Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

Labor supports the Treasury Laws Amendment (ASIC Governance) Bill, subject to an amendment. I move:

That all words after 'That' be omitted with a view to substituting the following words:

'whilst not declining to give the bill a second reading, the House notes the importance of effective oversight and regulation by the Australian Securities and Investments Commission in ensuring the protection of Australian consumers, given increasing reports of misconduct in the banking and financial services industry'.

Labor will always support a strong and well resourced watchdog in the financial services sector. We've always supported ASIC and its work and made sure that it was well resourced to do the job for which it was constituted. That's in stark contrast to the approach that this government has taken with respect to ASIC. We all know that, during the first Abbott government budget, it dramatically cut the amount of funding to ASIC, resulting in job losses. In the wake of that, we saw some of the scandals that occurred in the financial services and banking industry that are now the subject of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, which has uncovered some shocking evidence of not just plain misconduct but potentially criminal actions. It's clear that we need a strong and effective regulator, but it's taken a royal commission to help this terrible government to see that a little bit more clearly.

This bill amends the ASIC Act to provide the Governor-General with the discretion to appoint a second deputy chairperson of ASIC. We support an additional deputy chairperson and note the government's intention to nominate Mr Daniel Crennan QC to this role. Amending the ASIC Act to provide for two deputy chairs will help ASIC to be an effective and efficient regulator and will provide greater flexibility for the commission to determine how it undertakes its oversight and other governance functions. A second deputy chairperson will also support ASIC in engaging with stakeholders to better communicate its role, its priorities and how its resources are allocated.

ASIC's role has also been expanding, with new directions powers to boost its oversight of the Australian Financial Complaints Authority, the so-called one-stop shop for dispute resolution that the government is in the process of establishing. We also note that the government has proposed that ASIC be responsible for the management of expected additional disclosures following reforms to whistleblower laws, and ASIC may soon also have new responsibilities for administering the new Asia Region Funds Passport regime. It's also the case that legislation has been introduced into the parliament to expand ASIC's oversight and give it a competition mandate, albeit one similar to, and incidental to, the role that's performed by the Australian Prudential Regulation Authority, and this is contained in the Treasury Laws Amendment (Enhancing ASIC's Capabilities) Bill. As Australia's corporate markets, financial services and consumer regulator, we need it to operate as effectively and efficiently as possible. That's why Labor will be supporting this bill.

Labor supports protections for mum-and-dad investors, superannuation holders, general members of the public who hold bank accounts and those who invest in managed investment schemes, different types of investment vehicles and, indeed, corporations that operate under Australian Corporations Law. We seek to ensure that they're protected from fraud and from some of the activities that we've seen being undertaken by the big banks and other big financial service providers in the royal commission. To paraphrase a former Prime Minister, Paul Keating: 'It's the royal commission that we really had to have.' For too long, the Turnbull government did nothing. It ignored Labor's push for a deeper inquiry, through a royal commission, into what was going on in banking and financial services, despite the many scandals that had plagued this industry: the collapse of Storm Financial, Trio Capital, Timbercorp and a number of other investment vehicles; the scandal that was going on in the Commonwealth Bank with their wealth management division; the CommInsure scandal; and the fact that all of the big banks had been the subject of ASIC inquiries and had charged fees for services that weren't supplied and been required to pay back customers' funds for advice that wasn't given or was levied in an inappropriate manner. There's been a litany of cases through which scandal and misdemeanour have plagued this industry, and for 600 days the Prime Minister sat in this parliament and said to the Australian public that there was no need for a banking royal commission.

Well, the Prime Minister and other members of the government now have egg on their faces. Even in the first weeks, the veracity and the value of the royal commission was proven in the evidence that was given. The history has already been written. Yet again, all the evidence shows that the Turnbull government got another call wrong—another big call wrong—when it came to highlighting what was going on in this industry. They even shut down calls for action amongst their own backbench. That's exactly how out of touch the senior members of this government are. It was only after getting the green light from their mates in the financial services sector and the big banks that the Liberals and Nationals finally relented and agreed to what they hoped would be a very short and sharp royal commission. Now, of course, they're already talking about extending the time frame if the commissioner requires it. In the early stages of the commission, it's already shown just what happens when light-touch Liberals prioritise banks and financial institutions over the people.

The banking royal commission has highlighted the hypocrisy of Malcolm Turnbull, Scott Morrison and in particular, I've got to say, the finance minister, Senator Cormann. During his time in parliament the finance minister has consistently supported the banks and financial planning industry above the interests of everyday Australians. The finance minister and the Turnbull government have been more concerned with what they call 'red tape' and the banks' costs of doing business, despite the fact that these corporations are already generating superprofits. We've seen in recent days that both ANZ and Westpac have reported their half-year profits, and it's no surprise that once again they're in rude health. We need only look at Senator Cormann's maiden speech to see that he emphasised an ideological importance of checks and balances on government power but made no mention at all of the checks and balances on the power of the banks and the financial corporations. This hands-off, light-touch approach that the Liberals have taken has been at the cost of the welfare and livelihood of many Australians.

The seeds of this approach were really sown in 2014. That was the time when this government tried to gut the core of Labor's Future of Financial Advice reforms. These laws had previously been introduced to help prevent the same scandalous behaviour—driven by greed and distorted financial incentives—that we're today seeing uncovered in the royal commission. At the heart of the Future of Financial Advice reforms was a best-interest test for clients, a legal obligation for financial advisers to do the right thing by their customers. It's hard to believe this, but prior to FoFA becoming law there was no legal obligation in any statute for financial advisers to act in the best interests of their customers. And guess what? They didn't; many of them didn't. That's the evidence that's being uncovered in the banking royal commission at the moment and that was uncovered through numerous parliamentary inquiries initiated by the previous Labor government into the likes of schemes like Trio Capital, Westpoint, Opes Prime, Timbercorp and all of these other financial collapses where many Australians who'd entered the retirement phases of their lives and had basically put the lot of their retirement income into these schemes lost the lot. They not only lost their life savings and their retirement incomes but in many cases lost their kids' inheritance as well, because some of them had remortgaged their homes to go deeper into some of these financial schemes on the advice of these financial advisers. Labor, in government, acted with the FoFA reforms, which were strongly opposed by the financial advice industry. Never forget that: the banks and the big financial advice industry houses, like AMP and the Financial Services Council, opposed what Labor was doing in introducing a best-interest test into the industry.

