Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and associated bills represent minor but welcome regulatory reforms that reduce in a small way the red-tape burden facing Australian business and Australian consumers. On that basis, the Labor Party will support these bills without amendment. The package introduces changes to corporate regulation in the areas of financial services, company reporting obligations, auditor independence, corporate governance, fund raising, takeovers and compliance as well as other initiatives. This bill will reduce some of the regulatory burden on providers of financial services, it will increase access to financial advice and it will make improvements to other aspects of the financial services regulatory framework. The changes include removing the need for the provision of a statement of advice: firstly, where there is no recommendation in relation to a particular financial product and no remuneration; and, secondly, where the amount to which the advice relates is under the prescribed threshold, proposed to be $15,000.

In relation to superannuation, this will be limited to: consolidation into or supplementation of an existing account; refining the circumstances where a financial services guide is not required to be provided, particularly at seminars; and some other measures. In respect of the disclosure documentation issued under the Financial Services Reform Act, generally providers have been issuing advice documents of up to 100 pages. These are costly, complex and unreadable for consumers. I would argue that these documents are counterproductive. They are so thick and so substantial that consumers are not reading them; therefore, while they are intended to improve transparency and assist consumers, they are counterproductive because consumers simply cannot and will not read them.

The measures in this bill represent the second attempt at so-called refinements to reduce red tape and lengthy documents in some areas of disclosure. They do represent a partial reduction on the expansion of lengthy documentation under this government and, accordingly, Labor support them as far as they go. We do say, however, that they should go much further. What is concerning about these reforms is that the government appears to regard them as the be-all and end-all of regulatory reform. The government appears to regard them as a major achievement and it appears to regard them as a substantial reduction in red tape. I say that because I have read the press releases of the Parliamentary Secretary to the Treasurer—and I am glad that he has been able to join us in the chamber—and those press releases present this bill as a substantial achievement.

I must say that I really enjoy the parliamentary secretary’s press releases, and I compliment him on them. You would be particularly unsurprised, Mr Deputy Speaker Jenkins, that I subscribe to the press releases of the Treasurer, the Assistant Treasurer and the parliamentary secretary, and I get a particular giggle when I read the parliamentary secretary’s. They are particularly good. I really like the headings: ‘Pearce delivers consumer benefits and drives reductions in red tape’ and ‘Pearce continues delivering reductions in the red tape burden’. My personal favourite, Mr Deputy Speaker, which is not particularly germane to this bill but I am sure you will not mind, is this one: ‘Pearce delivers major insolvency law reform’. The headings would have you assume that these are major deliverances by the parliamentary secretary, very modest soul that he is: ‘Pearce continues to deliver’, ‘Pearce’s major achievements’. I was drawn to his release a few months ago:

The following item has been released by the Hon. Chris Pearce, Parliamentary Secretary to the Treasurer. Achievements: the parliamentary secretary to the Treasurer has released a new achievements page on his website outlining some of his key portfolio achievements.

I tried to look them up, thinking they would be mentioned under ‘achievements’ on his website but unfortunately it has been removed. Apparently in hindsight there have been no achievements by the parliamentary secretary. I am sure he will have a look at that. I thought it may be under ‘publications’. I looked that up but, unfortunately, there were no publications on the parliamentary secretary’s website. He has not been very busy writing publications, and the ‘achievements’ section has been removed. Apparently in hindsight there have been no achievements.

My other concern relates to the press release ‘Rudd fumbles on policy again’, which he issued after the Leader of the Opposition’s budget reply, where we announced our policy of major regulatory reform, of substantial regulatory reform—not tinkering around the edges. The parliamentary secretary said in his press release:

Mr Rudd has failed to get across the Government’s policy that has been on show for months. I have already announced significant changes to the Financial Services Regime, which are designed to make it easier for Mum and Dad investors to make informed investment decisions ...

So he thinks his reforms are the same as the ones Labor announced. He thinks they go as far as the reforms that Labor has announced. They go less than one-tenth as far as those that Labor has announced but he says, ‘Now we can put up our feet on the table and relax because we have delivered’—as his press release would say—‘major reform.’ They have done nothing of the sort: this is tinkering at the edges. What we need is major reform, like that the Leader of the Opposition announced in his reply to the budget on 10 May: Labor will introduce simple, standard disclosure forms for financial services products.

