Has the Financial Services Reform Act Fixed the Problems with the Regulation of Securities and Derivatives?

The Financial Services Reform Act 2001 (Cth) introduced new definitions of “derivative” and “financial product” into the Corporations Act 2001 (Cth), and replaced the separate regulatory regimes governing futures contracts and securities with a single financial markets authorisation regime and a single intermediary licensing regime. This article examines the reforms to evaluate whether they have been successful. It is argued that there are definite improvements resulting from the reforms, and the scope for regulatory arbitrage has been greatly reduced. However, numerous problems remain. There are significant differences in the regulation of securities and derivatives. The distinction between securities and derivatives is still based on legal characteristics, not economic function. There is uncertainty as to the exact scope and interaction of the definitions, particularly with respect to equity derivatives, warrants and options. The current law has thus not fully addressed many of the problems that existed prior to the reforms