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 Parliamentary Joint Committee on Corporations and Financial Services report on the statutory oversight of ASIC. I would like to, first of all, thank the secretariat for their assistance in preparing this report and ASIC officials for their continuing cooperation with the committee and their hard work as well. I would particularly like to thank former ASIC Deputy Chairman Jeremy Cooper for all his assistance to the committee over the years and wish him the best in his new role as head of the government’s recently announced review of Australia’s superannuation system.

The report covers a number of issues, including the lift on the short-selling ban; ASIC’s efforts to improve market integrity; and recent corporate collapses, including Storm Financial, Timbercorp and Great Southern. The committee also continued to seek information about mortgage fund redemptions, credit-rating agency regulation and professional indemnity insurance arrangements for the financial services industry.

The ban on covered short selling of financial stocks was lifted on 25 May, exceeding the length of similar measures in overseas jurisdictions. ASIC defended its cautious approach and suggested that a ban could be re-introduced if extreme market conditions justify it. The committee welcomes the lifting of the ban. We will monitor the effectiveness of the new reporting arrangements for covered short sales in bringing transparency to this area.

ASIC has also sought to address the market integrity issues that made short selling such a problem during the period of market volatility. Although the steps ASIC has taken to stamp out false and misleading market rumours have not generally led to successful prosecutions, they claim that their efforts had a deterrent effect. The committee expects that the resources allocated to this task through Project Mint will result in more tangible results in the near future. We also look forward to seeing more effective market surveillance now ASIC has taken responsibility for this from the ASX.

The collapses of Storm Financial and agribusiness MIS companies Timbercorp and Great Southern have led to the committee conducting two separate committee inquiries into the regulatory issues around these events. In terms of the collapses themselves, the committee strongly supports ASIC taking whatever steps it can to prosecute regulatory breaches, wherever they may have occurred. I understand that work is continuing, and we expect to see results from ASIC in those terms.

Freezes on redemptions from mortgage funds and cash management trusts continue. A number of hardship payments have been made so far, and ASIC has announced that it will extend the scope for hardship payments to assist those who remain affected by the freeze. But the task of unfreezing these funds is a difficult one—they need new funds to allow redemptions, yet such an inflow of funds is unlikely while they remain frozen. This is a real dilemma not only for the funds themselves but also the people who invest in them and the management of those funds in these difficult times. The committee welcomes the expansion of hardship payments and will continue to monitor this sector.

The new arrangements for the regulation of credit-rating agencies have been delayed until 1 January 2010. These changes will require credit rating agencies to hold an Australian Financial Services licence and report on their ratings processes and on how they manage conflicts of interest. ASIC told the committee that the delay is due to international developments. The committee reiterates ASIC’s warning that the ratings provided by these agencies should not be blindly relied on.

Finally, the phasing-in of professional indemnity insurance requirements for financial services providers is causing concern in the industry. Cover is getting more difficult to obtain, which might cause problems for smaller operators when the implementation period for compulsory cover concludes at the end of this year. The committee will continue to seek further updates on this problem as the requirement for a higher standard of cover begins. The committee would also like to see ASIC better explain the limited capacity for PI insurance to compensate investor losses. I commend the report to the House.

See this speech in context