Can ASIC be trusted to ‘sensibly modify law’?

The Financial Advice Association of Australia says it is broadly supportive of legislative which provides scope for the Australian Securities and Investments Commission (ASIC) to “sensibly modify the law” to overcome unintended consequences.

While the FAAA along with the Stockbrokers and Investments Advisers Association and accounting groups have expressed concern about ASIC using regulations to extend beyond the boundaries of some legislation, the FAAA urged greater use of exemption and modification powers.

In its recent response to ASIC’s regulatory simplification consultation, the FAAA said it believed “ASIC fails to utilise its exemption and modification powers in situations where doing so would provide great benefit to the financial advice profession without any detriment to the community or ASIC itself.

“We would welcome a shift in this regard and call for the following administrative relief:

• Breach reporting more generally, including with respect to a range of civil penalty provisions that are automatically classified as reportable situations. Whilst a breach of the best interests duty might appear to be a material matter, often issues with respect to this can occur where there is no client detriment and the solution is additional learning. Equally in the past problems existed with respect to minor differences in Fee Disclosure Statements (FDS).
• Breach reporting for the recent client fee consent form issue, where in many cases the form did not include the account number prior to the client signing as it was yet to be issued.

“The FAAA is broadly supportive of legislation that provides some flexibility for ASIC to sensibly modify the law, particularly where this is used to address unintended consequences,” the FAAA response said.

“There are parts of the law where this power applies, however there are other parts where it does not. “

“The Corporations Act should be amended to provide the power to ASIC to fix minor matters. ASIC has very little powers with respect to Part 7.7A of the Corporations Act. There are no amendment powers with respect to Division 3-Charging ongoing fees to clients. Thus, there was no way to resolve the issue that arose earlier in 2025 with fee consent forms that did not include an account number as it was a new account, and the account number did not exist at the time of application. This is a problem, and we would like to see ASIC being vocal about obtaining this power.

“The law is often inflexible with respect to minor errors. For example, under the previous FDS regime, a minor numerical mistake in an FDS might have entirely invalidated an FDS. This often arose as the adviser might have applied a particular advice fee to the wrong period, since the fee came out of the client’s account in a different period to the period that it was received by the adviser.

“Providing ASIC with the ability to deal with these minor matters in a timely basis is important. We would also like to see ASIC more willing to use these powers when it is practical to do so, has material benefit to the regulated population and has little or no consumer impact,” the FAAA response said.