And guess who it was also opposed by? None other than those opposite. Yes, that's right. Members of this coalition government, led by the Prime Minister, led by the finance minister, led by the Treasurer, opposed the introduction of a catch-all provision in the best-interest test. So the very scandalous behaviour that is being uncovered by the royal commission at the moment would not be illegal if the Turnbull government had its way. That's a very important point to remember. It has been forgotten in much of the commentary associated with the royal commission. If the Turnbull government had its way, the behaviour that's being uncovered by the royal commission at the moment would not be illegal; it'd just be a bad look. That in itself is scandalous.

Not only did they oppose the original FOFA legislation but, when they were elected in 2013, they quickly set about dismantling that best-interest test, despite the pleas of consumer groups to leave the scheme in place. Let's not forget that Senator Cormann said at the time of Labor's changes that they 'went too far' by having a legal obligation requiring financial advisers to take any reasonable steps in their clients' interests. The Abbott government had once again sided with the big banks and the financial advice industry over the interests of customers.

Labor had to fight tooth and nail to help retain those laws despite the coalition's persistent efforts to undermine these groundbreaking changes. Thankfully, most of the Senate crossbench agreed with the Labor Party, and we were able to stop that. The government actually got that reform to water down the best-interest duty in the FOFA regulations through the parliament. It passed the House of Representatives. It passed the Senate. It was only through the good work of Labor senators in putting a rescission motion in and managing to convince the crossbench of the idiocy of what they'd done in agreeing with the government that we were able to overturn that. Thankfully, we did. If this government had its way, there'd be no laws against what the banks and the likes of AMP have done—to some extent. It would be simply a bad look for them, and ultimately there would be no accountability.

For Liberal and Nationals MPs to now come into this place and in public express their outrage about the behaviour uncovered by the royal commission is rank hypocrisy. It is rank hypocrisy. We still have no idea why this government would want to water down financial protection laws in Australia. But that is exactly what it tried to do in the early stages of this government. The heart-wrenching stories of mum-and-dad investors losing everything in a string of financial scandals in the wake of the global financial crisis were not enough for this coalition government to stop it removing from customers the protection from dodgy financial advice.

In 2012, Senator Cormann and his Liberal colleagues strongly argued against the introduction of the FOFA reforms. In a dissenting report to the Parliamentary Joint Committee on Corporations and Financial Services, in the inquiry into the FOFA legislation, Senator Cormann and his Liberal colleagues said the legislation would 'increase red tape and costs for both businesses and consumers for no additional consumer protection benefit'. In 2014, when introducing a watering-down of consumer protections, Senator Cormann also said:

Labor's changes in government went too far [and] imposed too many additional costs without a proportionate consumer protection benefit.

That was the view of the finance minister in 2014—that introducing a best-interest duty to protect customers from the behaviour that we're seeing in the royal commission and for the likes of AMP to act in the best interests of their customers was going too far and was increasing red tape. Now they've got the hide to come in here and say to the Australian public that the royal commission is the right thing to do. Some of them have said, 'We've always supported this style of laws and this type of inquiry.'

These laws have been previously introduced to help prevent the same scandalous behaviour, driven by a lack of regulation and enforcement, that we are seeing today. To highlight one of the examples of the importance of FOFA, ASIC's own Financial advice: fees for no service report revealed in October 2016 that the big four banks and AMP had spent years taking fees from customers for financial advice services that were never provided. That's a classic case of not acting in the best interests of the customers: charging customers for services that weren't provided. It's debatable whether or not that would be illegal, if FoFA weren't around and there weren't this best-interest duty. Yes, there were systems in place to record the rivers of cash coming in. But, no, there was little in place to prove that customers were getting anything in return. That report found that the customers who initially signed up for financial advice had been charged fees for services they did not even receive, and in some cases after they'd had contact with their bank. It is very sad to see this evidence being uncovered in the royal commission. According to ASIC, the amount of the fees that were improperly charged was over $200 million, excluding interest. That's $200 million extracted from mum-and-dad investors, who Labor wants to protect.

On the matter of ASIC, it was the Abbott and Turnbull government that tried its best to gut the regulator in its first budget by undermining its ability to cover and prosecute unconscionable financial conduct. Let's look again at the evidence and the recent history. In 2014, in its first budget, the Abbott government slashed ASIC's funding by $120 million. The result, not surprisingly, was a devastating loss of staff and expertise, with a significant effect on the ability of the corporate and financial services regulator to address misconduct. The result was a further kick in the guts for victims of financial rip-offs. Despite the depth of the cuts to ASIC and the massive impact that this had, the government took zero action and only partially unwound the cuts after Labor began to shine a light on the industry and some of these scandals were being uncovered. It actually makes it worse. They reacted to this only because of community pressure, because of the Labor Party and because of Australians being put in these very difficult situations.

Millions of Australians have been let down by the Turnbull government, none more so than the victims of financial advice. These hardworking Australians really do deserve an apology from the Prime Minister for failing to support FoFA in the initial stages, for trying to undermine it when they got to government and for refusing to support a banking royal commission two years ago that could have gotten to the bottom of what's been going on in this industry.

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