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Berkshire Hathaway Specialty Insurance
Berkshire Hathaway Specialty Insurance

Extensive review will tackle 'complexity' of financial services laws

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The Federal Government has asked the Australian Law Reform Commission (ALRC) to carry out a three-year review into the legislative framework for corporations and financial services regulation.

Today’s announcement follows the Hayne royal commission finding that the law is overly complex and should be simplified.

“This complexity of corporations and financial services laws makes it harder for consumers and regulated entities to understand how the law applies to them and increases their regulatory compliance burden,” Attorney General Christian Porter said.

“The review will provide a principled blueprint for a more efficient, navigable and adaptive legislative framework for corporations and financial services regulation that would allow industry and consumers to more easily understand their rights, obligations and the intent and effect of the law.”

The ALRC says a first interim report focusing on the appropriate use of definitions in corporations and financial services legislation is due by November 31 next year.

A second interim report focusing on regulatory design and the hierarchy of primary law provisions, regulations, class orders, and standards, is due by September 30, 2022.

A third interim report focusing on potential reframing or restructuring of Chapter 7 of the Corporations Act is due by August 25, 2023, and a consolidated final report is due by November 30, 2023.

The ALRC says it is not tasked with recommending policy changes regarding obligations on financial service providers.

“Rather, the inquiry is more technical in nature, and seeks to facilitate a more adaptive, efficient, and navigable framework of legislation within the context of existing policy settings.

“The ultimate goal is to achieve meaningful compliance with the substance and intent of the law.”

The review has been welcomed by the Insurance Council of Australia (ICA) and National Insurance Brokers Association (NIBA).

ICA says it has been in discussion with Treasury about implementation of the Hayne recommendations and “the potential simplification of laws that regulate financial services in Australia”.

“The ICA, and members, have explored the possible approaches that the ICA could adopt and we look forward to talking in detail with the ALRC,” spokesman Campbell Fuller told insuranceNEWS.com.au.

NIBA CEO Dallas Booth says there is “general confusion” about a number of key principles such as personal advice/general advice, and retail/wholesale clients.

“We share the views of the Hayne royal commission in relation to the need to simplify the law,” Mr Booth said.

“The review is very welcome and we look forward to making a significant contribution.”

Mr Booth hailed the work done by the ALRC in the 1980s which he says led to “world-leading” reform of insurance law.

“Over the years we’ve had ongoing reforms, and while each particular issue was most likely valid in its own right, it keeps adding further complexity to the process.

“Should we go back to the Insurance (Agents and Brokers Act) 1984?”

The ALRC says it will carry out wide consultation, including the financial services sector and representative bodies.

Click here to see the review terms of reference.