The Investment and Financial Services Association (IFSA) Regulatory Affairs Board Committee has outlined its intended approach toward improving regulation for the financial service industry with the release of its Headland Statement.
“It’s really an approach which puts out the view from IFSA on how we might move and change our approach towards better regulation,” ISFA committee chair and MLC chief executive Steve Tucker explained.
The five recommendations contained in the statement are a combination of new initiatives along with a reinforcement of existing policy.
The suggestions include a return to principle-based legislation as opposed to a rules-based approach that is seen to cause uncertainty and encourage corporations to focus on mitigating their liability rather than informing their customers.
“From the industry’s point of view, our legal teams and our companies want to interpret and protect ourselves. From the regulators’ point of view they want to make sure they have clarity and the approach is consistent. Somewhere in the middle we sometimes actually lose it in the translation and end up with a more complex system than we need, and consumers end up not necessary benefiting as much as they should from these changes,” Tucker said.
IFSA has also proposed greater reliance on industry self-regulation in conjunction with principle-based legislation, a formal consultative approach involving discussions between IFSA, government bodies and regulators, as well as an increased focus on the risks and benefits of regulation.
In addition, the industry body has recommended the formation of a Financial Services Committee made up of representatives from the government, the regulators and the industry to review draft regulatory reforms.
Tucker feels a change in approach is needed because consumers currently cannot recognise the advantages of financial services reform.
“I can certainly say consumers are not grateful for the disclosure regime we have today. Disclosure is a good thing and we want to make sure people know what’s going on, particularly around things like remuneration and how we run our funds and so on. But we’ve got to the stage now where the volume of disclosure is beyond most consumers’ reach, in terms of getting through it, and therefore the benefits are now diminishing,” he said.
According to the IFSA committee chair, the implementation of the headland statement initiatives will be carried out fairly quickly, with the establishment of the financial services committee to potentially be the most time consuming step.
“We’ll put this out there now into the public arena for discussion and debateÉ There’s nothing here that’s too radical and it should be able to be implemented fairly quickly,” Tucker said.
