, risks and benefits of implementing a given NCSC recommendation; for example, if your organisation wants to protect itself from phishing, it’s a good idea to consider the email security advice.
General enquiries may be directed to the Agency’s switchboard, on 0300 678 0015 or by using our contact form.
The Government has published a consultation, “The Future of Insolvency Regulation – proposals to strengthen the insolvency regulatory framework”.
The consultation sets out ambitious plans to reform and modernise regulation of the insolvency profession with proposals for an enhanced role for Government to strengthen the independence and impartiality of the regulatory framework. It takes account of views expressed in response to the Government’s Call for Evidence on the review of the insolvency regulatory landscape issued in July 2019. It also takes account of information gathered by the Insolvency Service as the oversight regulator acting on behalf of the Secretary of State. A summary of responses to the Call for Evidence on the review of insolvency regulation and a list of respondents are also published at Annexes C and D of the consultation.
An outline of the Government’s proposals in the consultation are:
- Establishment of a single independent government regulator to sit within the Insolvency Service in place of the current regulatory framework (the regulator would have powers to authorise, regulate and discipline Insolvency Practitioners and to set standards. It would also have the option to contract out certain functions to suitably qualified bodies).
- Introduction of regulation of firms offering insolvency services, alongside the authorisation of individual Insolvency Practitioners.
- Creation of a public register of individual practitioners and firms offering insolvency services.
- Introduction of a process for compensation where a party or parties have been adversely impacted by an error or transgression of an Insolvency Practitioner or firm offering insolvency services.
- The consultation also covers proposals for some reforms to the current arrangements for Insolvency Practitioners to hold a bond or security (or in Scotland, caution) in the event of dishonesty or fraud (see Dear IP chapter 4 article 7).
The Government is seeking views on its proposals and is also asking for respondents’ views on whether they can be improved and (with supporting evidence) views on their likely impact. A consultation stage impact assessment is being published alongside the consultation document. We welcome comments on individual proposals as well as the proposals as a whole and are particularly keen to hear from members of the insolvency profession.
You can read the consultation proposals and impact assessment in full and details of how to respond by clicking on the following link: The future of insolvency regulation - GOV.UK (www.gov.uk). The consultation ends on 25 March 2022.
Any enquiries regarding this article should emailed to: @IPRegulation.Consultation@insolvency.gov.uk
New sanctions and further measures
Insolvency Practitioners will be aware that from 24 February, in response to Russia’s invasion of Ukraine, the Government has announced an unprecedented package of sanctions against Russian interests. On 1 March the Government also announced sanctions against Belarus for its role in supporting Russia’s invasion. These measures apply in addition to existing sanctions.
Insolvency Practitioners should ensure that they pay close attention to the evolving sanctions obligations and that their actions do not breach those requirements in cases they administer, especially as the situation is in flux. Breaches of financial sanctions are a serious criminal offence.
Internet links are included at the bottom of this article.
The Government has announced that it will:
- Freeze assets of Russian banks.
- Introduce a clearing prohibition to stop Russian banks from being able to make transactions through the UK.
- Ban Russian state and private companies from raising funds in the UK.
- Exclude Russia from the SWIFT financial system.
- Impose asset freezes and other designations on over 100 entities and individuals including 386 members of the State Duma of the Russian Federation.
- Limit the amount of money Russian nationals hold in their UK bank accounts.
- Ban the Russian carrier Aeroflot from the UK.
- Scale-up trade measures on high tech goods, designed to erode Russia’s strategic development.
For the full list of those who are subject to financial sanctions, please consult the Office of Financial Sanctions Implementation Consolidated List.
Consideration should also be given to individuals and entities that may be owned or controlled by a sanctions target. Those entities may not be designated in their own right, so their names may not appear on the Consolidated List. However, those entities are similarly subject to financial sanctions.
The Economic Crime Bill was introduced into Parliament on Monday 28 February, with core documents available online at: http://www.gov.uk/government/publications/economic-crime-transparency-and-enforcement-bill-2022-overarching-documents .
