06.02.2024

FAQs: The FSL Schedule

News section: Presentations & Articles

This article answers some of the (hypothetically) frequently asked questions about the Financial Services Law Schedule (the ‘FSL Schedule’) recommended by the ALRC. Implementing two of the ALRC’s recommendations would produce the FSL Schedule:

This is the fifth in a series of short pieces following the release of the ALRC’s Final Report relating to the legislative framework for corporations and financial services regulation.

What is the FSL Schedule?

The FSL Schedule would contain the key provisions relating to the regulation of financial products and financial services. It would be a clearly identifiable body of primary legislation that would be more coherently structured and easier to navigate than existing legislation.

The FSL Schedule would replace most of Chapter 7 of the Corporations Act and the entire Part 2 Div 2 of the ASIC Act, thereby reducing the number of places users need to look to find the law.

 

What would the FSL Schedule contain?

The FSL Schedule would contain the most important regulatory provisions, such as core obligations, core prohibitions, offence provisions, rights, remedies, and definitions.

The FSL Schedule would comprise three elements:

  • all of the key financial services-related provisions that are currently found in Chapter 7 of the Corporations Act and Part 2 Div 2 of the ASIC Act; and
  • objects clauses which would identify the fundamental norms of behaviour underpinning the legislation; and
  • a list of defined terms.

The provisions of the FSL Schedule would be structured and framed in a way that would make it as easy to navigate and understand as possible. For more detail about how this could be done, see Chapter 5 of the Final Report.

Why did the ALRC recommend a schedule?

As discussed in Interim Report C, a schedule would allow the greatest flexibility to restructure and reframe the existing legislation while causing the least amount of disruption to other parts of the Corporations Act and ASIC Act.

In addition, the ALRC recommends that the Financial Services Law be contained in a schedule because:

  • a schedule can be used to create a clearer legislative ‘identity’ for the regulation of financial services and to highlight common themes that traverse several chapters;
  • it would be easier to facilitate integration of Part 2 Div 2 of the ASIC Act because all levels of the macrostructure (such as chapters and parts) could be used;
  • retaining the substance of Chapter 7 in a schedule to the Corporations Act would enable existing linkages with other parts of the Act to be maintained more easily; and
  • provision numbering in the schedule could ‘start afresh’, whereas any restructuring of the provisions of Chapter 7 of the Corporations Act would require renumbering.

What did stakeholders say about the idea?

A number of stakeholders provided submissions  in response Interim Report C, where the ALRC first suggested the FSL Schedule. Stakeholders were generally supportive of the proposal.

Some stakeholders commented on the structure of the proposed FSL Schedule, and others made suggestions about other licensing regimes that could be included in the Schedule.

Several stakeholders expressed a preference for the Financial Services Law to be enacted as a standalone Act, but in light of existing constitutional constraints were supportive of the proposed schedule.

For further discussion, see the ALRC’s background paper on ‘Reflecting on Reforms III — Submissions to Interim Report C’.

Is there a risk that people will think the provisions in the FSL Schedule are less important than the provisions in the body of the Corporations Act?

This was a concern that some stakeholders raised with the ALRC. At least one stakeholder raised a concern that putting the Financial Services Law in a schedule ‘may lead to a perception that financial services regulation is not deserving of a prominent place in our Australian laws’.

However, the FSL Schedule would not be the first instance of a regulatory scheme being contained within a schedule to an Act. Other examples include:

  • The Australian Consumer Law, in Sch 1 to the Competition and Consumer Act 2010 (Cth). The location of the Australian Consumer Law in a schedule was driven by the legislation’s constitutional basis, like the FSL Schedule.
  • The Criminal Code in a schedule to the Criminal Code Act 1995 (Cth).
  • The National Credit Code in which is Sch 1 to the National Consumer Credit Protection Act 2009 (Cth) (‘NCCP Act’).
  • The Insolvency Practice Schedule (Corporations) and Insolvency Practice Schedule (Bankruptcy) contained in, respectively, Sch 2 to the Corporations Act and Sch 2 to the Bankruptcy Act 1966 (Cth).

As discussed in Interim Report C, experience with the Australian Consumer Law suggests that its location in a schedule has improved, rather than detracted from, public awareness of the legislation.

What alternatives did the ALRC consider?

During the Inquiry, the ALRC canvassed several alternatives, such as:

  • enacting the Financial Services Law as a standalone Act;
  • consolidating similar and overlapping regulatory regimes currently spread across different pieces of corporations and financial services legislation (for example, the Corporations Act, NCCP Act 2009 (Cth), ASIC Act, and Superannuation Industry (Supervision) Act 1993 (Cth)); and
  • inserting the Financial Services Law as a new chapter within the Corporations Act.

For discussion of these alternatives, see Chapter 8 of the Final Report.

Why did the ALRC not recommend a standalone Act?

The ALRC has not recommended a standalone Act or consolidation of regulatory regimes for two main reasons. First, doing so may go beyond the Terms of Reference for the Inquiry, including because it may involve questions of policy.

Throughout the Inquiry, several stakeholders suggested there should be a standalone Act relating to financial services. In part, these suggestions stem from the perception that Chapter 7 of the Corporations Act is like an ‘Act within an Act’ in terms of its length and scope (see Chapter 8 of Interim Report C for further discussion). Some stakeholders would also prefer financial services provisions to be in a standalone Act to emphasise how important financial services regulation is within Australian law.

Second, enacting one or more standalone Acts would appear to be possible only by reforming the existing constitutional basis for the Corporations Act. In brief, the current referral of matters from the States to the Commonwealth would not empower the Commonwealth to enact other (standalone) primary legislation relating to the regulation of corporations and financial services.

Nevertheless, should a standalone Act or consolidation of regulatory regimes be considered, the ALRC’s recommendations could provide a useful starting point for that legislation.

For discussion of the constitutional underpinnings of the corporations and financial services legislation, see the ALRC’s background paper on ‘Historical Legislative Developments’ and Chapter 5 of the Final Report.

Why did the ALRC not recommend a new chapter of the Corporations Act?

The ALRC has not recommended that the Financial Services Law be enacted as a new chapter to the Corporations Act (or, alternatively, the ASIC Act) for two key reasons. First, there is no obvious ‘home’ for the Financial Services Law within either Act. Second, a schedule (as opposed to a new chapter) can be used to create a clearer legislative ‘identity’ for the regulation financial services and to highlight common themes that traverse several chapters.

Is it pronounced ‘shedule’ or ‘skedule’?

This question prompts heated debate on the internet (and even divides some of the ALRC team), so we’ll stay out of this one.