‘Dizzying number of definitions’ forced ALRC to act on financial services law

The Australian Law Reform Commission’s (ALRC) has told ifa draft legislation released by government last week – designed to “reduce the complexity of Australia’s corporations and financial services law and improve its navigability” – will look to align closely with the Quality of Advice Review recommendations.

Government’s amendments use recommendations from the ALRC’s “Review of the Legislative Framework for Corporations and Financial Services Regulation”, released late last year. 

The government’s draft legislation also includes the recommendation that the financial product advice law definition be repealed.

The ALRC told ifa this week that the move was made as one section heading refers to “financial product advice” despite the section also defining “general advice” and “personal advice”.

“The government’s proposed amendments would include these other terms in the heading of the section as well,” the commission said in a statement.

“There are a dizzying number of definitions in the Corporations Act, and the ALRC found that many of them are redundant. The draft legislation would repeal a number of definitions, aiming to de-clutter the legislation and reduce the number of times readers must flip back and forth between sections to find the defined meaning of a particular term.

“For example, the phrase ‘financial product advice law’ is currently defined in the Corporations Act, but it is unnecessary because that phrase never in fact appears in the law.

“The government’s draft legislation would remove that definition.”

It comes after QAR reviewer Michelle Levy put forward 12 proposals this week including that the financial services regime should regulate the provision of “personal advice” and should no longer regulate “general advice” as a financial service and the definition should be removed together with the obligation to give a general advice warning.

“The government’s draft changes to the law are really just the first steps towards a much larger program of simplification envisaged by the ALRC,” ALRC president, Hon Justice Sarah Derrington AM told ifa.

“The ALRC will continue to monitor closely the progress of Treasury’s Quality of Advice Review to ensure our recommendations align with substantive changes that may flow from that review.”

The ALRC’s next interim report, set for release at the end of September, will outline a “legislative hierarchy model” and financial advisers will have an opportunity to make submissions in response until 30 November.

Meanwhile, feedback on the QAR proposal paper is now open and closes on 23 September 2022.

Ms Levy recently discussed progress on the QAR on the ifa Show podcast. Listen to the full episode here.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.