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Complexity, advice issues targeted in law reform feedback

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Feedback to a financial services law reform inquiry has backed simplification of the legal framework and drawn attention to specific problems such as the failure of distinctions between general and personal advice.

The Australian Law Reform Commission (ALRC) says there is a level of consensus that the law is “too complex” and that even experienced lawyers can’t be confident they are taking into account all provisions and instruments on an issue without “missing something”.

Some stakeholders have expressed concern that simplification might in practice mean deregulation and weakening protection for consumers.

“Others feared it might mean stripping the law back to principles alone, without a necessary level of detail or certainty to guide industry,” an ALRC paper on initial stakeholder feedback says.

Consultees have noted that the general and personal advice distinction is “inappropriate in an insurance context”, general advice is a misleading label and the current definition is too difficult to apply.

Some feedback favours potentially locating Chapter 7 of the Corporations Act in a separate piece of legislation, while there is support for consistent terminology across primary and secondary legislation and guidance documents.

Feedback on the retail and wholesale client distinction notes that there are different definitions in the Insurance Contracts Act.

Potential policy implications from proposed financial services regulation reforms include the need for harmonisation of state and Commonwealth laws in areas such as insurance.

The ALRC, which is completing a three-year review aimed at simplifying the Corporations Act and its surrounding framework, released the feedback paper after holding public webinars, arranging targeted consultations and attending industry and professional events.

Formal submissions will be sought for the review after the ALRC releases a first interim report on November 30.