4.1 Simplifying the law so that its intent is met

A general recommendation is that, as far as possible, exceptions and qualifications to generally applicable norms of conduct in legislation governing financial services entities should be eliminated (Recommendation 7.3).

In this way, the first, and essential, step to take is to reduce exceptions and carve outs.

The more complicated the law, the harder it is to see unifying and informing principles and purposes. Exceptions and limitations encourage literal application and focusing on boundarymarking and categorisation. Boundarymarking and categorisation may promote uncertainty. Removing exceptions and limitations encourages understanding and application of the law in accordance with its purposes. That is, ‘its intent is met, rather than merely its terms complied with’.[1] Like cases are more evidently treated alike. Uncertainty may be reduced.

Several recommendations propose the removal of exceptions and limitations in the existing law and industry codes. They relate to:

  • the pointofsale exemption for retail dealers under the NCCP Act (Recommendation 1.7);
  • grandfathered commissions (Recommendation 2.4);
  • life risk and general insurance commissions (Recommendations 2.5, 2.6 and 4.4);
  • funeral expenses policies (Recommendation 4.2);
  • insurance claims handling and settlement (Recommendation 4.8); and
  • the definition of ‘small business’ in the 2019 Banking Code of Practice (Recommendation 1.10).

Next, as far as possible, legislation governing financial services entities should identify expressly what fundamental norms of behaviour are being pursued when particular and detailed rules are made about a particular subject matter (Recommendation 7.4). By drawing explicit connections in the legislation between the particular rules that are made and the fundamental norms to which those rules give effect, the regulated community and the public more generally will better understand what the rules are directed to achieving.

The recommendation that mortgage brokers owe borrowers a best interests duty (Recommendation 1.2) gives mortgage brokers the same duty to their clients as financial advisers owe their clients.

The further recommendation that mortgage brokers be subject to and regulated by the same laws as financial advisers (Recommendation 1.5) will ensure consistent treatment of advisers.


[1] Treasury, Interim Report Submission, 1 [2].