Australian Law Reform Commission’s review of financial services legislation

In September 2020 the Australian Law Reform Commission received terms of reference to consider whether the Corporations Act and its regulations could be simplified and rationalised, particularly in relation to:

  • the use of definitions
  • the coherence of the regulatory design and hierarchy
  • how the provisions in Chapter 7 of the Corporations Act and regulations can be reframed or restructured.

Each of these three major themes will be the subject of a separate interim report (November 2021, September 2022 and August 2023) with a final report due in November 2023. The November 2021 report was released last year and submissions responding to it were due to be lodged on 25 February 2022.

The Commission has undertaken a comprehensive analysis of Australia’s financial services laws, consulted with stakeholders and made the following conclusions regarding the complexity of Australia’s financial services laws:

‘’On a variety of complexity metrics, such as structural intricacy, obligations, conditional statements, potentially duplicative provisions, prescription, language, and thematic diversity, the Corporations Act often stands in a class of its own.’’

‘’ … the ALRC’s assessment, the significant compliance costs on industry occasioned by the current regime and the difficulty for consumers in understanding their rights and entitlements suggest corporations and financial services legislation requires urgent and significant reform. Moreover, the extent to which the Corporations Act is amended by regulations and instruments which are difficult to locate and interpret raises broader rule of law concerns.’’

That sounds pretty serious.

SAFAA has lodged a submission welcoming the review and highlighting the biggest issue our members’ face – a ‘one-size-fits-all’ approach by government and regulators to the development of regulation and standards that are applied to all participants in the financial advice sector. The AFSL regime has a very wide scope and covers a wide variety of industry participants and business models. Of particular concern to our members is the assumption by government and regulators that all advisers are financial planners and must be subjected to regulation that best suits that speciality. This disadvantages stockbrokers and investment advice firms and their clients, as well as other specialised advice services (for example, accountants providing advice to SMSFs). We have pointed out that it is important that regulators and government understand the way the stockbroking and investment advice industry works and fits within the broader financial advice service ecosystem.

SAFAA’s members do not share views held by other parts of the financial services sector on a number of issues such as:

  • the push for individual licensing
  • changing the general advice definition
  • changing the wholesale investor test
  • separating product from advice.

Some of these issues are likely to be dealt with by the government’s Quality of Advice Review that is taking place this year. SAFAA will be engaging closely with that review and providing our members’ feedback.

This article is general information only.