Further detail
Legislation introduced into Parliament has extended the UK Government’s powers to act against Russia’s financial and banking sector.
This includes:
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Measures to stop designated Russian banks from having a correspondent banking relationship with UK banks, or being able to clear payments in sterling. This is an entirely new sanction for the UK and will restrict designated Russian banks’ access to UK financial markets, their ability to invest in the UK and prevent them from clearing payments in sterling.
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Measures to restrict Russian state-owned enterprises and companies from accessing UK capital markets. This is in addition to existing financial restrictions and is targeted at those companies connected with Russia.
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A prohibition on dealing with new issuances of Russian sovereign debt, preventing the Russian state from issuing in the UK and from accessing loans or credit from the UK.
Details of all the legislation in place can be found on gov.uk https://www.gov.uk/government/collections/uk-sanctions-on-russia and OFSI has updated its Russia guidance to reflect the changes https://www.gov.uk/government/publications/financial-sanctions-faqs. All businesses need to adjust their activity in order to take account of newly designated sanctions. OFIS has also published a blog setting out what has changed with useful links for businesses: https://ofsi.blog.gov.uk/2022/03/10/russia-what-has-changed-and-what-do-i-need-to-do/.
Insolvency Practitioners may wish to take legal advice if they suspect their business is impacted.
The situation in Ukraine and Russia will continue to change over the coming days and weeks. This may involve further sanctions which could affect cases Insolvency Practitioners administer.
Insolvency Practitioners should continue to check the guidance pages listed below to ensure their business activities are compliant with the current sanctions against Russia.
Useful weblinks
Russian Sanctions - Guidance document: https://www.gov.uk/government/publications/russia-sanctions-guidance
The Office for Financial Sanctions Implementation (OFSI) publishes financial sanctions:
UK sanctions - GOV.UK (www.gov.uk)
https://www.gov.uk/government/organisations/office-of-financial-sanctions-implementation
Financial Guidance, Russia: https://www.gov.uk/government/publications/financial-sanctions-ukraine-sovereignty-and-territorial-integrity
This page is updated regularly and will show the most up-to date position on current sanctions.
Payment of dividends to sanctioned parties
Insolvency Practitioners should also ensure that they are familiar with sanctions regulations made under the Sanctions and Anti-Money Laundering Act 2018, and the Russia (Sanctions)(EU Exit) Regulations 2019 (as amended), particularly when a sanctioned entity is a creditor of an insolvency in which they are appointed.
Whilst there is nothing in those regulations that would prevent a sanctioned entity who is a creditor in an insolvency from making a claim in the proceedings and participating in the process, the sanctions would, in most circumstances, prevent a payment being made to that creditor.
If in doubt check Insolvency Practitioners should check with their authorising body or the Office of Financial Sanctions Implementation (OFSI).
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS) continues to encourage Insolvency Practitioners to consider their money laundering and/or terrorist financing risk exposure in relation to Russian and Belarusian sanctions, and to speak to their professional body supervisor if they have any concerns or questions.
UK Financial Intelligence Unit (UKFIU) has introduced a new Suspicious Activity Report (SAR) glossary code for entities associated to sanctioned individuals and companies on the sanctions list. It has advised that the code XXSNEXX be used where you suspect the activity is consistent with money laundering and is linked to entities sanctioned by the UK, US, EU and other overseas jurisdictions as a result of the Russian invasion of Ukraine.
Further to the recently published Article 114, UK Government Sanctions on Russia (Dear IP no 142), Insolvency Practitioners should be aware that Article 89, Financial Sanctions and Insolvency Practitioners (Dear IP no 73) has been updated and now is as follows:
Financial Sanctions and Insolvency Practitioners
The Insolvency Service is aware of some individuals who may be subject to financial sanctions who are seeking to use both solvent and insolvent liquidations to circumvent financial sanctions. This article provides some information about financial sanctions and details of a free subscription service to identify designated persons, entities or bodies to which Insolvency Practitioners are encouraged to subscribe.
