Check against delivery

Firstly, welcome to the ASIC Annual Forum – our 27^th!

Thank you to Aunty Joan for her welcome to country. I also acknowledge the Traditional Owners of the lands on which we meet today, the Gadigal people of the Eora Nation, and I pay my respects to Elders past, present and emerging.

Thank you also to our co-hosts Amelia and Michael. We are all in good hands for the next day and a half.

There are too many distinguished guests to acknowledge, but I do want to thank my fellow ASIC Commissioners – Deputy Chair Sarah Court, Kate O’Rourke, Alan Kirkland and Simone Constant, as well as the many ASIC staff and leaders who have made this event possible.

Twelve months ago, I opened last year’s ASIC Annual Forum by observing “now more than ever, we’re all navigating complex, even uncharted, waters.”^[1]

And today, I would add that we’re navigating those waters with overly-complex tools – a fragmented system where everything was designed for a specific circumstance…but no tool was designed with all the others in mind.

To drop the metaphor and speak plainly – I’m talking about regulation.

I would venture that addressing this issue is more important than ever – not just for this generation, but for generations to come.

As a community, we rightly value regulation as a necessary part of our lives – to advance and protect the interests of everyone, particularly the vulnerable.

Indeed, ASIC has this year demonstrated how targeted and proportionate use of all our regulatory tools promotes compliance and accountability.

We’ve achieved a number of regulatory and enforcement firsts – the first court-imposed penalty for greenwashing for example, and the first infringement notice issued to a market operator, the ASX.

We also took down more than 7,300 investment scam and phishing websites. We highlighted shortcomings in the way lenders provide financial hardship support. And we’ve continued to address emerging regulatory challenges, including in relation to sustainable finance, crypto assets, and artificial intelligence technologies.

And yet, as I’ve said before,^[2] perhaps the single biggest challenge to how effectively regulation can advance and protect the interests of the community and business – is its complexity.

It has been a consistent theme in the many conversations I and my fellow ASIC Commissioners have with businesses, industry groups, and consumers, but also other regulators.

This complexity has two dimensions:

1. First, the environment. The legal and regulatory landscape is increasingly complex; and we’ve also seen a sharp increase in what the public expects of governments, regulators and business;
2. And second, the legislation and regulations that we devise, draft, deliver and implement can also be complicated.

So today I would like to address this issue head on, and ask: is our approach to regulation working?

It’s time to pause and reflect

So, let’s start with ‘why’ and ‘why now’.

We are at an opportune time to reflect because we’re at a point where we can look back and consider past and recent law reform from a perspective that is informed by a wealth of experience.

Many of you will know that separately there have been, over the years, several attempts to simplify and streamline aspects of our legislative framework: the corporations law ‘simplification task force’ established by the Commonwealth Attorney-General in the 1980s, the Corporate Law Economic Reform Program in the 1990s^[3], through to the recent reviews by the Australian Law Reform Commission into, for example, corporate criminal responsibility and Chapter 7 of the Corporations Act^[4].

It’s also now over five years since the report of the financial services Royal Commission. Subsequent tranches of law reform have included:

• the implementation of the Financial Accountability Regime;
• reform of the way in which breaches of the law are to be self-reported, with the introduction of the ‘reportable situations’ regime;
• law reform in relation to competition in clearing and settlement, and financial market infrastructure; and
• the establishment of the compensation scheme of last resort.

And that isn’t an exhaustive list. All these reforms relate directly to ASIC’s responsibilities and jurisdiction. To varying degrees, all of them impact the financial sector and markets, and consumers and investors. And there are further changes ahead particularly driven by community expectations and the rapid pace of technological change, including:

• the proposed scams prevention framework;
• mandatory climate disclosure;
• building potential guardrails around AI; and
• further consideration of how to regulate crypto assets.

It seems to me that – against this background of multiple waves of reform, past present and future, and as we stand on the cusp of ever more change – it’s time for a renewed national discussion about regulatory complexity particularly following the recent review by the ALRC, and also how ASIC implements regulation.

As a regulator, our experience is that simplicity means enforceability. That’s good for consumers and investors – they get justice and outcomes – and it’s good for businesses, who get clarity about what’s required of them.

But are we providing this clarity right now?

The current complexity

Looking at the current legislative and regulatory landscape, as I’ve said before – we don’t do simplicity well in Australia.

