Govt commits to reviewing principle-based regulation

The Government has announced the reviewer and terms of reference for the Quality of Advice review.  

Announcing the terms of reference for the review, which would complete its report by 16 December, 2022, Senator Jane Hume said the review would assess how the regulatory framework could deliver better outcomes for customers.  

Financial service and superannuation regulation lawyer, Michelle Levy, had been appointed as reviewer. 

The four terms of reference it would investigate were:  

  • Opportunities to streamline and simplify regulatory compliance obligations to reduce cost and remove duplication, recognising that the costs of compliance by businesses are ultimately borne by consumers and serve as an impediment to consumers’ access to quality advice; 
  • Where principles-based regulation could replace rules-based regulation to allow the law to better address fundamental harms and reduce the cost of compliance; 
  • How to simplify documentation and disclosure requirements so that consumers are presented with clear and concise information without unnecessary complexity; and  
  • Whether parts of the regulatory framework have in practice created undesirable unintended consequences and how those consequences might be mitigated or reduced. 

Principle-based regulation had been a topic raised by the industry as there was a general belief that financial advice regulation had become very operational and specific in how outcomes should be delivered to clients. 

However, it would exclude the following factors: 

  • The professional standards for financial advisers; 
  • The new disciplinary and registration systems for advisers (Royal Commission Recommendation 2.10), the reference checking and information sharing protocol (Royal Commission Recommendation 2.7), the obligation on licensees to report serious compliance concerns (Royal Commission Recommendation 2.8) and to take steps when they detect an adviser has engaged in misconduct (Royal Commission Recommendation 2.9); 
  • Changes to the definitions of ‘retail client’, ‘wholesale client’, and ‘sophisticated investor’, including the income and asset thresholds; 
  • Financial services redress arrangements; and 
  • The application of taxation and privacy laws to financial advice. 

Levy said: “I am pleased to be appointed to lead the Government’s Quality of Advice Review. I believe there are many ways we can improve the regulation of financial advice, making it easier for Australians to receive quality advice when they need it and in a form they want. I am optimistic about what we can achieve”. 

The Review invited submissions from the public and consult with stakeholders, including consumers, industry and regulators.  




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