Overview
Certain formal insolvency procedures could be used to circumvent or breach financial sanctions. Breaching financial sanctions is a criminal offence. This notice sets out the responsibilities of Insolvency Practitioners and directions to further sources of information and guidance.
Financial sanctions are in force against a number of regimes, individuals and companies. In practice this means that you cannot do business with such designated individuals or companies, companies owned or controlled by designated entities, or undertake any relevant transaction that may be indirectly benefitting a designated entity, unless there is a relevant exemption in the sanctions regime or, you have a licence from the Office of Financial Sanctions Implementation (OFSI). For further information on financial sanctions, see the OFSI guidance:
https://www.gov.uk/government/publications/financial-sanctions-faqs
How do sanctions affect Insolvency Practitioners?
In order to comply with financial sanctions, Insolvency Practitioners must ensure the following:
- insolvency services are not provided to, or for the benefit of, a designated person (a company or individual subject to financial sanctions) or an entity owned and/or controlled by a designated person;
- transactions which are subject to financial sanctions (for example, transfers of funds in some circumstances) are not carried out;
- assets which should be frozen must not be realised or made available to a designated person;
- formal insolvency processes are not used as a route to circumvent sanctions;
unless there is a relevant exemption in the legislation of the sanctions regime or you have an OFSI licence that permits you to do so.
Insolvency Practitioners should familiarise themselves with financial sanctions and understand how they apply to their business. When conducting usual anti-money laundering checks, practitioners should refer to the OFSI list of financial sanctions targets:
https://www.gov.uk/government/publications/financial-sanctions-consolidated-list-of-targets (section 3 gives more information on this list and how to use it).
It is a criminal offence to breach the prohibitions in financial sanctions regimes. If you find that you have already carried out an economic transaction that was prohibited by sanctions (for example by dealing with a designated person’s funds without an OFSI licence) you should contact OFSI to regularise the position. (OFSI@hmtreasury.gov.uk).
Licences
Under certain circumstances a licence may be issued to allow transactions to take place. These circumstances are limited to the licensing grounds as set out in the legislation of the sanctions regime and Practitioners should be aware that not all transactions or insolvency services can be licensed. For more information on licences including the process of applying for a licence and the circumstances in which they can be provided please refer to the OFSI guidance.
Licences cannot be issued retrospectively so it is important to apply for a licence before any work takes place.
Please note that OFSI will only consider licence applications where you have identified a valid and appropriate licencing ground that permits a licence to be issued as set out in the relevant legislation.
Further Information
OFSI operates a free subscription service which allows subscribers to receive updates whenever there are changes to financial sanctions effective in the UK. Practitioners can find out how to subscribe at:
https://public.govdelivery.com/accounts/UKHMTREAS/subscriber/new
Any enquiries regarding this article should be directed towards HM Treasury’s Office of Financial Sanctions Implementation at OFSI@HMTreasury.gov.uk,
telephone number 020 7270 5454
Amendments:
- On OFSI’s advice, a previous reference to Section 9 of the OFSI Guidance, Compliance for Businesses from 2016 has been removed. Current OFSI guidance is available at Financial sanctions: guidance.
- References to EU legislation have been removed.
- The email for HM Treasury’s Office for Financial Sanctions Implementation has changed to OFSI@hmtreasury.gov.uk.
Insolvency Practitioners should be aware that a market-wide enforcement action has been launched by the UK Committee of Advertising Practice (CAP) and the Advertising Standards Authority (ASA) in relation to advertising and marketing of services for Individual Voluntary Arrangements (IVAs) and/or Protected Trust Deeds (PTDs).
CAP writes the advertising rules, which are enforced by the ASA, the UK’s independent advertising regulator. Information about the UK advertising regulatory system can be found on the ASA website at https://www.asa.org.uk/about-asa-and-cap.html.
