In its submission to the Financial System Inquiry, the US-based law firm – which completed the takeover of Australian firm Middletons in January 2013 – strongly criticised the regulatory system governing Australian financial services in no uncertain terms, pointing to inconsistencies that have "obscured the law".
"Regulator overlaps, inconsistencies in enforcement and successive regulatory modifications have lead to pervasive uncertainty in the financial services industry," the submission states.
"A rationalisation and consolidation of financial services regulation would benefit consumers, industry and the Australian economy at large.
"The most over-used and misapplied legislative instruments are ASIC Class Orders and ASIC Regulatory Guides. Both have been utilised to create entirely novel regulatory regimes for specific categories of financial products and financial service providers."
The use of these two tools by ASIC has "distorted and glutted financial services regulation", the submission stated.
In addition, the law firm’s submission – which is signed by partners Andrea Beatty and Elizabeth Gray – argues that the Australian funds management industry’s international competitiveness is being hampered by the “current regulation of companies and trusts”.
“The regulation and operations of companies under the Corporations Act is insufficiently flexible to provide any incentive for Australian funds to be structured as a company,” the submission states.
“In our view, this is a distinct disadvantage for Australian fund managers who are now competing in an increasingly global marketplace populated by fund managers that are able to offer investors multiple investment vehicles in a variety of different legal structures.”
As a corollary, the submission recommends that corporations law is amended so as to allow funds to be set up in Australia, either as funds or unit trusts, depending on the preferences of the relevant stakeholders, as has recently been implemented in Hong Kong.
