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ASIC’s Report Card on Liquidators – not too bad but one Fail

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Yesterday ASIC released its report on its supervision of registered liquidators for the calendar year 2011.  For the profession generally, complaints to ASIC dropped from 3.5% of all appointments (2010) to 2.8% (2011) but over 80% of those complaints were either due to misunderstanding of the law governing the liquidator’s work or were matters where the alleged misconduct was inadvertant.  So that’s “not too bad” in my book.  But there was one big fail buried in the detail.

ASIC performs a mix of industry wide programmes and many specific reviews as a result of concerns or complaints.

Specific Reviews

So let me summarise the results of the specific reviews first.  So these reviews are undertaken because of a complaint or a concern.  The key results were:

  • Enforceable undertakings or bannings of six liquidators. The most prominent of course, Stuart Ariff, who was sentenced to jail for six years.
  • 426 enquiries and reports of alleged misconduct resulting in 16% of those being categorised as “serious breaches of standards” whilst the rest were regarded as procedural problems or required some education of the liquidator.
  • There were 65 individual transaction reviews. In only nine of those cases was the issue taken further.

I’d say “not too bad”.

Industry Wide Programs

ASIC also undertook three industry-wide compliance projects:

  1. Monitoring of Declarations of Independence (DIRRIs). 47% of DIRRIs were inadequate. That’s not as bad as it sounds. The requirements for disclosure in a DIRRI had been upgraded just prior to the review so many liquidators had clearly not updated their precedent DIRRI effectively.  Now they have.
  2. Remuneration monitoring project. ASIC reviewed 199 external administrations and in 23 cases required some sort of corrective action on the approvals or drawings of fees.
  3. And now to the Fail…….. Section 533 (1) project review. A Section 533 Report is the report a liquidator lodges with ASIC after completing an investigation, so it is an important report. ASIC identified that in 424 liquidations involving 169 registered liquidators that were finalised in the last three years, the registered liquidator had failed to lodge a 533 Report.

Can that be right? It’s certainly what the Report says.  So there are 671 registered liquidators and 169 of those registered liquidators finalised a liquidation without having lodged a Section 533 Report.  I can’t help but think that statistic is misleading in some way as the completion of the 533 report is on every checklist I’ve ever seen. ASIC will be releasing a separate report detailing those findings – I look forward to reading the report!

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