Adverts targeted at consumers with debt who are seeking a solution have the potential to cause serious detriment if they are not accurate. Insolvency Practitioners and those who refer work to them and advertise IVA/PTD services must be careful to ensure their advertising, marketing and any other forms of promotional activity is compliant and does not mislead.
On 23 June 2022 ASA published a new Enforcement Notice about Debt Management (IVA/PTD) Ads by Insolvency Practitioners and Lead Generation Companies. The Notice provides guidance as to advertising standards expected from Insolvency Practitioners and lead generators in relation to marketing activities promoting their services in this area.
Insolvency Practitioners should familiarise themselves with the requirements within the grace period before enforcement action commences. From 25 July 2022 CAP will be carrying out proactive monitoring and taking up enforcement cases against those who remain in breach of the Notice.
If a non-compliant advert/website or social media post is made public by any insolvency work referrer, CAP will contact both the lead and the associated Insolvency Practitioner. When contacted, advertisers would be expected to amend rapidly or remove those parts of the advert in contravention of the Notice. If adverts are not swiftly amended or withdrawn, CAP will proceed to sanctions, which will vary depending on the medium in which the advert appeared. If CAP continue to see problems by an advertiser, they will consider referral to Trading Standards, other enforcement agency, or an appropriate regulator. More information on sanctions can be found here: https://www.asa.org.uk/codes-and-rulings/sanctions.html.
Insolvency Practitioners are reminded of their obligations in respect of both their own and third-party advertising, marketing and other forms of promotional activity as outlined in Dear IP 108 (https://www.gov.uk/guidance/dear-insolvency-practitioner/13-general).
The ASA has published advice regarding debt management and IVAs, which is available at https://www.asa.org.uk/advice-online/debt-management-and-individual-voluntary-arrangements-ivas.html.
CAP offers a range of services to help advertisers comply with the rules, including free bespoke Copy Advice at https://www.cap.org.uk/Advice-Training-on-the-rules/Bespoke-Copy-Advice.aspx and training at https://www.cap.org.uk/Advice-Training-on-the-rules.aspx.
Enquiries regarding this article may be sent to:
The FCA has issued guidance on its approach to schemes of arrangement and other compromises for regulated firms (FG22/4).
The guidance clarifies how the FCA approaches compromises in line with its statutory objectives to protect consumers and the integrity of markets. The new guidance aims to help regulated firms and their advisers understand the FCA’s role, the information firms need to provide to the FCA and the factors the FCA will consider when assessing compromises and deciding if and what actions to take.
The guidance is targeted at firms that are solely regulated by the FCA, and firms that are dual regulated by the FCA and PRA from the perspective of conduct regulation. It is also relevant to advisers of regulated firms considering compromises (including insolvency practitioners and professional advisers, trade associations, consumers and consumer protection organisations).
The guidance took effect from 5 July 2022 and can be accessed via the link below:
Any enquiries regarding this article should be directed towards email: resolution@fca.org.uk
The Official Receiver and Insolvency Practitioners must ensure that any data exchanged between them is dealt with in accordance with legislative requirements. In particular, they should ensure that personal data is only provided to parties that are eligible to receive it. Improper provision and gathering of data is a serious matter and we will take firm action where a breach is identified.
Insolvency Practitioners should only seek to obtain information which they are lawfully entitled to receive and handle in accordance with data protection laws. These laws include the UK General Data Protection Regulation (UK GDPR) and the UK Data Protection Act 2018. In relation to bankruptcy or liquidation cases under the control of the Official Receiver, Insolvency Practitioners will be entitled to receive information where they are authorised to do so by a creditor, or in their capacity as office holder.
Where an agent or Insolvency Practitioner is authorised to act on behalf of a creditor, they may receive information in place of the creditor, but they would not be entitled to any more information than the creditor. Creditors are generally entitled to information that could be included within a report to creditors (RTC) and any notice of dividend. They can be provided with a list of creditors in a case in which they are listed as a creditor.
