The Financial Services Council (FSC) has noted the “enhanced risk” that comes from implementing changes to financial advice legislation simultaneously with the Quality of Advice Review (QAR).
In a submission to the Australian Law Reform Commission’s (ALRC) consultation, the FSC discussed changes proposed for the financial advice legislation in the Corporations Act.
The ALRC’s report aims to reduce compliance costs and enforcement expenses for consumers and regulators.
Focusing specifically on financial advice, it said the current structure and framing of provisions relating to financial advice in the Corporations Act, specifically in chapter 7, make it hard for advice providers and recipients of financial advice to find the law.
Secondly, it makes the law harder to understand by obscuring the broader context and purpose of financial advice provisions. This lack of context means the law fails to communicate that advice providers are subject to a highly developed and tailored regulatory regime.
To improve this matter, the ALRC proposed the creation of a single legislative chapter that will bring together all provisions that regulate only financial advice.
Click here to read the timeline and information of the three Interim Reports.
While the ALRC has stated it will take proposals in the QAR into consideration, the FSC is concerned it will still demonstrate ‘enhanced risk’.
“The FSC also notes that this is an example of enhanced risk where parallel reform processes are being undertaken. Here, there is enhanced risk in seeking to implement Proposal C6 at the same (or approximately the same) time as any policy reforms of the law of financial advice are implemented pursuant to the Quality of Advice Review.”
It also noted a problem of subjectivity where the proposed relocation of parts of advice legislation “may not necessarily result in an improved outcome in terms of intuitive flow or for navigability for all users of the legislation”.
“For example, sections 912EA and 912EB of the Act are currently located within the broader set of reportable situations/breach reporting provisions, which makes sense and is intuitive in terms of ease of access to such provisions generally.
“If moved to a new standalone financial advice chapter, as proposed, this may be an unexpected result and less intuitive for a reader who is expecting to see these provisions sit with the rest of the section on breach reporting (although the FSC notes that the ALRC outlines sensible reasons for including these provisions within the financial advice chapter given that they deal with the provision of personal advice).
“If moved, the FSC suggests that the legislation include comprehensive cross references between the general breach reporting provisions and such provisions in other parts of the law such as the proposed financial advice chapter in the Schedule. Alternatively, if these sections are not relocated, the financial advice chapter could incorporate cross references back to these relevant breach reporting sections which may be a simpler and less cumbersome outcome.”
A final report from the ALRC is due on 30 November 2023.
