Regulation & Policy
Third FINSIA submission of 2022 - to the Australian Law Reform Commission - in line with professionalisation strategy
By Lewis Panther
Senior writer, FINSIA
Published Wed 16 Mar
2 mins read
Latest submission draws on Banking Code of Practice review and an understanding of the importance of professional training and education.
<p>CEO and Managing Editor Chris Whitehead Chartered Banker F FIN noted that the 12-page submission on behalf of members was guided by the belief that the best customer outcomes were based on a principles-based approach.</p> <p>The letter to the ALRC in relation to Financial Services Legislation also draws on the recent submission made to the Review of the Banking Code of Practice.</p> <p>It states: “A prescriptive approach can never anticipate every circumstance.</p> <p>“FINSIA suggests that frequently the cause of customer harm and dissatisfaction is the application of rigid policies when the application of professional judgement is needed.</p> <p>“However, a principles-based approach requires a professional framework of skills, experience and conduct rules which supports the application of sound judgement.</p> <p>“FINSIA has recently raised this issue in the context of the Independent Review of the Banking Code of Practice 2021 and suggested that the Code is currently driving an over-reliance upon rigidly prescribed rules which has been shown to diminish self-accountability and resulting in higher levels of risk incidents and inferior community outcomes.</p> <p>“We are delighted to see the positive solutions we advocated have been emphatically adopted in Recommendation 30 of the Final Report.</p> <p>“Nor is FINSIA the only financial services association expressing these views.</p> <p>“The Financial Services Council has also done so in its White Paper on Financial Advice which advocates for principles bases regulation noting “for example, guidance should provide examples of what an ethical or professional advice provider looks like, how they approach their work and in what manner.</p> <p>“This would be more suitable to a profession than specific directions on what to do topic-by-topic, which implies a prescribed advice process.”</p> <p>“We agree with the ALRC’s comment in its background paper, Complexity and Legislative Design, that complexity in legislation “is likely to be excessive and unjustified where the prescription is disproportionate when measured against the capacity of the regulated community to understand, and comply meaningfully with, the legislation”.</p> <p>“In addition, we would suggest that sound judgement, within a professional framework of skills, experience and conduct rules, are an important part of the capacity of the regulated community to understand and comply meaningfully with the legislation.</p> <p>“Having said that, FINSIA acknowledges that some areas of prescription in the legislation have been made in response to industry concerns about uncertainty in the interpretation of more broadly expressed obligations.</p> <p>“While FINSIA supports a principles-based approach, FINSIA’s view is that reducing words does not necessarily equate to ‘simplification’, and we do not necessarily support removing specific or prescriptive provisions that assist interpretation particularly where they may have been introduced to address uncertainty or lack of clarity in a broadly expressed obligation.</p> <p>“The financial services industry does require a reasonable degree of certainty about conduct that will or will not comply with the law, and we believe this also needs to be a guiding principle in assessing proposed changes to the law.”</p> <p><a href="https://www.finsia.com/sites/default/files/2022-03/FINSIA%20Submission%20on%20ALRC%20Report%20A%20Financial%20Services%20Legislation.pdf"><strong>Read the full submission and detailed responses to 24 questions here.</strong></a></p>