Any changes to regulatory regimes to lift consumer understanding of financial products and services should not come at extra cost or complexity to the financial services sector but from the alignment of current regimes according to two financial services lawyers.
King & Wood Mallesons partners Katherine Forrest and Jim Boynton said the Financial Systems Inquiry (FSI) has indicated it would look at changing regulatory regimes but warned that these changes need to reduce costs and complexity for consumers and product providers.
They pointed to the single regime that was created after the release of the 1997 Wallis Report but said this regime has been altered and added to significantly over time with costs typically passed on to end users and had still fallen short of providing the necessary levels of disclosure required by consumers.
Forrest and Boynton stated that suggestions to shift the responsibility for assessing the suitability of products from the consumer to the product issuer would be a significant change and would require many financial services providers to gather more consumer information to ensure they were issued appropriate products.
They said that efforts in this area in the credit sector had made some products unavailable while also increasing back office work and costs related to information gathering and record keeping.
“These administrative burdens would be amplified in an investment context for issuers who currently collect much more limited information on investors, in particular those who are introduced through intermediaries,” Forrest and Boynton said.
They said that any moves in this direction should be prefaced with a stocktake of current regulatory protections to examine if the introduction of a suitability test would remove the need for further proposed regulatory protections.
