The Australian Law Reform Commission has sought the advice of brokers on how to simplify a tangle of laws governing the financial services sector.
The government agency Australian Law Reform Commission (ALRC) has launched a review of the complexity of company and financial services law, after arguing in a recent report that the Corporations Act and the Company Regulations were unnecessarily complex.
“Many stakeholders have identified the navigability of the law as a major concern – it is too difficult to locate the relevant parts of the law and even experienced lawyers cannot always be sure that they are considering all provisions and relevant instruments on a particular issue without missing something,” said an ALRC summary report.
As indicated in the ALRC’s interim report, there is 3,539 sections, 30 chapters, 242 parts, 382 divisions, 262 subdivisions and three annexes in the Corporations Act. In the Company Regulations, there are 1,418 regulations divided into 25 chapters, 198 parts, 193 divisions, 74 subdivisions and 29 annexes.
The legislative texts are part of a regulatory ecosystem comprising more than 270 legislative instruments developed under the Corporations Act by ASIC, over 191 others Corporations Act legislative instruments, over 200 regulatory guides, over 20,000 ASIC instruments and over 677 ASIC reports.
Other issues with the legislation listed include complex use and difficulty in navigating definitions, laws that are overly prescriptive, unclear policy objectives and standards of conduct, and difficulties in administering complex legislation. .
The ALRC seeks to make recommendations for reform of the law, with an emphasis on how the current law can be simplified and streamlined.
As part of the review, it has opened an industry consultation, inviting submissions from vendors such as brokers and financial advisers, on its proposals for legislative reform and questions for stakeholders.
“Input from those on the front lines – such as finance and mortgage brokers, and their clients – is essential to understanding why the current law is so complex and how it could be improved,” the ALRC told The Advise in a press release.
A spokesperson added that the consultation will take into account discussions with leading bodies including the Finance Brokers Association of Australia (FBAA) and the Mortgage and Finance Brokers Association of Australia (MFAA).
The consultation paper, Interim Report A, discussed the regulation of credit activities, including mortgage brokerage, among other financial services.
The ALRC suggested exploring the consolidation of separate regulatory regimes for credit and financial products and financial services.
Currently, consumer credit – with respect to licensing, disclosure and conduct – is regulated by the National Consumer Credit Protection Act 2009 (NCCP Act), while the financial services ecosystem is controlled by the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Law).
Some of the reforms proposed by the ALRC are to include wording regarding credit in the Companies and ASICs Acts, and to have a definition of credit consistent with the NCCP Act.
“The perspective of finance and mortgage brokers will be important in developing this idea further,” the ALRC told The Adviser.
In addition, the report questioned whether it was not worth consolidating licensing regimes for financial services and credit.
Submissions in response to Interim Report A are due February 25.
The ALRC investigation is part of the government’s response to the Royal Banking Commission.
Prior to the publication of the interim report, the body had conducted 140 informal consultations across Australia.
[Related: Industry in ‘incredibly strong position’ ahead of rem review]
Sarah Simpkins is the managing editor of Mortgage Business and The Adviser.
Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.