As long ago as 1992, Professor Ian Ramsay wrote about the ‘love affair’ Australia has with legislation and complexity. As he put it, “it is now very clear that the way in which significant social problems are resolved is through legislation rather than the courts”, and that “nowhere is this more evident than in corporate law”.^[5]

More recently, the ALRC noted that:

“Corporations and financial services legislation has become unnecessarily complex. Regulated entities incur unnecessary costs when complying with their obligations. Consumers find it difficult to identify their rights. Lawyers struggle to advise their clients with sufficient certainty. Judges have become all too familiar with confronting the ‘usual labyrinthine provisions of the Corporations Act’.”^[6]:

Let’s look at some numbers. Almost all Commonwealth Acts refer to another Act, and several refer to dozens or even hundreds of Acts.^[7] Over 49,000 definitions appear across Commonwealth Acts – and around 13% of all words in these Acts are affected by one of those definitions.^[8]

The volume of legislation passed is also increasing. In the year of Federation, Parliament passed 17 Acts. Today the average is between 150 and 200 Bills a year.^[9]

The result of all this is an often dizzying web of connections, references, and definitions. This has been graphically referred to as “legislative porridge.”^[10]

Each new legislative reform is, of course, well-intended. It’s meant to solve a real and present problem at a particular time. But done in isolation, short term, reactive and specific legislative threads woven together can look less like an elegant tapestry and more like a painting by Jackson Pollock.

There can also be complexity in the administration of the law: in the practices of regulators – how they implement the law – and how they interact with each other.

In short – regulators can make it better or worse.

Now, it may appear to some that ASIC is responsible for some of the complexity – by way of the numerous legislative instruments we issue, for example. We also regularly receive feedback that the guidance we issue is too much, or too little. But the reality is that those instruments, along with our guidance, are designed to solve problems and help the framework function effectively. 

Indeed, one could argue that one indicator of the clarity and efficacy of a particular piece of legislation is the number of supplementary documents it requires to be understood and to work effectively – the number of modifications, instruments, explanatory material, and pages of regulatory guidance.

I cannot stress enough that the legislative and regulatory complexity I’ve highlighted, and the constant pipeline of change and reform, has implications for everyone.

Many of you will have experienced this impact yourselves. To quote the Attorney-General’s Department: “Complex legislation makes it difficult, expensive, and time-consuming for people to understand their legal rights and obligations. This creates burdens for business and restricts access to justice^[11].”

This goes back to what I said earlier – simpler and clearer legislation can be more effectively enforced.  

The mosaic of complexity also impacts consumer issues – including how we combat scams, predatory lending and unfair contracts.

It makes it more likely that Australians lose out on the intended benefits of worthwhile reform.

It’s clear, then, that these issues affect all of us – legislators, regulators, businesses big and small, and consumers and investors.

Effective regulation makes society better, it should not be an anchor holding us back.

If we continue on the path we’re on, we will undermine how effectively consumers and investors can exercise their rights, and we risk a chilling effect on productivity and innovation as businesses struggle to decipher and anticipate regulatory requirements.

To underscore the theme of this Forum, is that really the sort of legacy we want to leave for future generations?

So, if we’re to aspire to more effective regulation – regulation that’s easier to navigate, and better achieves its intended outcomes – it's time to ask: is this working, and if not, what should be done?

It means looking to the future and considering how things should evolve to deal with not just the problems of this generation – but also the next. That challenge is front of mind for ASIC. Not just in how we contribute to discussions and debates, but in how we implement the regulations we’re responsible for.

I would note here that as we grapple with the continuing digitisation of the economy – new responsibilities and expectations mount.

Now, this isn’t a call for more regulators. We have a relatively small economy in global terms, with a sophisticated regulatory architecture. More bureaucracy is not the answer.

Instead, this is a call to reconsider our approach.

As well as the various initiatives over the years to improve our legislative framework, there has been significant thought given – by the Attorney General’s Department, and others – to the principles^[12] that should be adopted, to improve the clarity and effectiveness of the legislative and regulatory process.

These are principles we at ASIC support. For example, that:

• laws should be as simple as possible, to give effect to policy;
• legislation should enable those affected to understand how the law applies to them; and
• achieving clearer laws requires designing, instructing, drafting and assessing for clarity.^[13]

Many of you will be familiar with the ‘reportable situations’ regime that came into effect in October 2021, and imposes obligations on Australian financial services and credit licensees to self-report non-compliance to ASIC. That regime was introduced with the best of intentions and indeed this time last year we announced it would be one of ASIC’s enforcement priorities.

One of the challenges we have encountered in administering and enforcing the regime has been the number of modifications, and the number of pages of guidance that have been required to help industry meet their obligations and ensure the regime meets its objectives – in other words, to make it work.

In short, the complexity of that regime is affecting how we translate its intent to get the full benefit.

It is an example of how complexity is a clear and present danger to our work as a law enforcement agency.

Time for action

So – I’m suggesting we would all benefit from some reflection about the edifice of complexity we have built, and dare I say it, the ‘red tape’ that can hold back consumers and businesses. I’m suggesting we get serious about what can be done.

I am grateful for the candour of the businesses, industry, and consumer advocates who have raised these issues with me over the past three years.

Across those many conversations it’s become clear that the breadth and ambition of legislation and regulation is having real-world impact on businesses, and on the outcomes consumers can get when they have been wronged.