The government’s new financial services disclosure regime has resulted in consumers being physically issued with long and complex documents of up to 100 pages long. It has created an administrative nightmare for businesses and consumers. Labor’s standard disclosure form will be no more than three or four pages in length, containing core information. Financial services providers will be required to have any further disclosure information on their websites, another practical initiative for business. That is a long way from what this parliamentary secretary, as he would describe it in his press release, has ‘delivered’. It is a long way from that; it goes much further than what the government is proposing in this bill—which is welcome but which is tinkering at the edges.

I have spoken to a lot of financial services providers over the last few weeks as I consulted on this bill and other matters, and I do not think any financial services provider in this country would regard this as a really serious and major reform, despite the rhetoric in the parliamentary secretary’s regular press releases—but I do encourage him to keep them up; they always provide me with amusement. When I get the email saying that the Hon. Chris Pearce has released a press release, I always have a good chuckle at the heading because I look to see what Pearce has delivered today. What Pearce has delivered today is minor, technical tinkering at the edges. What he should be doing is delivering major and substantial reform to the red-tape burden in this country. That is not what he is doing. I call on the Parliamentary Secretary to the Treasurer to adopt Labor’s package, to adopt the reforms—because, if you do not, we may just have to later in the year. Should we form a government later in the year, we will have to do it, because the parliamentary secretary, who has been in office now three years, has singularly failed to do it.

This is very important: I have had financial services providers in my electorate close down their businesses because the red-tape burden is just too high. The burden of the FSR is just too much. I hazard a guess that if I went to them today and said, ‘Have a look at these reforms; would these reforms have stopped you from closing your business down, because the red-tape burden is too high?’ they would giggle too. They would laugh too, and they would say, ‘This delivers nothing for us. We would have had to close down our business anyway.’ This is a very important matter: there are businesses closing in the financial services area because of the red-tape burden on them. Labor has a plan to reduce that burden, to assist those businesses and, just as importantly, to assist consumers—to give consumers readable information encompassed not in 100-page documents but in much shorter documents which give them the key information that they need, and if they wish to read more information then they can refer to a website.

In the area of corporate governance there are a number of changes, including reporting requirements for executive remuneration and a change in the definition of ‘a large proprietary company’, which has implications on the threshold for reporting. Executive remuneration reporting requirements for individual directors and executives in listed companies will, under the accounting standards in the Coporations Act, now be streamlined so that these obligations are contained in one act. This is sensible, and we support that. Companies must also disclose their policy on executives hedging their incentive remuneration and how this will be enforced. The Australian Council of Super Investors and the Australian Stock Exchange have already called for these steps to be taken to prevent hedging of unvested share options, and this is supported by the opposition.

There will also be changes to the definition of ‘a large proprietary company’, which will have an impact on the company disclosure thresholds. The proprietary company will be defined as ‘large’ if its consolidated operating revenue for the financial year of the company and the entities it controls is $25 million or more; the value of the consolidated gross assets for the financial year of the company and the entities it controls is $12.5 million or more; and the company or the entities it controls have 50 or more employees at the end of the financial year.

The threshold for proprietary companies has not been changed since 1995, the year that the threshold was first introduced. In order to ensure that the threshold remains relevant, this legislation allows that future changes to the threshold can be prescribed by legislation—again, a sensible minor measure which we have no objection to. Labor recognise the need for flexibility in the regulatory regime and therefore we support this reform.

As a result of other changes to company reporting, companies will no longer have to provide hard copies of reports to their members on request if a copy is provided on a website which is publicly accessible. However, the current methods of distributing annual reports will still be available.

Consistent with the Banks review, the restriction on employment relationships between an auditor and an audit client will no longer apply to a former partner or former audit company director who has left the firm or the audit company for five years. Currently, employment relationships between an auditor and an audit client should include a prohibition on more than one former partner of an audit firm at any time being a director of or taking a senior management position with the client. Again, we support that: it is a recommendation of the Banks review and it is very sensible.

The Labor Party expresses some concern over the changes which will allow the removal of the requirement for a member approval of related party transactions at or below a prescribed level. We believe that there is a case to be made as to why directors should be permitted to give shareholder funds to related parties without seeking shareholder approval. Labor notes that the government’s amendments reduce disclosure requirements in relation to small sums—the amount is flagged by the government as being $5,000—and further that the prescribed amount for which approval will no longer be required will be in the regulation. Labor will be closely examining those regulations in regard to the prescribed amounts when they are tabled. While we express some concern we do not intend to press the point today, but we put on the record that we will be watching developments in that field particularly closely.

