ASIC needs regulatory reform, not simplification: SIAA

A peak advising body has welcomed ASIC’s attempts to simplify industry regulation but highlighted the need for concrete reform to ensure reduction in complexity.

The Stockbrokers and Investment Advisers Association (SIAA) has joined similar calls from other peak bodies for ASIC to implement changes to regulations suggested through the Australian Law Reform Commission’s (ALRC) review of the Corporations and Financial Services Legislation.

Early in September, the Australian Securities and Investments Commission (ASIC) released Report 813 on regulatory simplification for consultation, with chair Joe Longo saying ASIC is “focused on reducing regulatory burden while maintaining consumer protections”.

“Simplification supports effective regulation and a well-functioning economy,” Longo wrote in the foreword for the report.

“ASIC is committed to simplifying how we regulate entities and individuals, including by making it easier to find and understand information, interact with us and comply with regulations.”

SIAA said in a submission responding to AISC that any simplification would be welcome, but that the regulations remained complex and hard to understand for its members.

“The unnecessary complexity and labyrinthine provisions of the Corporations Act have resulted in the need for lengthy and detailed regulatory guidance to assist users navigate the law and understand their legal obligations,” the submission states.

“Without changes to the relevant legislation, it will be challenging for ASIC to make potential improvements proposed in the Report that will result in the content of the Regulatory Guides being any simpler or more practical.”

In its report, titled Confronting Complexity: Reforming Corporations and Financial Services Legislation, tabled in Parliament on Thursday by Attorney-General Mark Dreyfus, the ALRC found that the legislation governing Australia’s financial services industry is a tangled mess – difficult to navigate, costly to comply with, and unnecessarily difficult to enforce.

SIAA outlined some of 58 the recommendations made by the ALRC, including:

- Restructuring and reframing financial services legislation.

- Applying a principled model to the legislative hierarchy.

- Making offences and civil penalties more visible.

- Making definitions easier to find and understand.

“Unfortunately, this work has not been done and Australia remains stuck in the confusing maze of this legislative framework,” the body said.

“While we welcome ASIC’s work in simplifying regulation and attempts to ease the regulatory burden, without implementation of the ALRCs recommendations by Parliament, reduction of regulatory complexity will not be achieved.”

SIAA highlight that much of ASIC’s principles-based guidelines fail to address complexity, stating that most ASIC stakeholders prefer prescriptive guidelines. They emphasise that licensees need explicit, clear guidelines that allow them to understand their legal obligations and have risk, legal, governance and compliance frameworks, policies and procedures in place to ensure parties comply.

“They require regulatory certainty to operate their businesses,” FIAA said.

“Without reform of the underlying law, we do not consider that there will be appetite amongst ASIC’s regulated population for less specificity in its guidance.”

This view of principles-based advice is in contrast with the FAAA’s stance, which highlighted in their own response that much of their members would prefer a principles-based approach.

“This guidance should be principles-based, with examples and templates to support concepts. Our membership would also like ASIC to provide more educational services about its guidance, be more open to industry feedback and increase engagement generally,” the FAAA said.

Despite this, both associations agree that more needs to be done to achieve regulatory simplification, with SIAA stressing the importance and key roll the 58 ALRC recommendations can play.

“Significant changes to the legislative framework are the government’s responsibility. SIAA strongly supports the implementation of the ALRC recommendations and we urge ASIC to continue advocating to government the importance of continuing this important work of reform.”