Future of FinTech and financial services reform in Australia
Updated: Sep 20, 2020
It's an exciting time for reformists in the financial services and FinTech industries. Following the release of an Interim Report by the Australian Senate Select Committee inquiry into FinTech and RegTech, the Australian Law Reform Commission (ALRC) has confirmed it is starting a three-year review into how financial services regulation could be more efficient.
While the two processes review and reform processes are entirely separate, there is little doubt that the ALRC will be considering the Senate Committee's 32 recommendations from the Interim Report, as well as the outcome of the final report due on 16 April 2021.
The Terms of Reference for the ALRC review focus on the provisions of the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth) primarily, while also referring to other financial services legislation, and legislative instruments.
Three fairly broad sub-topics are specifically identified, each of which is to be the subject of a separate interim report, prior to release of the consolidated Final Report by the ALRC. The timeline for each interim report is:
A first interim report focusing on the appropriate use of definitions in corporations and financial services legislation is due by 30 November 2021;
A second interim report focusing on regulatory design and the hierarchy of primary law provisions, regulations, class orders, and standards, is due by 30 September 2022;
A third interim report focusing on potential reframing or restructuring of Chapter 7 of the Corporations Act is due by 25 August 2023;
The above will all come together in a consolidated final report due by 30 November 2023.
Without going into significant detail, we expect that, at a minimum, the following recommendations from the Senate Committee's Interim Report will be on the radar for the ALRC:
Recommendation 13 - The committee recommends that the Australian Government provide the Council of Financial Regulators (CFR) with a competition mandate as advice to the government and that the CFR regularly report on competitive dynamics in the Australian financial services market.
Recommendation 14 - The committee recommends that the Australian Government establish a framework for the Council of Financial Regulators, supported by AUSTRADE, to regularly consider and report on Australia's external competitive position in financial services, including measuring technology adoption and innovation.
Recommendation 15 - The committee recommends that the Australian Government establish a market basis for determining the success of Australia’s financial regulators in supporting a pro-innovation and pro-competition culture in financial services.
Recommendation 16 - The committee recommends that the Australian Government establish a culture of innovation and competition in financial services by supporting self-regulation where innovative products emerge, whilst ensuring strong consumer protection.
Recommendation 23 - The committee recommends that the Australian Government expand the Consumer Data Right to include other financial services, starting with the superannuation sector and then including sectors such as general insurance.
Recommendation 24 - The committee recommends that the Australian Government amend the Early Stage Innovation Company and Early Stage Venture Capital Limited Partnerships qualification criteria to widen access to startups and investors.
Recommendation 25 - The committee recommends that the Australian Government implement a Limited Partnership Collective Investment Vehicle and a Corporate Collective Investment Vehicle regime to drive inbound capital investment for Australian startups.
With over a year until the ALRC's first interim report is due, we can expect to see a submission process opening in the near future, and look forward to seeing how the Final Report of the Senate Select Committee informs the first ALRC report in November next year.