Bernie Ripoll (Oxley, Australian Labor Party) Share this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee’s report entitled Statutory oversight of the Australian Securities and Investments Commission, together with evidence received by the committee.

Ordered that the report be made a parliamentary paper.

I am pleased to speak to the report of the Joint Committee on Corporations and Financial Services on the statutory oversight of ASIC. I would like to thank the secretariat for their work on this report as well as ASIC officials for their ongoing cooperation with the committee and their participation at the committee’s public hearing on 28 November last year. I also want to thank all the members of the committee for their hard and diligent work.

The report covers a number of regulatory issues stemming from the financial crisis, including the short selling ban and hardship exemptions for frozen mortgage fund redemptions. The committee also continued its interest in financial market regulation, ASIC’s restructure, superannuation issues and financial literacy.

Last year’s temporary ban on all short selling, and the proposed new disclosure regime for covered short selling, was the most significant issue discussed at the hearing. ASIC told the committee that it implemented the ban to provide a circuit-breaker during the height of the share market turmoil. It is hoped that the new disclosure regime for short selling will help the regulator identify those who profit from short selling during chaotic trading periods through false market rumours and insider trading. The committee also welcomes ASIC’s involvement with other national regulators to achieve an internationally consistent approach to regulating short selling.

A freeze on redemptions from cash management and mortgage trust funds following the announcement of the bank deposit guarantee has left many people without access to their savings. ASIC told the committee that 52 mortgage trusts had frozen redemptions, and the regulator has responsibility for administering hardship relief by the funds to eligible applicants. The committee will continue to monitor the effects of the bank deposit guarantee on this sector and the administration of hardship payments where they are needed.

Insider trading, false rumours and market manipulation continue to be of concern for us as a committee. ASIC has increased the number of investigations it is conducting in this area, although the difficulty of proving these activities makes it a difficult task. Initiatives such as ASIC’s Project Mint and the Corporations and Markets Advisory Committee’s investigation of overseas approaches are important steps in tackling these issues.

The implementation of ASIC’s restructure had almost been completed when we met in November, including senior executive appointments. Recruitment has apparently been made easier by the financial crisis and job insecurity in the private sector. The external advisory panel had not yet been appointed though. ASIC emphasised to us the importance of bringing cultural change to the organisation and getting staff to think about the market, rather than process. The committee supports these changes within ASIC.

The provision of projections to members of super funds continues to trouble ASIC. The funds are currently not permitted to provide projections because of the personal advice provisions in the Corporations Act, restricting an important source of guidance when members are calculating their contributions level. Although the committee understands the risks with super funds offering projected retirement benefits, particularly in current circumstances, the situation is preventing members from making informed decisions about their retirement income. ASIC should press for reform in this area as a matter of urgency. As we understand it, ASIC is doing work in that area.

Finally, improving the financial literacy of Australians was discussed at our hearing with ASIC. The committee strongly believes that financial literacy is crucial to minimising the harm done by investment scheme collapses and other financial products likely to cause financial hardship. The recent collapse of Storm Financial has highlighted the need for investors to better understand the character of the products they invest in. The committee has again urged ASIC to do more in the mainstream press to warn consumers about investment pitfalls.

It continues to be the case that ASIC plays an essential role in providing confidence as well as regulation to the markets. It is also essential that people who invest in Australian financial products understand the rules by which ASIC can apply pressure to organisations and financial institutions. The message of the committee to ASIC and to other people involved in financial products and services is to use the lessons that are being learnt from the global financial crisis to provide better governance and put better structures in place. I commend ASIC for the work it is doing but ask it to continue its efforts to improve the systems it has in place and its vigilance over financial systems and products to make sure consumers are protected. (Time expired)

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