I will note here the Government’s Regulatory Initiatives Grid, and the Regulatory Policy, Practice and Performance Framework released by the Department of Finance as policy steps in the right direction.

The Grid, for example, can help provide relief from the problems I’ve described by delivering better visibility of proposed legislation and regulation, consultation processes, and data collection; and by allowing regulators to focus on shared priorities and how to best implement reform.

The Grid lays down a challenge to all regulators. That we should consider the initiatives we’re proposing, and whether they need to happen at this or that particular time.

ASIC supports the Grid – and of course we have experience in setting out future ASIC activities in our own regulatory developments timetable that we introduced two years ago.

As the corporate regulator, with more than 30 years’ experience at the coal face of regulation, ASIC is regularly asked for its views on legislation and regulation. What I am proposing is built on that experience, and the success of our regulatory efficiency initiatives.

To that end, I can announce we will convene a Simplification Consultative Group made up of key consumer advocates, business leaders and directors and industry groups so we can address some of the complexity I have described.

Their task will be to identify how we, ASIC, can more efficiently and more effectively administer the law. How the levers and guidance available to ASIC can be more helpful.

The fundamental approach of this group will be to listen to consumers, investors, and industry and challenge us to simplify and streamline how these issues are addressed. They will do this by leveraging the existing consultative panels ASIC runs, and inviting additional participation of groups, all with an urgent focus on establishing the key priorities that we can help address.

Fresh thinking is required. We want to hear it. We want to engage with the ideas.

I want this group to reinvigorate national discussion about complexity. And I want to build on the success ASIC has seen with the regulatory efficiency outcomes – from how we develop guidance, to how we use our compulsory information gathering powers, and how we engage with stakeholders.

The focus has to be making the most difference as quickly as possible for consumers and investors, for businesses large and small and for directors.

Although ASIC is just one agency, we have one of the broadest remits of any law enforcement agency. This means the way ASIC interprets and administers the law puts us in a unique position to help address the complexity we all face.

These are issues that have built up over decades and as the ALRC’s report earlier this year has shown, there are no silver bullets. But I encourage all of you to work with us so we can make progress.

This will be similar to how ASIC has been driving a national discussion about the future of public and private markets, and the role of regulation in capital raising.

While the focus of this regulatory simplification work will start with ASIC, through this process I expect we will gain insights and ideas for new mechanisms that can provide more analysis and recommendations for reform.

Ultimately, we want to establish a consensus about what needs to be done, to ensure we tend towards simplicity for future regulatory development and implementation.

Conclusion

In conclusion, I think it’s fair to say that many aspects of the current system aren’t working as they should. There are clear costs to business, and hurdles for consumers and investors.

We all need it to be better.

This is about creating a simpler, more effective, and more enforceable regulatory system.

To all the consumers, business leaders and directors who have raised the issue of regulatory complexity with me – ASIC has heard you, and ASIC is going to act.

Simplicity makes it easier to follow the law, for consumers to be protected by the law, and for regulators to enforce the law.

It won’t be simple to get there – but we owe it to generations to come.

 

^[1] ASIC Annual Forum 2023: Navigating disruption: Setting a direction for ASIC in 2024

^[2] ASIC Annual Forum 2022: Chair’s keynote

^[3] Corporate Law Economic Reform Program | Treasury

^[4] Corporate Criminal Responsibility (ALRC Report 136) | ALRC

Confronting Complexity: Reforming Corporations and Financial Services Legislation (ALRC Report 141) | ALRC

^[5] Ian Ramsay, "Corporate Law in the Age of Statutes," Sydney Law Review Vol. 14, No. 4 (December 1992), pp. 474-494; p. 474

^[6] Confronting Complexity: Reforming Corporations and Financial Services Legislation (ALRC Report 141) | ALRC, pp. 33-34

^[7] For example “the Income Tax Assessment Act 1997 refers to 160 other Cth Acts, while the Criminal Code Act 1995 refers to 156 other such Acts.” Measuring Legislative Complexity | ALRC

^[8] Ibid

^[9] Cf. former High Court Chief Justice Robert French: presentation to Law Society of WA, Perth, 17 May 2013

^[10] Rares J in Wingecarribee Shire Council v Lehman Brothers Australia Ltd (in liq) (includes Corrigenda dated 1 October 2013 and 22 November 2012) [2012] FCA 1028 (21 September 2012) (austlii.edu.au) (para 948)

^[11] Attorney General’s Department, Causes of complex legislation and strategies to address these: https://www.ag.gov.au/sites/default/files/2020-03/causes-of-complex-legislation-and-strategies-to-address-these.pdf

^[12] For example: Attorney General’s Department, Causes of complex legislation and strategies to address these: https://www.ag.gov.au/sites/default/files/2020-03/causes-of-complex-legislation-and-strategies-to-address-these.pdf

^[13] Ibid.