According to the ALRC’s final report, the legislation governing Australia’s financial services industry is “a tangled mess”, as well as being tricky to navigate, costly to comply with, and unnecessarily difficult to enforce.

The legislation includes 1,200 notional amendments, an incoherent legislative hierarchy and fundamental norms obscured by excessive prescription – all of which were identified as key problems in the report.

According to the ALRC, judges have described the current laws as being like “porridge”, “tortuous”, “treacherous”, and “labyrinthine”. Complexity in the existing legislation has also been revealed to cost businesses, consumers, investors, and the economy at large.

“After more than 20 years of development, the legislative framework for corporations and financial services regulation is no longer fit for purpose. The existing legislative framework is unnecessarily complex, and complexity only continues to accrue,” the ALRC stated in the report.

As such, the ALRC has made 58 recommendations to simplify the law, including a revamped legislative framework for the financial services sector. These reforms will aim to reduce costs for service providers and consumers, improve productivity by reducing complexity, and provide clarity around compliance requirements and enforcement.

Of the 58 recommendations, 23 were made by the ALRC in interim reports A, B, and C. Thirteen of these recommendations have already been implemented, in full or in part, by legislation passed last year.

Recommendations in the final report include redesigning financial services legislation to identify as the “financial services law”, making it easier and less costly to find, navigate, and understand, as well as stopping the use of extensive and “almost invisible” notional amendments and using consolidated rulebooks in their place to provide flexibility for regulation.

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Recommendations also include the introduction of a single, simplified definition of “financial product” and “financial service” to make it easier to tell the difference between the two, in addition to making offence and penalty provisions less complex and more obvious by consolidating them into a smaller number of provisions that cover the same conduct, making them easier to identify, and making the consequences of breach clear on the face of the law.

The ALRC’s reforms would strengthen consumer protection substantially and reduce costs for businesses by making the law simpler to comply with and easier to enforce – something the president of the ALRC, Justice Mordy Bromberg, said had already received support.

“Australia’s laws governing financial services are a confusing maze and need to be overhauled. The reforms outlined in this report will make these laws easier to understand and navigate, drive down the costs associated with complying with the law, and make it easier for consumers to understand and enforce their rights,” he said.

“These laws provide the legal and economic infrastructure of the financial services industry. The reforms we’re proposing are broadly supported by stakeholders and, if implemented, will see substantial improvements for both consumers and business.”