The Investment and Financial Services Association (IFSA) wants the Government to rely more on industry codes of practice as a regulatory tool.

The recommendation is one of five major points made after a 12-month review of industry regulation and compliance volumes. They are contained in a “headland” statement of recommendations for the financial services industry.

The statement gives clear recommendations for future regulation of the industry in a bid to stabilise the increasing volumes of regulation and compliance, and reduce the cost directed to the industry and customers.

IFSA recommends that the drafting of legislation should be principles-based rather than rules-based, “which causes uncertainty and encourages market participants to be risk-averse”.

Other recommendations include the establishment of a formal consultative process for legislation and regulations, a financial services committee to provide government with endorsement of regulatory proposals, and a risk benefit approach to future regulation.