After the Hayne Royal Commission many advisers decided to steer away from large dealer groups in favour of becoming self-licensed. In the last six months, however, that trend has taken an abrupt turn.
While known for being the flagbearer for financial product providers, the Financial Services Council is now making serious inroads into the financial advice sector.
ALRC seeks to reduce ‘undue complexity’ in financial services laws
“Undue complexity”. “Byzantine complexity”. “Elephantine proportions”.
These are just a few of the superlatives used to describe one of Australia’s most important pieces of legislation, the Corporations Act 2001. The legislation turned 20 years old this year and whilst it has played an important role in simplifying the financial services landscape, few would disagree with the Australian Law Reform Commission (ALRC) who suggest it is overly complex and difficult to navigate.
The ALRC were engaged by the government to seek opportunities and report back on where improvements could be made to the Act which now extends beyond 3,900 pages. In the first of three reports to be released, the ALRC highlights two key themes, being “undue complexity” and “poor navigability” which they suggest are making understanding and enforcing the law more difficult than it should be.
According to the ALRC “the Act has not quite grown up” and in fact it could benefit from “significant reform” after two decades in operation. Their mission is to ‘simplify and rationalise’ the laws and associated guidance. In their initial report they highlight that there are some 1,000 unique defined terms in the Act, and over 570 of those are defined more than once with different meanings. For instance, property is defined 17 times.
This expands into the significant use of legislative instruments, regulatory guides and information statements that are used to ‘guide’ legislation but don’t for part of the law itself. On the ALRC’s count, there are close to 700 additional documents spanning thousands of pages.
“We all bear the consequences of legislative complexity, including through increased costs for financial products and services, and in publicly funding courts and regulators to wade through the legislative thicket” the report says. Reiterating that “being able to navigate the law is critical to understanding and applying it.”
The report provides 13 recommendations for reform, with the simplification of the definition of financial product and financial service central to these, but the focus on outcomes-based disclosure likely offers the greatest hope for the adviser community. The ALRC suggests an outcomes-based approach should be adopted for efficiency, noting the “highly prescriptive (and complex) nature of this area of the law at present”.
The report is open for submissions until 25 February 2022.
