Financial Professional Services Trading Advice Transparency Bill

On 21 October the Financial Professional Services Trading Advice Transparency Bill was drawn from the ballot of Private Members Bills. Here is a link to the parliamentary website with the details:

https://urldefense.com/v3/__https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_116381/financial-professional-services-trading-advice-transparency__;!!Nyu6ZXf5!5_G2HnFkw4wcz5Q5qC9CBtwL8iJYNIKG8dWAWwSKWqaKzzntADZ7RKQKOrmiyrg$

The Bill seeks to prevent professional advisers (defined as a person “providing advice on the financial management of companies”) who recommend receivership, liquidation, or administration of a business from subsequently undertaking any of those roles in respect of the entity in question. Clearly an Investigating Accountant (IA) type role would fall foul of this and the drafter points to an inherent conflict of interest in these circumstances.

The RITANZ Regulatory Committee intends to raise its concerns at this proposed law reform (with MBIE and in any subsequent consultation or committee phase) on the basis that:

1.    Receiverships are largely created by contract with the secured creditor entitled to make the decision when and who to appoint. Receivers have duties to their appointer and statutory duties to other parties. They are governed by the IP licensing regime and the rules and guidelines imposed on them;

2.    Liquidators and administrators are also Licensed Insolvency Practitioners and are subject to statutory duties of disclosure and engagement, actions of creditors to replace them and, ultimately, the supervision of the Court;

3.    This issue was extensively reviewed by the Insolvency Working Group in 2016 whose recommendations were largely adopted in the 2019 law reforms;

4.    Prior to the above law reform, the Courts, in Companies Act s280 applications, had reached the position where Investigating Accountants (who might otherwise have disqualifying relationships with the debtor or the secured creditor) were often in the best position to administer the debtor entity in the most efficient manner, for the benefit of all parties;

5.    Other jurisdictions (Australia in particular) which have a licensing regime, do not have laws of this nature.

If any members have any further views they wish to add then please make contact with our Executive Director or make your own views known to MBIE.