A note about R3’s guidance notes

You may have noticed (or maybe not) that R3 recently issued a Guidance Note titled “Approach to SIP 9 Reporting and Fee Estimates”. If not, you may be tempted to take a look.

I have now received a couple of queries which I thought might be good to share –

Q.  Does the guidance set a required (i.e. regulatory) standard?

A.  No.  It has been issued by R3 on its own and although I understand that the IPA may have endorsed it, I am pretty sure that ICAEW hasn’t and even if it had, SIP 9 remains the authority.

Q.  So, is it a good idea to read it?

A.  Yes, probably –at least if you are short of CPD ….

Q.  Okay, smarty-points aside, is there anything useful you would highlight?

A.  Sorry, yes.

  1. Transparency and proportionality are key – a small, straight-forward case, deserves a small straight-forward report. Even a big case doesn’t necessarily deserve a big report, but it does deserve clarity. So your question about anything put in the report should be – “will this make it clearer for the creditor?”
  2. Reports should major on narrative rather than figures.
  3. Detailed figures are helpful but are no substitute for the narrative. As I have suggested in my technical notes last year, summarise the key figures in the narrative (e.g. total recoveries, future expectations, costs expected, costs to date, dividend prospects, etc) and put the detailed figure work in the appendices.
  4. Reports should be focused on the work done in the period of the report and avoid repeating information already given.
  5. Don’t clutter up the narrative with endless detail about stuff you have or might do on a procedural basis. You can give guidance on generic duties in appendices (or even better, in policy type statements on your website/portal).
  6. Make distinctions in your estimates between work required by statute, work that gives a financial benefit and any other work that you will do, explaining why it is necessary/worth doing (but see below).
  7. Finally the guidance does make two useful, fresh observations; a) you can consider leaving out some details if they don’t add clarity, but have them ready to answer any follow up queries, and b) in justifying a proposal not to use time costs as a basis for fees, you can make reference to comparative market rates, without having to detail them, as such.

Q.  And anything you disagree with?

A.  Yes – the guidance says that reporting distinctions between work that produced value and work that didn’t is “paramount and of fundamental importance”. In my opinion, that language goes a lot farther than SIP 9 (paragraph 9) which says simply that distinctions of this kind will commonly be of concern to those who have a financial interest (and therefore should be addressed as necessary in the report). If you follow R3’s guidance, then every narrative about work done has to identify what was statutory, what was financially beneficial and what wasn’t – potentially very cumbersome.

By comparison, I think SIP 9 allows the IP to set out in his fee proposal what he is going to do and why (making the distinctions on benefit, if not already obvious) and later report on how he actually got on. Taking this approach, you only need to further report on such distinctions when things haven’t one according to plan (e.g. “We spent £5,600 on an extended investigation in the expectation of gathering evidence for a preference claim, but have been advised by Counsel that the evidence is insufficient to merit pursuit”).

I hope this helps.


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