ALRC Commissioner and federal court judge Justice Hon. John Middleton.

Australian Law Reform Commissioner and federal court judge Hon. Justice John Middleton has confirmed the ALRC will look at pulling chapter seven of the Corporations Act – which deals with financial products and services – out of the Act altogether as part of the group’s ongoing review into financial services regulation.

After an ALRC webinar presentation that outlined some of the complexities within the Corporations Act, Middleton was asked by ALRC president and fellow federal judge Justice Hon. Sarah Derrington whether chapter seven might be better “as a standalone statute”.

“It’s certainly something that’s on the table for consideration,” Middleton said, before adding that doing so “wasn’t an automatic cure, necessarily,” to the complexity issues that plague the Act.

“This touches on [the] cost benefits of altering legislation and reforms,” he continued. “We have to see really, once the inquiry progresses, the benefits of creating a separate Act.”

Justice Hon. Derrington will be providing insights into the ALRC’s ongoing review at the June 7-8 Professional Planner Licensee Summit in Katoomba.

ALRC President Hon. Justice S. Derrington

The Corporations Act has grown from 400,000 to over 800,000 words in is 20-year existence, with chapter seven taking up an outsized portion of the document according to ALRC legal officer Nicholas Simoes da Silva.

“Just about everyone thinks the Corporations Act is too complex and that it’s probably always been too complex,” da Silva explained, adding that it is the second largest Act of parliament and accounts for four per cent of all commonwealth statute law.

“Chapter seven alone, regulating financial services, would be the eleventh or twelfth largest Act of the commonwealth parliament if its stood on its own,” he said.

If part 7.9 of chapter seven was a chapter by itself, da Silva explained, it would be the fifth largest chapter of the Act.

Removing chapter seven would be a giant leap in fulfilling the ALRC’s technical mandate for the review, which is to find ways to simplify the Corporations Act – the framework of financial services regulation.

“If we want people to obey the law, we need to make finding and understanding the law as easy as possible,” da Silva said, noting the “astonishing complexity” of the current framework.

Dark law

Any move to excise chapter seven would require significant structural and legal upheaval, but that doesn’t mean the idea shouldn’t be approached according to Middleton. “Complexity sometimes is the nature of the beast, but we should try and manage it,” he said.

ALRC members refrained from speculating on where a standalone chapter seven would sit or how its removal would simplify the chapter itself, but de Silva made it clear that cascading rules and conditional statements (ie, those that begin with ‘if’, etc) would be a focal point for the review.