Several changes will also be made to fundraising. A prospectus or product disclosure statement will no longer be required for rights issued for quoted securities and other financial products. However, a cleansing notice to the market is required which would include information relating to the potential effect of the rights issue on the control of the entity. For small-scale offerings, chapter 6D and chapter 7 definitions of professional and sophisticated investors will now be aligned. Currently, chapter 7 definitions are much broader than those in chapter 6D. The total amount of money that can be raised under an offer information statement will be $10 million instead of $5 million. Disclosure relief for controllers of listed entities will be available for secondary sales of securities and other financial products, subject to cleansing requirements of both the controller and the entity that issued the shares. Secondary sales without disclosure will be possible for securities and other financial products quoted for a minimum of three months rather than the current 12 months. The reduced disclosure requirements applying to the continuously quoted securities and other financial products will be available after they have been quoted for a minimum of three months.

Importantly, employee share schemes and contribution plans will be relieved from a specific range of licensing and hawking requirements of the Corporations Act. That is something that we support. We think that there is a place for employee share ownership schemes in this country. I note that the government had a target to increase subscriptions to employee share ownership schemes and that the Prime Minister said many years ago that he would like to see Australia as one of the great share-owning democracies, and that target has not been met. Frankly, we have not come close to meeting it. Employee share ownership schemes can play an important role in boosting productivity, and we need all the help we can get there. Our productivity growth has declined, the gap between us and the United States has expanded and employee share ownership schemes can play a role. Again, these minor reforms are welcome. Personally, I believe much more needs to be done on employee share ownership schemes. Prospectus advertising requirements will be aligned with those for product disclosure statements except for advertising prior to the lodgement of a prospectus. Labor supports the reform of business regulation to ensure lower costs for business and a more effective regulatory regime. The objective here is to have regulatory reform without letting important standards slip, and this is achieved by eliminating overlap, duplication and outdated business regulation. Labor supports these initiatives contained in the bill.

But this bill goes nowhere near far enough. The parliamentary secretary might put this on his achievements page when it gets put back up—when he decides to say, ‘In hindsight maybe I do have some achievements’—but it is a very hollow achievement indeed. If he had achieved real financial services regulatory reform maybe the government would let him put his achievements page back on his website. Maybe then he could issue a press release entitled ‘Pearce delivers major reform’ without being greeted with guffaws of laughter from the financial services industry, let alone the opposition. Maybe then, when he puts out those regular press releases entitled ‘Pearce delivers again’ and ‘Pearce’s great day of achievement again’, people would actually take it seriously. Until that happens these great protestations of achievement will not be taken seriously, because they are laughable. These are minor reforms which are welcome, but for anyone to call them a major achievement is a joke. Until we have real financial services reform in this country, small business, big business and consumers will continue to bear the burden.

Cameron Thompson (Blair, Liberal Party) Share this | Link to this | Hansard source

I am glad that the member opposite has wound up. He spent a lot of time reviewing the Parliamentary Secretary to the Treasurer’s website and he has been following his press releases very closely, so I am surprised that he was not able to fill the whole time allocated to him. I would have thought he would have made a bigger effort to properly review this legislation, because it is significant legislation. For the member opposite to say that some motherhood statements made by the Leader of the Opposition in his budget reply speech amount to a policy is an absolute farce. It is a joke. I can sit here and say that I am going to reduce red tape, in much the same way as the Leader of the Opposition did. There has never been a government in the existence of time that has not proclaimed that it wanted to reduce red tape. That is about as innovative as us all turning up here today. There is nothing to it. It is a motherhood statement. He trumpets that and says that that is the way to be going ahead while we have these real, legitimate improvements which were won as a result of careful consultation and consideration by the parliamentary secretary and the government. I think that it is important that we consider them and take them seriously and that we do not just spend our time sniggering behind our hands because we do not like the way the parliamentary secretary writes his press releases.

There are a lot of very good things to be considered in the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and related bills and one of the major things that I thought was remarkably—and not surprisingly—glossed over by the member opposite was the issue of employee share ownership schemes. I noticed he said:

Personally, I believe much more needs to be done on employee share ownership schemes.

