Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I thank the Assistant Treasurer for his comments. In reply, I hope we can persuade government members of the wisdom of what we are putting. The first point I want to make is that the risk is known: the risk to mum-and-dad investors, who are being convinced by certain financial advisors—not all of them—to invest in what is, by its very nature, a very opaque form of investment instrument, one where it's almost impossible for a retail investor, an ordinary mum-and-dad investor, to properly analyse the value and underlying risk in the instrument that they're investing in.

The risk has been known to the government for quite some time. In the documents discovered through the FOI process, it is now known that the government was warned by the Australian Securities and Investments Commission at least six months ago, if not longer. For at least six months the government has known about this. I wrote to the Treasurer on 23 January urging an immediate bipartisan approach to this. In that letter I pointed out that, the longer we wait, the market will respond by rushing to the door. We are concerned that the longer this process goes on, the more those that have benefited enormously through the stamping fee process will rush through the door. There'll be listings and there will be commission based sales of these innately risky products to mum-and-dad investors, and it will be too late to unwind that. I seek leave to table a copy of that letter.

Leave not granted.

In addition to writing to the Treasurer, I wrote to the Commissioner of the Australian Securities and Investments Commission. I pointed out that there was a significant concern amongst Labor members about this continuing loophole. I referred to the documents and ASIC's own research, which pointed out the poor performance of these funds; the fact that these trusts and companies were trading at large discounts to the net tangible assets; that there were high, significant management fees that were being charged; and that the conflicting selling arrangements in 42 of the 48 listed investment companies, that have been listed since the loophole was opened up, were directly related to the higher stamping fees. That is to say, ASIC's own research showed that there was a positive correlation between the amount of stamping fees, the amount of commissions that were being paid on an issuance and the poor performance of that fund.

Against this background, I don't think anyone can stand here and credibly say the public wants us to let this loophole continue. I don't think anyone can say it is in the public interest to let this known risk continue. And it'll be on all of our heads, if, against this background—against the known risks, the deep concern within the financial advising community, indeed the support for the majority of people within the financial advising community; and that there are further issuances and further listings and commission based selling of these products—we let this risk continue and we have not acted. If one of those companies or one of those trusts falls over, it will be on our heads, because we will not have acted. I don't think there's anybody in this place who wants to look back in 12 months or 18 months time and say, 'We had the opportunity to close this loophole down, and we did not act.'

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