1.1 This document outlines the process involved when the Inspector-General in Bankruptcy considers taking steps to cancel the registration of a debt agreement administrator. It also outlines the broad steps that may lead to such action and the basis of the Inspector-General’s decision making.
1.2 An administrator may be subjected to disciplinary action where they fail to comply with the Act without reasonable explanation, diverge from acceptable practice or behave in a manner that brings the integrity of the profession into disrepute.
1.3 Disciplining of registered trustees who act as debt agreement administrators is not dealt with in this document; rather, see IGPS 8 Involuntary cancellation of trustee registration.
2.1 There is a range of sanctions or actions which AFSA Regulation and Enforcement (R&E) staff, as delegates of the Inspector-General, can take when breaches of duty or non-compliance are considered to have occurred. Possible sanctions/actions include:
a. education—making administrators aware, both individually and collectively, of problem areas and the correct practice or law
b. individual counselling—by far the most effective means of achieving timely remedial action
c. changing the risk profile of an administrator. This will lead to a more in-depth inspections
d. formal investigation and reporting under section 12 of the Act. Such reports may be supplied to creditors, police and other regulatory or disciplinary bodies such as CAANZ, CPA or Law Councils and Societies
e. imposition of penalties for realisations and interest charge breaches
f. issuance of 'show cause' letters requiring an administrator to explain both their actions and why they should continue to be registered
g. litigation including seeking orders that the administrator make good any losses caused by negligence
h. referral to other investigation units or law enforcement bodies
2.2 R&E utilises a classification system to describe areas of non-compliance and to assist our decision on the appropriate action to take, subject to the seriousness and impact of the non-compliance. These classifications can be found at paragraph 4.20 of the legislative instrument pursuant to section 186Q of the Act, the 'Guidelines relating to the registration and cancellation of registration of a debt agreement administrator under the Bankruptcy Act 1966' (the Guidelines). This provides a structured process that will see the escalation of a matter if it is not resolved by the administrator.
2.3 Breaches or non-compliance with the Act may give rise to a simple query as to the reasons why there has been a deviation. Some matters are resolved quickly and amicably after our intervention. However, where there is a serious breach or repetitive breaches, we may commence the process to cancel an administrator’s registration.
3.1 Cancellation of registration is generally a sanction of last resort. Such disciplinary action may be taken where a breach of the Act is identified. In deciding what action is appropriate, R&E takes into account:
a. the nature and circumstances of the breach
b. the seriousness of the effect of a failure to comply, including the impact on a particular administration or individual
c. the relevant prior conduct of the practitioner.
Cancellation of an individual’s or company’s registration
3.2 Sections 186K and 186L of the Act states that the Inspector-General must cancel an individual’s or a company’s registration as a debt agreement administrator if the Inspector-General is satisfied that they no longer pass the basic eligibility test (the basic eligibility test is discussed further at paragraph 4.2 in IGPS 4 Processes for Registration of Debt Agreement Administrators)
3.3 The Inspector-General may also ask for a written explanation (show cause letter) as to why the registration of an individual or company should continue if there are reasonable grounds to believe one of the following has occurred:
a. an individual or company no longer has the ability (including the knowledge) to satisfactorily perform the duties of an administrator in relation to a debt agreement
b. an individual or company has failed to properly carry out the duties of an administrator in relation to a debt agreement
c. an individual no longer has the qualifications or experience prescribed by regulations
d. an individual or the company no longer has adequate and appropriate professional indemnity and fidelity insurance
e. an individual or the company is not a fit and proper person, or if any director of the company is not a fit and proper person
f. an individual or the company has contravened a condition of registration, including contravention of an industry wide condition that has been set by a ministerial legislative instrument.
3.4 A company must ensure that at all times it has in its employ at least one registered administrator or registered trustee that has overall management responsibility for the company’s debt agreement activities. This is a condition of the company’s registration.
3.5 If these individuals have their registration cancelled, the condition of the company’s registration will be breached and this will prompt commencement of the involuntary cancellation process for the company. This process will commence with the Inspector-General seeking an explanation as to why the company should remain registered.
3.6 Should the individual with overall management responsibility resign from their employment with the registered company administrator, the onus is on the individual and the company to notify the Inspector-General as soon as possible. If a company continues to conduct debt agreement activities without a registered person in that position, the cancellation process will also commence.
3.7 If a director of a company becomes ineligible, any company of which the person is a director is also ineligible to act as an administrator and the company’s registration must be cancelled. Usually the director will have knowledge of pending matters that may affect their eligibility and should take steps to remove themselves as director to circumvent possible cancellation of the company’s registration.
4.1 The Inspector-General may commence action against an administrator if there is a belief that one or more of the prescribed grounds are established and other sanctions are not appropriate. See explanation of prescribed grounds at section 3.3.
4.2 It is usual practice that an administrator will first be informed of any concerns in relation to possible breaches, and be provided an opportunity to state their position.
The decision to cancel registration or impose conditions
4.3 If the Inspector-General does not receive an explanation within 28 days of the show cause letter, or receives an explanation that he/she is not satisfied with, then the Inspector-General or delegate will decide what sanctions are appropriate, including cancelling the individual’s or company’s registration.
4.4 The Inspector-General has three decision options at this point:
- cancel the registered administrator’s registration
- allow the administrator to remain registered unconditionally
- allow the administrator to remain registered but with conditions imposed.
4.5 The Inspector-General cannot suspend an administrator’s registration. However, a conditional registration could be made where the administrator remains registered
but may be restricted from practising for a certain period or restricted in some other way.
4.6 For procedural fairness reasons, this final decision will be made by a delegate independent to R&E’s investigations and decision to issue the show cause letter. In reaching the decision the Inspector-General is guided by the Guidelines.
4.7 If the Inspector-General decides to cancel the administrator’s registration or impose conditions on registration, the Inspector-General must give the administrator written notice of the decision and the reasons for it.
4.8 Upon advice of any decision to cancel registration, the administrator is required to return their certificate of registration unless they have a reasonable excuse not to do so. Failure to do so is an offence. The administrator will not be entitled to a refund of all or part of any registration fee that has been paid. The administrator will not be entitled to re-apply for registration for a period of 10 years.
5.1 If the administrator is dissatisfied with the Inspector-General’s decision to either declare them ineligible for breaches of duty, impose conditions on registration or cancel their registration, they may appeal to the Administrative Appeals Tribunal (AAT). An application to the AAT for a review of the Inspector-General’s decision must be in writing, must set out the reasons for the application and must be made within 28 days of the date the Inspector-General’s decision is received by the administrator. Full information about applications to the AAT can be obtained from the local AAT Registry or from the AAT website.