I do not know whether that is going to be Labor Party policy. I do not know whether Dean Mighell and those sorts of people would endorse the idea of employee share ownership schemes. Do you think they would? The Australian Bureau of Statistics reports that in 2006 the number of employees that received shares as part of an employee entitlement had increased from 404,300 in 1999 to 501,100. It is something that is popular among employees, and there are an increasing number of AWAs that facilitate this kind of sharing in a firm’s profitability for employees and encouraging that kind of outcome. That is part of the flexibility that you get through the new industrial relations system that the government has introduced. The opposition just cannot get their heads around that.

I can hear the member for Prospect saying, ‘Yes, personally I support an increase in employee share ownership schemes,’ but do honourable members really think we would ever get that from the puppet representative of the ACTU, as Prime Minister of Australia? I doubt it. That would go to the very bottom of the bottom drawer and would not be seen again, despite the innovative and motivational impact that employee share ownership has on people. It makes them want to increase their productivity and the profitability of the companies in which they work. Companies which increase their competitiveness enhance the outcomes not only for them but also for their employees and the people of Australia. The member for Prospect would have us believe that reducing red tape is simple. Apparently, the Leader of the Opposition just does a press release and—voila!—he has fixed red tape. Isn’t that amazing? He can fix it. He does a press release and—bing!—it has happened. What a sad reflection on the member for Prospect’s understanding of just how difficult it is to get sensible, focused reform.

We are engaging here in a careful balancing act. On the one hand, there is the need to effectively protect shareholders and others in the community who rely on this industry. The managed funds investment industry has $1.1 trillion in consolidated assets. We want to provide people with protection, so they can trust the industry in that what they are getting is a very carefully managed and controlled investment. On the other hand, we want to facilitate that investment, to make it as easy as possible. This is a balancing act. If you make it too easy, standards can slip. If you make it too regulated, there is the red tape that the Leader of the Opposition promised to wipe out overnight. This is a balancing act which obviously the member for Prospect just does not understand.

These reforms are not just part of the balancing act that must be engaged in between the government and the industry; the process also draws in all the states. It is part of the COAG reform agenda. Not only are the minister and the government negotiating this with the industry; they are also negotiating it with the states. They have done that very effectively. The other governments of Australia are following the government’s lead and participating in the process. As a result of this consultative process with the business and investor community, we have 32 measures to simplify and streamline Australia’s corporate and financial services law. They follow in the wake of a paper which was distributed by the parliamentary secretary last November, called ‘Corporate and Financial Services Regulation Review—Proposals Paper’. After its distribution, 100 submissions were received. The paper indicated the kinds of measures we are now seeing implemented here by the parliamentary secretary. I congratulate the parliamentary secretary. I think these measures are major achievements, and he is right to trumpet them as he does in his press releases. Australians need to know that the government is forging ahead with these achievements. We do not need the kind of carping criticism that came so glibly from the member for Prospect. He thinks that tomorrow he can issue a press release, written in invisible ink on the back of a stamp, and everyone will then be so much happier. As a result of the efforts of this government, in 2006 the World Competitiveness Year Book ranked Australia third out of 61 countries for the protection of shareholders’ rights and share market financing. At the same time we are providing further protections for shareholders.

I want to talk about some of the areas in which this legislation will be making reforms. In particular, there is the proposal to remove the need for what is called a ‘statement of advice’ when providing financial advice with a simpler document called a ‘record of advice’. The threshold for that change would be $15,000 or less. So the government is saying that small shareholders or investors seeking advice can get it in a more simplified form without having to pay the added cost and without the difficulty of seeking the more complicated statement of advice. That is one area in which changes are being made. There is also the issue of fundraising. We know that often the need to raise funds for investment can come up very quickly, so it is important that we facilitate businesses having the flexibility, and the investment markets having the opportunity, to quickly raise funds in a flexible manner. That is where we come to the issue of encouraging employee share ownership. The government is reducing the cost of raising funds by, for example, removing various disclosure requirements. We are also taking steps to encourage employee share ownership. Unlike the opposition, a stated goal of the government is employee share ownership. The coalition parties want to see it proceed, to the great benefit of all Australians.

