ALRC backs advisers on regulatory burden
The Australian Law Reform Commission has reinforced the fact that financial advisers are being penalised by unwieldy legislation and regulation and how they feed into the Australian Securities and Investments Commission industry funding model.
In its final report to the Government the ALRC has specifically referenced financial advisers as being impacted.
“The complexity of the existing legislative framework creates substantial unnecessary costs for businesses and other regulated persons, such as financial advisers,” it said.
“These costs are unnecessary because the legislative framework could be designed to enable policy objectives to be translated more effectively into legislation. The costs to regulated persons principally result from the higher compliance expenses and the less predictable regulatory environment generated by legislative complexity.”
“In addition to these costs, regulated persons indirectly bear the costs of unnecessary complexity incurred by ASIC, given the industry funding model on which ASIC operates.
“The most immediate costs faced by regulated persons appear in the form of higher compliance expenses. Compliance costs increase because regulated persons must navigate a complex legislative framework to identify and understand their obligations. It is well established both theoretically and empirically that complex legislation produces higher compliance burdens,” it said.
“in addition to ‘opportunity costs involved in the time and energy devoted to compliance’. Evidence suggests compliance costs may be particularly burdensome for small businesses, which lack economies of scale that help others manage compliance costs.”
Elsewhere in the report, the ALRC said that unnecessary complexity in the existing legislative framework created barriers to entry that might reduce competition in financial services and financial markets.
The ALRC has recommended significant simplification of the act, including around the definitions of financial advice and financial services.