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Law review aims to wind back complexity

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Financial laws have ballooned in complexity over the past two decades with the Corporations Act becoming a “Russian doll” of definitions within definitions, a review seminar has heard.

The Australian Law Reform Commission (ALRC) says the Corporations Act, which covers insurance and other financial services, is now more than 800,000 words long after a series of amendments, compared with around 500,000 when introduced in 2001.

“The commission has concerns regarding increasing complexity of the legislative framework that may be weakening protections of consumers, unnecessarily increasing the compliance burden for industry and significantly complicating the important role of regulators and administrators,” ALRC part-time commissioner and Federal Court judge John Middleton said.

Chapter Seven of the Corporations Act, which regulates financial services, would by itself be the eleventh or twelfth largest Commonwealth Act, if it stood on its own, the seminar heard.

ALRC Legal Officer Nicholas Simoes da Silva says in many areas, including on whether a product disclosure regime applies, there can be “multiple cascading thresholds” created by conditional wordings, before getting to exceptions.

The Corporations Act is also surrounded by regulations and legislative instruments that empower the Australian Securities and Investments Commission and Australian Prudential Regulation Authority and which add to the complexity.

The Federal Government last year asked the ALRC to conduct a review aimed at simplification. Three interim reports on separate issues will be released during the process, with a final consolidated report to be delivered by November 30 2023.

Issues partly reflect a general principle for the Act to cover a broad range of conduct, products, services and organisations through standardised regimes, with clarity often obscured by voluminous rules, the webinar heard.

Mr Simoes da Silva says the ALRC will look at the balancing of principles and prescription as it considers reform options.

“In meetings with over 100 organisations and individuals we have heard a clear appetite for simplification of our law,” he said.

“One idea is to focus the Act more on norms and principles that are then accompanied by detailed and clearly identifiable and navigable legislative instruments, of which there should be very few.”

National Insurance Brokers Association (NIBA) CEO Dallas Booth says the “elephant in the room” is the one-size-fits-all approach taken across Chapter 7 of the Act.

“One size almost never fits all and I think that is something the law reform commission is going to have to think about as part of this project,” he told

NIBA has met with the ALRC and supports the inquiry and reforms to simplify and clarify the legal framework around insurance and broking.

“There is massive complexity around what is a financial product, what is a financial service and what is financial advice,” Mr Booth said.

“If you look at the diagram they showed, as to what constitutes a financial service and how you determine if you are giving financial advice or not, that is serious headache material.”