The new era of advice regulation

Alex Burke,  Senior Writer,  No More Practice Education

Last week, we discussed ASIC's sudden reversal on the adviser levy - bringing down to 2018-19 levels - and the announcement of a review into the industry funding model. 

On top of that, Treasurer Josh Frydenberg issued a new Statement of Expectations for the regulator, which asked ASIC to "identify and pursue opportunities to contribute to the Government's economic goals" and ensure its actions are "not inconsistent with the policies of the Government." Furthermore, Frydenberg requested that ASIC not be "unduly prescriptive" in its guidance and make sure it isn't "[limiting] business' discretion and flexibility to operate in the manner they see fit while still complying with the law." 

If that sounds to you like a rebuke of the philosophies underpinning some of ASIC's past enforcement activities - and indeed Kenneth Hayne's recommendation of a "why not litigate" position in the Royal Commission - you're not alone. Labor MP Stephen Jones called the statement a "direct repudiation of the findings of the Banking Royal Commission" and said it "[made] crystal clear that Scott Morrison and Josh Frydenberg are simply not on the side of small business, mum and dad investors, and the many Australians who need the protection of a strong, independent regulator." 

Of course, new ASIC chair Joe Longo has a very different interpretation. In a parliamentary committee, Longo said that Frydenberg's statement "commits us to supporting economic growth and recovery, takes an active and targeted approach to enforcement, focuses our action on the areas of greatest harm, and uses our enhanced range of regulatory tools to ensure Australians can participate with confidence in the financial system." 

For advisers, it would be very difficult to assess this potential overhaul of ASIC's enforcement approach separately from the news about the levy reduction. If the first glimpse of a post-Statement of Expectations ASIC involves moving to address one of the advice industry's most pressing concerns of the past few years, then would it not be prudent to let the good times roll? 

The issue is that, as with the advice levy, many advisers' ongoing concerns can be partly (or in some cases wholly) attributed to the legislative framework that informs how ASIC conducts itself. And while there have been disagreements between ASIC and Government as to how much wiggle room the regulator has regarding interpretation of legislation, substantial changes can only be made when the underlying laws are reviewed. 

In the interim, though, ASIC has said it's committed to an overall reduction in regulatory costs and has established a dedicated unit for this purpose. As per the regulator's 2021-25 Corporate Plan, this unit will identify where changes can be made and streamline interactions with stakeholders so as to "support the more efficient and effective delivery of its regulatory remit." 

Commenting on the new unit, Minister for Superannuation, Financial Services and the Digital Economy Jane Hume said: "I want all Australian households to have access to affordable, high quality financial services and advice. The creation of this unit, alongside the $46 million of relief the government announced this morning for financial advice are important steps forward for Australian businesses.”

Hume added: “The implementation of the Government’s stewardship approach – focused on minimising regulatory burden while preserving consumer protections – provides a model for other regulators."

Do you anticipate major changes at ASIC as a result of the Government's Statement of Expectations? Which parts of the legislative framework for advice do you think need an urgent review?


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