In an industry webinar on Monday, Australian Law Reform Commission legal officer Nicholas Simoes da Silva said in the two decades since the Corporations Act had been introduced, it had increased in size by around 60 per cent and been amended more than 100 times.
“In 2001 the Act was 500,000 words long, one of the biggest on the statute book, and 121 amending acts later it’s over 800,000 words and accounts for 4 percent of all statute law at the Commonwealth level,” Mr Samoes da Silva said.
“That can mean some sections being so long that a reader fails to maintain a clear understanding of what that section is trying to achieve – the average section length is 200 words, but 59 sections come in at over 1,000 words. Some of the more substantive sections come in at over 25,000 words, including the obligations necessary to hold an AFSL.”
Mr Samoes da Silva revealed a number of sobering statistics around how long and unwieldy the central act governing financial services law had become, with the number of sections in the Corporations Act increasing by 72 per cent over the past 20 years, and the number of subsections rising by more than 120 per cent.
“Length in the wrong way can be a significant source of complexity, as what should be clear obligations become obscured behind voluminous rules in the Act,” he said.
“The number of divisions, subdivisions and parts has skyrocketed, but the number of chapters has remained largely the same, so we’re packing more detail into chapters that are losing their conceptual consistency and clarity.
“Sections are deeply interwoven through cross-references and few parts or sections stand on their own, so to understand one section you need to understand multiple sections, or potentially even multiple sections of other Acts. You can be led on a race around the whole Commonwealth statute book.”
Mr Samoes da Silva said in its current state, even large corporations could only navigate the financial services legal system “with difficulty”, and that it was becoming “a huge problem” for mid-sized licensees and self-licensed advisers.
“It’s easy to think complexity affects those who can manage it – businesses, lawyers, sophisticated participants – but complexity matters to us all,” he said.
“If we want people to obey the law we need to make understanding it as easy as possible, this is critical for competition. Consumers also need to know their rights and be able to exercise them under the law, otherwise it matters little to the average citizen.”
The commission is currently conducting a review into corporations and financial services legislation, with its first interim report due in November.
I guess all those “commentators” stating Financial Planners not able to understand and follow this class act being incompetent now look a little silly themselves – if not ignorant of ever having read it.
Not sure what it says about those who have been involved in making this mess – incompetent drunk fools running traffic lights comes to mind.
“Before you pass a new piece of legislation, why don’t you repeal an old one” . Kerry Packer
The problem the mid and large licensees have is of their own doing. Costs and complexity in their own org structures should not be the problem of the adviser.
Clear, concise and effective…..hmmm….pot / kettle.
Hang on….I read the Corps Act for my FASEA exam and I understood it….backwards and forward I searched looking for the penalty for not handing out an FSG…reading and re reading……but I’m only a dumb uneducated financial planner. One thing I am very sure of, is that Common sense is not allowed in these Departments, and Mr Samoes da Silva employment will soon be terminated. An advantage of being so long is when the auditor comes along and says I’m risking breaching Section X, I show them Section Y and say… I don’t think so. They then show me Section B and I then show them Section C and on we dance.
Simplicity is the ultimate sophistication. I rest my case.
START AGAIN!!
As I have said in this forum on many occasions, how on earth are we as financial planners expected to comply with laws that are so complex that even the scholarly minds of High Court judges struggle with it? It shouldn’t have taken the likes of the ALRC to point how complex (& ridiculous) all this is. Blind Freddie saw it for years!
Successive Governments have tinkered & fiddled with it so much over the years that it bears no resemblance to what it looked like when I first started in the industry…all in the name of protecting & providing better outcomes for consumers. What a load of bollocks! The crooks are still getting away with it (& always will), evidence recently Melissa Caddick who managed to slide though the cracks unnoticed by anyone. Although, to be fair, there are ongoing actions undertaken by ASIC to ban advisers.
As Princess Leia Organa said to Darth Vader when he was chasing down the rebel scum: “The more you tighten your grip, the more star systems will slip through your fingers”. Perhaps the Government can take a lesson from that when trying to “tighten up” legs & regs .
For the last 10 years, I have maintained that the whole of Chapter 7 should be torn down & and rebuilt. Perhaps this will be one of the ALRC’s recommendations…I can only hope. And when it comes to rebuilding it, how about engaging a few practitioners to help with the construction? There would be some hope that it wouldn’t turn into the tittering, ramshackle mess Chapter 7 has become.
Don’t start me on that fiasco called FASEA!
Perhaps we as a country (and industry) should look to:
1. Rewrite the laws into plain english – ie, not have lawyers write them all
2. Make the rules branching from the laws (ie financial service rules/regulations) in plain english also (ie remove the lawyers from the process)
3. Have ASIC replaced with a regulator who understands the industry they’re regulating (or have people working within who do, instead of analysts and delegates whose only focus is to ban)
4. Have the new regulator put into place rules and guidelines that are black and white – ie plain english, straightforward, examples, templates, etc.
But wait, this would mean fewer public servants would be needed; less departmental funding would be required as a result; less need for justifying the public servants’ existence; less ability to claim scalps in the media of Advisers trying to help clients but being caught up in the regulator’s rubbish; and less blame. Best we keep the “Yes Minister” style industry and regulation we have in this country that strangles everyone and everything EXCEPT the public servants.
Excellent article and comments by Mr Samoes da Silva. Now just stop product providers from controlling advisers and you have eliminated much of the reason for this monstrosity.
Another great example of how this government is making things simple!