However, until the Official Receiver is satisfied that an Insolvency Practitioner or a third-party agent is properly authorised to act on behalf of the creditor, they will not be provided with any information relating to a case. The Insolvency Practitioner will only be properly authorised if there is a written authority from the creditor giving a blanket or case specific authority for the Insolvency Practitioner to represent it.
An authority from the creditor is required before any information, including a copy of the RTC and a list of creditors, can be shared with the Insolvency Practitioner. A nomination from a creditor in a decision making process for appointment as liquidator or trustee, is not considered to be sufficient authority that the Insolvency Practitioner is acting on behalf of that creditor in its dealings with the Official Receiver.
When seeking a rota appointment of an Insolvency Practitioner, the Official Receiver should provide all the relevant information to the Insolvency Practitioner to enable an informed decision to be made on whether to accept the appointment. This information will centre on the assets and liabilities of the insolvency party.
Rob Peck
Director Official Receiver Services
It has come to the Insolvency Service’s attention that a number of websites linked to individual Insolvency Practitioners are using the Insolvency Service’s logo for display on their pages without first seeking our permission.
The Insolvency Service logo is subject to Crown copyright. Unauthorised use of the logo, without the Insolvency Service’s express consent, infringes the copyright and could result in legal action being taken against any party doing so.
The use of the Insolvency Service logo on documents or websites, or in association with any other information that is not directly managed by the Insolvency Service, could give the misleading impression that the content has been created in affiliation with, or with endorsement from, the Insolvency Service.
The Insolvency Service may give permission to third parties to use the logo in certain circumstances, usually involving collaboration or joint events, for example:
- where an organisation is working with the Insolvency Service to deliver an event or a piece of joint work, and wishes to use the logo online or in hard copy materials,
- where an organisation is hosting an event at which Insolvency Service staff are speaking or contributing,
- where a supplier working with the Insolvency Service wants to include the cooperation in a testimonial or marketing material.
The above list is not exhaustive, and all queries and applications to seek permission should be sent to Stakeholder@insolvency.gov.uk with details of how, where and when you would like to use the logo.
Permission will be granted on a case-by-case basis, with new application required for any subsequent usage.
In his Spring Budget on 6 March 2024 the Chancellor Jeremy Hunt announced changes to Debt Relief Orders (DROs) to help people in problem debt get a fresh start with their finances and access the support they need.
As a result, the government is introducing the following changes to DROs:
- From 6 April, the £90 administration fee DRO applicants need to pay will be permanently removed.
- From 28 June, the maximum amount of debt that an individual entering a DRO can hold will be increased from £30,000 to £50,000, allowing more people to apply.
- The value of a single motor vehicle that can be disregarded from the total value of a DRO applicant’s assets will be increased from £2,000 to £4,000. This will help DRO applicants retain a personal vehicle as a method of transport they rely on by increasing the value to reflect the current market better.
The announcement of the changes does not alter the existing process for accessing a DRO until the changes come into force.
Insolvency Practitioners have an obligation to ensure that people in financial difficulty are provided with all relevant information to make an informed decision on the right solution for their individual circumstances. Those who supervise IVAs should consider the impact of the changes to the DRO criteria on their portfolio and if necessary, put in place a policy to review cases consistently.
When determining when to review cases, Insolvency Practitioners should look at consumers’ individual circumstances in order to decide whether this should happen immediately or at their annual review.
Enquiries regarding this article may be sent to:
The Financial Conduct Authority (FCA) has published a consultation on proposed amendments to FG21/4 - Guidance for Insolvency Practitioners on how to approach regulated firms (the Guidance). The proposed amendments reflect legal, regulatory and economic changes since the Guidance was first published and also seek to improve clarity and provide further information on certain aspects.
The Guidance is aimed at Insolvency Practitioners (IPs) appointed over firms solely authorised or registered by the FCA. It may also be relevant for IPs appointed over firms that are dual regulated by the FCA and Prudential Regulation Authority (PRA).