There are also changes to a company’s reporting obligations. In that process, for example, we have looked at what is the definition of a ‘large proprietary company’, which requires a high level of company reporting. We have looked at that taking into account where the economy is today and the changes in the way companies operate. When we seek to identify a large proprietary company, we are seeking to identify companies that are economically significant. That is what it is supposed to identify. A lot of the thresholds that apply in identifying those companies have been redefined. There are changes to the current operating revenue and assets thresholds to the tune of 150 per cent. This measure is expected to result in cost savings for about 33 per cent of companies currently required to report.       

The bill facilitates companies doing their reporting on the internet but at the same time requires them to make hard copies available to shareholders who prefer to get them in that manner. This is, of course, merely moving with the times and making sure our requirements fit. In making the change to identifying what a large proprietary company is, we have adjusted things so that future changes to those thresholds can be made more easily by regulation. I think that is an important step because inevitably there will be changes, and the definition of what constitutes an economically significant company will continue to evolve.

Members might want to talk about the interesting issue of the impact of telephone monitoring during takeover bids. There has been some discussion of that in a recent very high profile case—that is, the Qantas takeover bid. During takeovers, all advice from all parties, both the target and the takeover proposer, is currently required to be recorded. This bill will repeal those requirements. Quite a deal of consultation with industries and other parties involved in those processes has quite clearly determined that the benefits gained from monitoring are very small, given the onerous burdens that it places on the companies participating, whether they be targets or proposers of a takeover.

I said earlier that this process has required consultation not only with the industry but also with COAG. I note that the elements of the bill which needed to be considered by the Ministerial Council for Corporations have been so considered, and the council has given its approval. Not only has the parliamentary secretary achieved a great step forward in providing improvements in regulations covering company reporting, fund raising, takeovers and compliance; he has been able to bring with him the other Australian governments involved in the COAG process. So the government has made good progress in this regard, and I look forward to many more meaningful changes of this sort coming forth from the government.

As I indicated at the outset, the process of eliminating red tape continues. We cannot drop the ball on this and governments need to continue the process. We can all stand up and say, ‘Oh, yes, we will get rid of red tape,’ as the Leader of the Opposition has done, but to specify how you will do it is where it comes down to the devil being in the detail. The glib statement, ‘Yes, I will wipe out red tape,’ might impress the member for Prospect but it does not impress the industry, which relies not only on the government’s regulations for its credibility but also, in effect, on the government’s good management for its profits. If you want to have a competitive industry it has to be accessed easily. In this regard the government has the balance right. I commend the parliamentary secretary and thank him for the opportunity to speak in this debate.

Laurie Ferguson (Reid, Australian Labor Party, Shadow Minister for Multicultural Affairs, Urban Development and Consumer Affairs) Share this | Link to this | Hansard source

Today I wish to deal with the simpler regulatory components, especially the disclosure aspect of the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007. The bill will amend the Corporations Act 2001 and related acts and regulations in order to simplify Australia’s corporate and financial services law. The proposals for the bill were outlined in the ‘Corporate and Financial Services Regulation Review—Proposals Paper’, released in 2006. Today’s legislation is part of the government’s response to some of the recommendations made by the Taskforce on Reducing the Regulatory Burden on Business in its report Rethinking Regulation, the Banks report. Most of the proposals are in line with Labor’s approach to reducing the red-tape burden on business.

In respect of disclosure documentation issued under the Financial Services Reform Act, providers have generally been issuing advice documents of up to 100 pages. They are complex, costly and essentially unreadable to most consumers. The proposed bill represents a partial reduction in the expansion of lengthy documentation under the Howard government. To this end, Labor supports the bill.

Since being appointed to the shadow consumer affairs portfolio, it has become clear to me that dealing with the information asymmetry between consumers and product suppliers is a key aspect of empowering Australian consumers. Time and again I am confronted with stories from consumers who feel they have been duped into taking out an insurance policy, getting into a get-quick-rich scheme, entering into a financial plan that does not suit their circumstances, or even subscribing to floats that they do not understand.

I am not surprised, nor are the numerous consumer advocates I have met with. Open any product disclosure statement for a simple product such as motor vehicle insurance and you will be confronted with an extremely complex and confusing set of terms describing what should in reality be quite simple. Indeed, the average disclosure document for motor vehicle insurance now runs to at least 50 pages—almost a book. It is not at all surprising that consumers are constantly reporting that they are confused and unable to comprehend what is before them. Bridging the information asymmetry between consumers and sellers requires significant simplification. A starting point is making communication documents more efficient and easy to read and, hence, better understood by the consumer. This surely was a key objective of the Financial Services Reform Act.

