Gail Pearson

Financial services law and compliance in Australia

Until the 2008 global credit crisis, ‘financial services’ was the fastest growing sector of the Australian economy. This growth has had profound implications for individuals, corporations and government. Following extensive review in the last part of the twentieth century, Australia put in place an overarching system for regulating all financial services, replacing a system that was based on separate regulation of products in individual industries. The new system continues to evolve. Focusing on the implications of the new system for retail clients – ‘financial citizens’ – Financial Services Law and Compliance in Australia provides a comprehensive account of the regulatory structure and a detailed analysis of the legislative framework, including discussion of the new regulatory bodies, the new licensing requirements for those wishing to enter the financial services market and the new obligations for those marketing or offering financial services to the public. The book demonstrates that, as a result of our distinctive regulation, Australia is in a relatively good place to weather the global crisis in financial markets. It is an essential resource for those working in, and advising on, financial services, for students of financial services law, and for anyone needing to understand this new regime in Australia.

The Place of Codes of Conduct in Regulating Financial Services

Codes of conduct in financial services regulation are used to draw industry into the regulatory system. This enrolment presupposes a consonance between regulatory objectives and the industry bodies. This historical examination of the evolution of particular codes suggests that this is not always so. Further, by maintaining a code of conduct, industry can retain a certain degree of autonomy and regulators can shift regulatory risk to industry. Yet by supporting a system of codes of conduct dealing with relations with consumers of financial services, industry is also ‘responsibilised’ in its contact with consumers. This article traces the legislative and regulatory approaches to financial services codes of practice as a form of self-regulation and an aspiration for best practice. It examines the safeguards built into the approvals process to ensure that these self-regulatory rules are effective and that consumers can trust the code system. And it suggests ‘light-handedly’ that we should be aware of arguments for a retreat from ‘direct’ regulation to codes.

Enforcement and Effectiveness of Consumer Law in Australia

The Australian system is predicated on persuasion for corporate compliance through self-regulatory mechanisms, breach reporting and strategic regulatory intervention. A consumer in dispute with a business may register a complaint with the business or the regulator, and has the option of internal dispute resolution, external dispute resolution schemes such as Ombudsmen, an administrative Tribunal or a Court. The regulator can take independent enforcement action, initiate representative proceedings, and can also intervene in existing proceedings. In the Australian multi-regulator framework and with multi dispute options, it may sometimes be difficult for a consumer to know precisely how to proceed. Consumer law is administered by ten regulators (two national and eight State or Territory) plus separate specialist regulators for certain safety and telecommunications issues. However the agencies operate a ‘no wrong door’ approach which eventually leads consumers to the appropriate regulator. There is a general view that the multi-regulator model works well but is not flawless. In addition to confusion about where to go to resolve a dispute, there are issues of how fast the matter will be resolved and in some venues whether compensation will actually be paid. The system is currently being assessed from different perspectives and the various reports (discussed later) indicate that in general it works reasonably well though there is definitely room for improvement to enable consumers to resolve their disputes and meet their legal needs.

Further Challenges for Australian Consumer Law

The Australian Consumer Law (ACL) was reviewed in 2016 following an Issues paper produced by Commonwealth Treasury in March 2016. It adopted a behavioural economics approach rather than a pure efficient market standpoint. There will be another national Consumer Survey as a follow up to the 2011 Survey.

Current Issues for Consumer Protection Law in Australia

The Australian Consumer Law (ACL) is being reviewed in 2016. The review is being undertaken by the Commonwealth Department of Treasury pursuant to an intergovernmental agreement at the time of the new national framework.

The UNGCP Guidelines: Some Comments

Now that the General Assembly has passed the revised Consumer Protection Guidelines in December 2015, we have two tasks. The first is to critique the Guidelines themselves and ask whether they are sufficiently protective for the lived conditions of the world’s natural persons who have a personal family or household purpose. The second is to ask whether the proposed international infrastructure can effectively add to safeguarding all of us, all of the world’s natural persons.

A credit lens: implementing twin peaks

This article looks at credit, linked to both debt and culture, to outline challenges in methods of regulation and its assessment. It takes the proposed architecture of credit regulation within South Africa’s coming “twin peaks” structure, refracted against some Australian experiences, to ask what questions should be posed and what methodologies are available to assess credit regulation in a new regulatory regime. The article argues there may be gaps between existing cultural norms, the behaviours required for a new regulatory regime, and community expectations of what regulation may be expected to achieve. Understandings of the regulatory task, and accountabilities of the regulatory regime become more important. This is particularly so when a new regulatory regime incorporates already established parts and some existing values in a staged approach. It argues that a culture of cooperation and coordination is key to maintain both access to credit as debt, and credit as trust.

Failure in corporate governance: financial planning and greed

The revelations of malpractice in a financial planning arm of one of Australia’s oldest banks led to an unprecedented public apology, further government enquiries and calls for a Royal Commission. This raises questions about the way in which large financial institutions ensure compliance with the law, and how financial advice is provided. It has highlighted tension between revenue streams from customers and advice for customers, and gaps between the rhetoric of governance and its practices. It also points to shortcomings in interactions between the corporate regulator and large financial institutions. This is one part of an unfinished story of how Australia is bringing accountability to organizations that deal in other people’s money. The relevant entities are Commonwealth Financial Planning Limited (CFPL) which reported through Colonial First State (CFS) to the Commonwealth Bank of Australia (CBA).