Some of the more substantive amendments and the reasons for proposing them are summarised below:
Introduction of the Consumer Duty
The Consumer Duty introduces higher and clearer standards of consumer protection across financial services and requires firms to act to deliver good outcomes for retail customers.
FCA rules require firms to consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – and
how they behave, at every stage of the customer journey. As well as acting to
deliver good customer outcomes, firms will need to understand and evidence
whether those outcomes are being met. The Consumer Duty came into effect
on 31 July 2023 for new and existing products and services that are open to
sale (or renewal). From 31 July 2024, the Consumer Duty will apply to the
products and services of firms held in closed books.
FCA rules, including those relevant to the Consumer Duty, continue to apply to firms in insolvency, up until their permissions are cancelled. Changes have therefore been made to the Guidance setting out the FCA’s expectation that IPs conduct the affairs of the firm in a way that is compatible with the Consumer Duty.
The Court of Appeal decision in In The Matter of Ipagoo LLP
The Court of Appeal in the Ipagoo decision held that the Electronic Money Regulations 2011 do not create a statutory trust over relevant funds held by an Electronic Money Institution (EMI), but that the ‘asset pool’ includes relevant funds that have been properly safeguarded and an amount equivalent to relevant funds that should have been safeguarded but were not.
Changes have been made to the Guidance to reflect the FCA’s understanding of the Ipagoo decision so that IPs are aware of and understand the need to top-up the asset pool where there is a shortfall in safeguarded relevant funds.
Availability of Financial Services Compensation Scheme (FSCS) protection for customers of payment and electronic money firms where a credit institution holding safeguarding deposits fails
In March 2023, the PRA amended its rules to make FSCS depositor protection available to eligible customers of an EMI/payments institution (PI) in respect of their relevant proportion of safeguarded funds, should a credit institution holding the safeguarded deposits fail.
Changes have been made to the Guidance to reflect that whilst eligible customers of an EMI or PI may receive FSCS protection in certain circumstances where the credit institution that holds their safeguarded funds fails, IPs should avoid giving customers misleading impressions on the protection they can receive from the FSCS. This is because the availability of FSCS depositor protection depends on the particular facts of the case.
In addition, we have updated the Guidance to reflect that, where FSCS protection is available following the failure of a PRA authorised credit institution holding safeguarded deposits, an IP should liaise with the FSCS, including to consider whether clients/creditors need to be involved.
The FCA welcomes views on the proposed amendments by 30 April 2024. Respondents can use the online response form or email responses to gc24-1@fca.org.uk
Subject to the responses received, the FCA intends to publish the finalised amended guidance later this year.
The Insolvency Service and the Recognised Professional Bodies (RPBs) have been asked how often Insolvency Practitioners should be reviewing their estate accounts and whether the frequency should be in line with the requirements of their clients’ money regulations.
It is the view of all parties that estate account reconciliations should be carried out on a risk-based approach, but subject to any minimum requirements within their RPBs’ clients’ money regulations.
Some cases, particularly the small numbers of trading cases, may necessitate frequent, and potentially daily reconciliations at the early stage.
However, in lowest-risk cases, for example in cases with only one remaining issue to be resolved, it may be appropriate for reconciliations to be carried out less frequently, if permitted under their RPB’s clients’ money regulations.
Insolvency Practitioners should document consideration of the reconciliation frequency on each case, particularly where the reconciliations are being pushed out to extended periods. Practitioners should always ensure that estate accounts are reconciled before progress reports are issued.
There is an overriding and key obligation on Insolvency Practitioners to ensure that estate funds are protected, and that there are adequate cashiering controls in place to ensure that. The review of bank reconciliations will play a part in that as referenced in SIP 11 paragraph 9(g).
IPs should also ensure that where significant sums are being held, they consider placing funds on interest-bearing accounts, adhering to the RPBs clients’ money regulations. Having had so many years of low or negligible interest rates we are now in a position that IPs should be ensuring that funds are invested where appropriate to maximise realisations for the estate.