Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Hansard source

The Corporations and Other Legislation Amendment (Trustee Companies and Other Measures) Bill 2011 was introduced during the last sitting of the House on 23 February. It amends the trustee company provisions in chapter 5D of the Corporations Act 2001 to provide for some further improvements and refinements flowing from the 2009 reforms in the regulation of trustee corporations. On a separate issue, the bill gives a general exemption to part IV of the Competition and Consumer Act—formerly the Trade Practices Act—for participants in the ATM industry because of the interlinked nature of our payments system, which, of course, means that companies that would otherwise be competitors also have to rely on strong cooperative linkages to make the system friendly for consumers. Notwithstanding their competitive nature, the system, for obvious reasons, requires all of those companies to have some linkages, and that is why the exemption is required.

As I said, the changes in this bill—these amendments—flow from those reforms to trustee laws in 2009. That created the national regulation of trustee companies in addition to the system of regulation at a state and territory level, and the coalition, back in 2009, strongly supported those reforms. They have helped trustee companies that have needed to operate in multiple jurisdictions. At the time, the shadow minister for financial services, superannuation and corporate law, Chris Pearce, the former member for Aston, said that the reforms were an example of good and targeted reforms, and we in the coalition maintain that position. Consequently we support these amendments, which flow from those original reforms. They are amendments which respond to industry and stakeholder consultation.

Trustee corporations are required by law to always put the interests of clients first, and they owe fiduciary duties to the beneficiaries of the assets they administer. They offer high degrees of protection to clients. The coalition has long advocated the fiduciary duty of financial advisers, and we of course support the current fiduciary duties that exist in the financial services sector.

On a product level, I think that if people choose to have stronger fiduciary duties then they should, of course, be free to do so. A trustee company is one way of structuring a fund to ensure that the duty to put the interests of clients first always remains. There are only 11 licensed private trustee companies in Australia, but they play an important part in the financial services system. It is hoped that, with a national system and these subsequent reforms embodied within this bill, more trustee companies will voluntarily come under the federal system, which offers protections similar to those under state and territory regulatory regimes such as the Trustee Companies Act 1968 in Queensland and the Trustee Companies Act 1964 in New South Wales.

This bill is an example—I must, unfortunately, say a rare example—of the government listening to industry stakeholders: specifically, in this case, the Trustee Corporations Association of Australia, which is the peak body representing trustee corporations in Australia. It is a shame that government listening to stakeholders is the exception rather than the rule, but on the rare occasion that it does occur I think it is fair enough to highlight it as a welcome, albeit very rare, Halley’s-comet-like experience here in the House with this government.

The bill contains a number of specific measures, as I mentioned at the outset, to provide for some further refinements and maybe to correct some oversights and unintended consequences flowing from the original reforms. I say that not in a negative way. That is always the case when there are complex reforms in an area that requires follow-up, and that is what this bill does.

Specifically, the measures include a change which will now allow licensed trustee companies to apply to ASIC in order to transfer estate assets and liabilities from another ASIC-licensed trustee which was previously licensed under state or territory law. It will give ASIC the power to determine whether there is to be a transfer of estate assets and liabilities from a trust company which has had its licence cancelled to a public trustee of a state or territory. It will allow the establishment of a formal procedure under which prospective licensees will be able to apply to the government in order to be listed as a licensed trustee company. It will require trustee companies to hold an Australian financial services licence and prohibit them from holding themselves out to be a trustee company without one. It will also replace the term ‘authorised trustee corporation’ within the Corporations (Aboriginal and Torres Strait Islander) Act 2006 with the term ‘licensed trustee company in accordance with the meaning of Chapter 5D of the Corporations Act or the Public Trustee of a State or Territory’.

The bill also deals with amendments to the operation of common funds, drawing down an imposition of fees. This section allows a management fee to be drawn from the fund for its management and administration. However, in the spirit of openness and transparency, the fee must not give a financial benefit unless such a benefit would be as a reasonable arm’s-length transaction. These are all outlined, of course, in the minister’s tabling speech and the explanatory memorandum. I am advised that this requirement had existed under the Corporations Regulations 2001, but adding it to chapter 5D of the Corporations Act is a welcome move that is likely to encourage better prudential regulation.

As I said at the outset, the bill also amends the payment system to allow for a general exemption from part 4 of the Competition and Consumer Act, the former Trade Practices Act. It is simply a measure for the regulatory change that has been in place since 2006 and which was implemented under the Howard government. The interlinked nature of our payment system means that often there have to be cooperative arrangements and it is desirable to have cooperative arrangements between participants. They are otherwise solely competitors in the ATM sector. These arrangements have the potential on a black-letter reading to contravene the competition laws we have in place; therefore the ATM industry needs a general exemption from the competition laws in order to carry out regular everyday business. In order to protect consumers and the system, the RBA currently runs and administers ATM regulations through the ATM access regime and of course it is in the best interests of consumers that an efficient and stable payments system exist.

The regulations exempting the sector from the Competition and Consumer Act have to be reviewed every two years. The current regulatory clause expires right now, in March 2011. Given that the structure of our ATM system relies on these relationships, it is unlikely that the renewal of these regulations will become unnecessary. We therefore support a legislative change. The fact that the payments system is incredibly interlinked is a welcome feature. It requires a special form of oversight, currently done through the payment system board of the Reserve Bank of Australia.

The opposition have been supportive of the reforms in the ATM sector. Lastly, this bill has responded to stakeholder concerns outlined by the industry—concerns that have come forward flowing from those original reforms. It is welcome that the government on this rare occasion has listened and I have no hesitation or problem in saying that we supported the reforms in 2009 and we support the refinement to the reforms embodied within this bill. This bill has the opposition’s full support.

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