The Australian Law Reform Commission (ALRC) has outlined a number of “long-term gains” that the industry will achieve should it endure transition costs with changes to current legislation.
Speaking at the Stockbrokers and Investment Advisers Conference this week, ALRC president Sarah Derrington addressed a recent comment she made when she said “The question ultimately is whether the government to whom we make these recommendations is willing to accept that the pain that will inevitably be felt through transition costs will be for the best in the long run for future long-term gains”.
“What should happen if the reform of the nature that we are suggesting takes place there should be better compliance. That should happen at the outset because it should be more straightforward and easier to see and to understand with what one is supposed to comply,” Ms Derrington said.
Ms Derrington added that the reforms the ALRC proposed could also reduce financial litigation and result in better dispute resolution structure.
“All of this in turn should result in a more productive financial services sector which is confident to take the risks in such an everchanging market,” she said.
“That can only be a good thing for the economy and therefore the country overall.”
Ms Derrington conceded that the “level of pain” the government is willing to enforce is unknown due to the new incoming Albanese government. However, it has charted a range of options from “least painful” to “unbearable”.
“’Least painful’ looks like simply using technological solutions to the federal register of legislation to make things clearer and more easily navigable. I think if we did that, people would be disappointed. But that is an option,” she explained.
“’Unbearable’ is scrapping the whole thing and redrafting from scratch. There’s not a lot of appetite for that either so we will land somewhere in the middle.”
The ALRC is currently engaging with economic experts to cost these options and hopes to provide some “proper economic modelling” soon.
In a background paper released in March, the ALRC said that existing legislative model in financial services has proven “inadequate”.
It argued that the Corporations Act’s structure is “unsuitable” and that the legislation administered by the Australian Prudential Regulation Authority (APRA) had better adapted to the ongoing changes to financial risk.
“In the end, the history of Australian financial regulation highlights a risk of an entirely different stripe: the risk that the law will become, or already is, too complex, incoherent, or inaccessible to be understood or applied,” the ALRC said.
Scrap it.. the system is broken.