FSC flags concerns on overlapping regulatory changes

In its submission to the Australian Law Reform Commission’s (ALRC) Background Paper FSL11 – Superannuation and the Legislative Framework for Financial Services, the Financial Services Council (FSC) said that the ALRC’s proposed restructuring of provisions relating to financial advice taking place at the same time as the implementation of the Quality of Advice Review’s recommendations would be “disruptive”.

The ALRC recommended a process of identifying targeted and staged reforms that successive Parliaments and governments may take forward and attempt to “learn from the successes and challenges of previous reform programs”.

“In this regard, the ALRC should provide further detail as to specific issues or areas where learnings are being implemented to avoid problems of the past,” the FSC submission said.

“The FSC notes that the Reform roadmap in the report contemplates a reform pillar for ‘policy-evolving provisions’ (Pillar 6) which the ALRC suggests would not disrupt implementation of the reform package.

“The FSC has reservations with this suggestion. On the contrary, in our view, it is likely that attempting to implement evolving policy changes at the same time as reframing or restructuring existing law would be potentially very disruptive.”

Pointing specifically to the interaction of the ALRC’s proposals for amendments to the Corporations Act and the QAR, the FSC said “it is difficult to see how this would not be disruptive”.

“Users of the provisions concerning financial advice will need to track how they are transferred from their current locations and then reframed and restructured in the new Chapter 5 of the Financial Services Law, while simultaneously track any substantive changes driven by policy change,” the FSC said.

“It would seem that where reframing and restructuring is accompanied by policy change the burden on all parties in keeping up with the changes would be materially increased.

“The FSC submits that more detail should be provided on how Pillar 6 would interact with the other reform pillars set out in the report.”

The ALRC’s review of the Legislative Framework for Corporations and Financial Services Regulation has been underway since 2020, and in June 2023, it tabled its third report, Financial Services Legislation: Interim Report C.

In the report, the ALRC said that the proposed reforms do not involve a rewrite of the Corporations Act or of Chapter 7 of the act.

“Rather, the reform package comprises a series of self-contained reform pillars that would be implemented through a single legislative architecture,” the report said.

“Each pillar would offer governments the opportunity to pursue their existing policy commitments. The reform roadmap and taskforces could also adjust as governments prioritise different reform pillars involving varying degrees of technical and policy reform.”