Office of the Superintendent of Bankruptcy Plans Regulatory Initiatives

You may recall in our June 2017 newsletter that we reported that the OSB had issued a report into its Review of Licensed Insolvency Trustee business practices in relation to administration of consumer insolvencies

As a result of that report; the OSB is proposing some changes that will address three areas:

  1. Renewal of counselling in insolvency matters;
  2. New directive on service delivery to be proposed;
  3. Amendment to Directive No. 6R3, Assessment of an Individual Debtor.


The counselling Directive is planned to address four main objectives:

  1. to ensure that the individuals an LIT involves when providing for insolvency counselling meet OSB standards with regard to knowledge, experience and professional ethics;
  2. to ensure the learning curriculum is tailored to meet the needs of the majority of insolvent debtors;
  3. to pursue an innovative, cost-effective and efficient means of delivery adopting the best use of technology and in-person counselling, and;
  4. to facilitate the monitoring and assessment of the outcomes of insolvency counselling, to inform future improvements.

The OSB is proposing to strengthen the regulatory requirements which apply to the registration and monitoring of individuals whom LITs may use to fulfill their counselling obligations. This will include having LITs register insolvency counsellors against their individual license as well as to formally designate a registered counsellor to deliver counselling with respect to each bankruptcy or proposal.

Rules related to LIT registrations will ensure that individuals providing counselling are properly qualified and not involved in activities that represent a conflict of interest. Rules around the LIT’s designation of an insolvency counsellor will also require that there is no conflict of interest between the interests of the debtor and those of the counsellor.

It seems that the main theme of these changes are aimed at counsellors who are not employees of the LIT and provide counselling outside of the LITs office.

Service Delivery

One of the issues with regards to service delivery was that certain LIT firms were travelling to places where they did not have a presence. Whether that be a resident or non resident office.  The OSB hopes that by issuing anew Directive it will assist in clarifying those issues.

The principle objectives for the new requirements will include:

  • a high standard of client service offering for BIA insolvency services where LITs wish to operate offices;
  • transparency on the availability of consumer service at different types of LIT offices;
  • a level playing field for LITs regarding the geographic operation of offices where they offer services; and
  • prohibiting delivery of BIA insolvency services at unauthorized locations, including those associated with incompatible activities and the operations of unlicensed third parties

This means that LITs will be prohibited from practicing in areas where they have no presence by using the office of an unlicensed third party who may perform incompatible services or who has a conflict of interest.

Assessment of an Individual Debtor

The (OSB) will be proposing amendments to Directive No. 6R3, Assessment of an Individual Debtor, with changes to standards and requirements that apply to the individuals who may assist the Licensed Insolvency Trustees (LIT) with the debtor assessment process, as well as new standards for existing assessment requirements and related statutory documentation.

Clarified LIT requirements for the assessment of an individual debtor are proposed to ensure:

  • An LIT is accountable and responsible for all elements of the debtor assessment process;
  • Debtors understand the insolvency process and receive high quality advice and service from their LIT throughout the duration of their insolvency, as well as the information they need to avoid paying unnecessary costs;
  • Individuals the LIT involves in the assessment process have the necessary competencies, knowledge, experience and education to independently and accurately perform prescribed assessment requirements; and they are without any real, potential, or perceived conflict of interest with the interests of the debtor they serve;
  • Statutory and estate documentation is prepared by the LIT, with objectivity, and that completely and accurately represents the debtor’s financial situation; and
  • The OSB, LITs and debtors have increased opportunities to identify non-compliance related to the debtor assessment process.

 Some points to ponder.

  1. Does this mean an end to third party counsellors who are not employees of the LIT? Only time will tell what the OSB has in mind.
  2. Does this mean that third party counsellors need to be covered by the LITs professional negligence insurance?
  3. Does this mean that all sign ups and counselling be done in the LITs office?
  4. Will this mean that any third party who provides services to the Trustee need to take a prescribed training course.
  5. Will the OSB be prescribing what it perceives the conflicts to be?
  6. The LIT will remain responsible for all aspects of the entire insolvency process.

Consultations on the new measures are planned for the fall of 2017, with implementation and compliance measures coming into effect in 2018. The entire newsletter can be found here.