Tim Watts (Gellibrand, Australian Labor Party) Share this | Hansard source

I encourage the member for Mackellar to learn some parliamentary procedure, and to read the second reading amendment, to get across what is in this debate. Even the Treasurer said we didn't need the royal commission because of ASIC, the subject of the bill before the House today. Prime Minister Turnbull still won't apologise for delaying this royal commission. He said it was a political mistake. So he gets that it has hurt him. The politics look bad for the Prime Minister. As a politician, yes, I can sympathise with some political pain, but what about the scandals that hurt Australian consumers? They are the ones who have suffered. When is the Prime Minister going to apologise to them? When is the Prime Minister going to apologise to the one Australian who lost a quarter of his superannuation, based on dodgy financial advice from AMP, during the 600 days that the Prime Minister delayed this royal commission? Where is his apology? I'm sure he doesn't care about the political damage that the Prime Minister has incurred. That's not his priority. They make the wrong calls because they have the wrong priorities and the wrong values.

The governance problems we have seen with ASIC—some of which this bill is trying to address—are a function of the Turnbull government's approach to ASIC. What has ASIC done? When ASIC appeared in front of the royal commission, we found that it had 'never' pursued civil penalties against a financial adviser for dodgy advice. It has pursued only one criminal prosecution of a financial advice licensee this decade. This isn't a coincidence. This is the result of the policy framework put in place by the Turnbull government for ASIC.

After the Abbott-Turnbull government were elected, in the 2014 budget—that was a cracker; do you remember that one? It went well!—they gouged $120 million from ASIC's budget. In their statement of expectations to the regulator, they told them to 'minimise compliance costs for business', and they did this despite ASIC warning the government repeatedly that their proactive surveillance would be substantially reduced due to these cuts. That's the governance framework for ASIC. If you take money away from them, if you reduce their headcount, you reduce the ability for that tough cop on the street to be effective.

The Turnbull government only started to restore some funding to ASIC after Labor began calling for the royal commission. It was only designed to make it look like they were trying to do something, to stave off the royal commission. Even restoring the funding to ASIC was a way of trying to protect the banks. But the damage was already done. The impact of these cuts on ASIC's capabilities can't be reversed overnight. Inside ASIC, you build up that competence, that capability, that institutional knowledge of enforcement, over time. They ripped it out. Now we've got to put it back. These cuts were to the capability of the corporate regulator and gave a free pass to the financial misconduct we've seen in the royal commission.

Another area where it's really clear that this enforcement framework has just been completely misunderstood by the Turnbull government came with respect to the Labor Party's Future of Financial Advice reforms. This was the other plank to the way that the Abbott-Turnbull government dealt with ASIC when it was elected. It cut its funding, told it to minimise compliance costs for government and tried to rip the guts out of the most substantial consumer protections for Australian recipients of financial advice. Labor's Future of Financial Advice reforms were critical, because we know, from the evidence at the royal commission, that they were changing behaviour at the banks. The Future of Financial Advice reforms only came into force in the first year of the Abbott government. They were introduced by the previous Labor government but they only came into force under the Abbott government. We know, from the evidence of the banking executives at the royal commission, that they were changing behaviour. When you change the law to require financial advisers to act in the interests of their clients, not themselves, guess what: their behaviour changes. At ANZ they changed their remuneration practices. They changed the way they give bonuses, not only to financial advisers but to the executives supervising them, saying: 'The law requires us to put the customer first, so maybe let's start doing that, as a corporate citizen. Maybe let's start paying people on the basis of this advice.'

The FOFA reforms also gave ASIC important new powers to rein in poor financial advice. They banned conflicted remuneration. They instituted a duty for advisers to act in the best interests of clients and created an obligation for advisers to renew ongoing fee arrangements with clients. This is ground zero of the financial advice scandals that we've seen in the royal commission, and the Abbott government wanted to remove them. They wanted to get rid of the protections that were there—such as they were; we've seen how inadequate they were from the evidence in the royal commission. They have made every wrong call, because they have the wrong priorities. The only reason that we've retained the obligation for financial advisers to act in the interests of their clients is that the Labor Party wouldn't cop these changes. We went into bat for the Australian public when the Abbott-Turnbull government was going into bat for the big end of town.

At this point in time, after 600 days of delaying the banking royal commission, after an extended period before that of gutting the corporate oversight regime, the corporate law enforcement regime governing corporate Australia, it's clear that we now have a crisis of trust in the Australian public for corporate Australia. We need to restore confidence in the banking sector. Our financial system depends on trust and confidence. That's what banking is about. Sunlight is the best disinfectant, and the royal commission into the banks needs to be able to run its course. It needs to air all this dirty laundry; we need to get it out there. And those who have presided over misconduct need to take full responsibility. When the commissioner of ASIC, Greg Medcraft, warned that there were subcultures operating within the banks that were not meeting community expectations, you knew that the system had a problem. Mr Medcraft warned against people characterising misconduct in the banks as 'a few bad apples' and at the start of 2017 he said:

Stop saying it's a few bad apples. At some point you've got to look at the damn tree and say, what's wrong with us as an organisation? That's what I am saying to these guys.

As Australia's corporate markets, financial services and consumer regulator, we need ASIC to operate as effectively and efficiently as possible, but we also need corporate Australia to take some responsibility for the scandals that we've seen. I'd like to see some shame. It's not asking too much, with the revelations and scandals that we've seen in the royal commission. It's not asking too much for the Australian public to see accountability, to see some responsibility taken. If I were a board member of these companies, I'd be ashamed. I'd take responsibility; I'd resign. I wouldn't fluff over it with euphemism. I'd take responsibility.

I want to call some attention to AMP's media release on 30 April, 2018 advising of AMP chairman, Catherine Brenner, 'stepping down' from her role as chairman for her company misleading ASIC on 20 occasions and her involvement in an 'independent report' into this behaviour. I want to compare that with the statement of Steve Smith, the Australian test cricket captain, following his one-year ban for Australian cricket's ball-tampering scandal, just to illustrate the corporate rot that has beset corporate Australia and how to respond to it. The lack of shame on AMP's part is astounding. Steve Smith started his statement after the ball-tampering scandal with the words, 'I'm sorry'. In AMP's statement, the board did not take direct responsibility for misleading ASIC; in fact, it cleared itself—it said the board had not engaged in inappropriate conduct and that the chairman was just stepping down. I don't know why. They blamed the legal counsel for it. AMP talk about being disappointed in the conduct of others and euphemistically talked about the chairman stepping down. They say that the general counsel and company secretary will 'leave' the company. No-one's getting sacked here. No-one's being held accountable. Excuses are being made. Steve Smith showed empathy for those affected by his actions, declaring, 'I now understand the consequences. I'll do everything I can to make up for my mistake and the damage it has caused.' AMP states, 'The board is satisfied they did not act inappropriately.' Where's the accountability? Where's the shame?

We need to change the culture of corporate Australia. Some of that comes from the governance reforms we see here with ASIC. But it also takes an intrinsic change in the way corporate Australia does business. The game of mates has got to stop. The covering up for misconduct has got to stop. The excusing of oversight of governance arrangements within companies—where a company can lie to the regulator on 20 occasions, where they can knowingly charge fees for services that aren't being provided, where they can doctor a supposedly independent report to remove references to executives—will not restore confidence in the Australian corporate sector. We need a tough cop on the beat. We need ASIC to start doing its job as an external oversight, but what about governance inside the companies that it's overlooking? That's the change that we need to see in corporate Australia.

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