Proposed simplification of financial services law

On 11 September 2020, Attorney-General Christian Porter MP announced that a review of the legislative framework for corporations and financial services regulation had been referred to the Australian Law Reform Commission (ALRC).

This review follows recommendations of the Banking Royal Commission, which noted that the complexity of the current regulatory regime is preventing the intent of the regime from being met. The review aims to “identify ways to make it more adaptive, efficient and navigable for consumers and regulated entities”.

The sometimes impenetrable complexity of financial services law is well known, including among the Courts. Perhaps one of the best recent articulations of this complexity can be found in Oreb v Australian Securities and Investments Commission (No 2) [2017] FCAFC 49, which stated:

"The refrain in explanatory memoranda that legislation in the form of the over 2,500 page long Corporations Act, replete with massive and over complex verbiage, is “user friendly” is patent nonsense. Professionals and judges must navigate tortuous, mind-numbingly detailed, cascading provisions to ascertain the meaning that the Parliament, supposedly, had in mind when enacting these telephone books, at huge cost to the community. Principles-based drafting would enable the elucidation of legislative intention much more effectively and also be likely to be user friendly and to reduce cost."

Simplification will be a complex and time-consuming exercise, and will need to be undertaken in a way that minimises the uncertainty that would arise from a rewrite of financial services law.

The ALRC's Terms of Reference include review of:

• the use and consistency of definitions in corporations and financial services legislation, including he circumstances in which it is appropriate for concepts to be defined, consistent with promoting robust regulatory boundaries, understanding and general compliance with the law;
• the coherence of the regulatory design and hierarchy of laws, covering primary law provisions, regulations, class orders, and standards; and
• how the provisions contained in Chapter 7 of the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth) could be reframed or restructured so that the legislative framework for financial services licensing and regulation is clear, coherent and effective.

Interim reports are to be delivered progressively by the ALRC from November 2021, with a consolidated final report to be delivered by 30 November 2023.