Home / Regulation / ‘Reflect and reconsider’: ASIC chair calls for complexity cull

The legislative threads surrounding financial services "look less like an elegant tapestry and more like a painting by Jackson Pollock", the ASIC chair said, before announcing a new thinktank to reassess ways the regulator can help make the system more efficient and less complex.

ASIC will stage a working group made up of consumer advocates, business leaders and industry groups to tackle the “dizzying web” of complexity in Australia’s regulatory system, after chair Longo highlighted the need for more efficient and effective management of the law.

With candour that has become trademark (for a regulatory executive), Longo delivered a speech at ASIC’s recent Annual Forum challenging his own professional ecosystem to ask whether the current framework is working, and what can be done to improve it. “We don’t do simplicity well in Australia,” Longo said.

The chair highlighted recent findings from the Australian Law Reform Commission’s seven-year probe into complexity within financial services legislation, which delivered a withering final report into the state of the Corporations Act in January.

“Corporations and financial services legislation has become unnecessarily complex,” the final report noted. “Regulated entities incur unnecessary costs when complying with their obligations. Consumers find it difficult to identify their rights. Lawyers struggle to advise their clients with sufficient certainty. Judges have become all too familiar with confronting the ‘usual labyrinthine provisions of the Corporations Act’.”

There are almost 50,000 definitions in the Commonwealth Acts that regulators depend on, Longo said, and 13 per cent of words in these Acts are affected by those definitions.

“The result of all this is an often dizzying web of connections, references, and definitions. This has been graphically referred to as ‘legislative porridge,'” he continued. “Each new legislative reform is, of course, well-intended. It’s meant to solve a real and present problem at a particular time. But done in isolation, short term, reactive and specific legislative threads woven together can look less like an elegant tapestry and more like a painting by Jackson Pollock.”

ASIC is partly to blame for the complexity, Longo conceded, “by way of the numerous legislative instruments we issue”. In reality, though, the truth is that the legislative instruments and regulatory guides ASIC publishes are largely simplified, distilled interpretations of legislation designed to make things easier.

But as a central pillar of the regulatory regime because of its enforcement role, Longo believes ASIC needs to lead a new era of reduced complexity.

“I’m suggesting we would all benefit from some reflection about the edifice of complexity we have built, and dare I say it, the ‘red tape’ that can hold back consumers and businesses. I’m suggesting we get serious about what can be done,” he said.

To that end, ASIC’s new Simplification Consultative Group will specifically identify how ASIC can more efficiently and effectively administering the law.

“The fundamental approach of this group will be to listen to consumers, investors, and industry and challenge us to simplify and streamline how these issues are addressed,” Longo said. “They will do this by leveraging the existing consultative panels ASIC runs, and inviting additional participation of groups, all with an urgent focus on establishing the key priorities that we can help address.

“Fresh thinking is required,” Longo continued. “We want to hear it. We want to engage with the ideas.”