Since its deregulation in the early 1980s, the Australian financial services sector has been characterised by a cascading and often interweaving set of guidelines, laws and principles designed to uphold the integrity of a marketplace which is often chaotic, unpredictable and open to abuse. Given the enormous impact that a decline in the integrity of this market may cause the economy, Australian governments have given special attention to constantly reviewing and reassessing the various laws which govern the sector. At the disposal of government is the principal instrument for governing the financial sector—that is, the Corporations Act 2001. Whilst the Corporations Act stands as the key regulatory instrument, it does so as a result of a very wide and diverse set of regulations which make up the pluralist tapestry that is financial services regulation. The financial sector is governed by Commonwealth laws and state laws, by federal regulation and state regulation, and by agencies such as the Australian Securities and Investments Commission, the Australian Prudential Regulation Authority, the federal Treasury and numerous industry sponsored self-regulatory guidelines and regulator issued practice guide notes.

In trawling the vast sea of financial services regulation, there appears to be no shortage of highly confusing prescriptions such as ‘clear, concise and effective’, ‘fair and reasonable’, ‘practicable’, ‘adequate’. To an extent this is what the great English legal philosopher Herbert Hart referred to as the laws’ ‘core of uncertainty’. As well as setting in place rules of practice and operation, much of the body of financial services regulation is concerned with resolving uncertainties by making definitions tighter.

The Wallis financial systems inquiry sought to create ‘a flexible regulatory structure which is to be more responsive to the forces for change operating in the financial system’. This enterprise was promulgated through the Corporate Law Economic Reform Program process, CLERP, which more or less overhauled most aspects of the financial system in Australia. CLERP 6, which went on to become the Financial Services Reform Act, was the most important reform as it initiated a system of co-regulation the success of which remains questionable.

The nature of the FSRA licensing system is such that it relies very heavily on the provision of privately sponsored codes of conduct and dispute resolution structures. In affect, ASIC have little inclination to act as enforcers. This is demonstrated by the looming catastrophe in property investments which seem to have occurred right under the nose of ASIC. As a result of evidence coming from the recently conducted Senate estimates, my colleague Senator Sherry has gone as far as saying in a recent media statement:

The Howard Government’s central protection for consumers of financial services—the disclosure regime—is next to useless.

Complex and lengthy documents, often between 50 and 100 pages are unreadable to most people.

They failed to protect investors in Westpoint, Fincorp and Australian Capital Reserve.

…            …            …

After two so-called ‘refinements’ of the disclosure regime, the Howard Government still does not get it.

A total overhaul of disclosure documentation is urgently required.

Simple, readable, standardised, no longer than 3-4 pages on a product by product basis, focusing on fees, return and risk level must be key elements of reform.

Kevin Rudd, the Labor Leader, highlighted Labor policy to overhaul the regime in his recent budget reply speech.

ASIC relies very heavily on industry systemic reporting in order to investigate malpractice. ASIC also relies very heavily on external disputes resolution reporting to assess where key problems lie. Given the hundreds of billions invested by Australian consumers, it surely follows that government should not merely rely on industry systemic reporting and an equally weak surveillance system. Instead it must act more vigorously by taking enforcement action whenever necessary. The debacle around Fincorp may have been avoided had ASIC acted earlier or been more decisive. In his second reading speech, the Parliamentary Secretary to the Treasurer, who is in charge of this legislation, stated:

Today I introduce a package of measures that will further deliver on the government’s commitment to reducing red tape. This bill will make the corporate and financial services regulatory system simpler.

The most troubling aspect of this statement is the fact that the parliamentary secretary views disclosure standards to consumers as an extension of red tape. This is not so. When properly conceived, disclosure has the potential to redress the information asymmetry I mention above. Nevertheless, I certainly concur that statements of advice running into the hundreds of pages are clearly inefficient and have the potential to confuse and mislead. I note that poorly written SOAs and poor advice have been the basis for hundreds of complaints that have been before the Financial Industry Complaints Service. In their submission to the Productivity Commission inquiry into business red tape, the Australian Consumers Association, Choice, stated:

We want as little regulation as possible—but as much as is needed. The idea that the size of the problem can be measured by the amount of regulation in the statute books—the ‘quantity theory of regulation’—is dangerously simplistic. Much of the regulation introduced in the past 20 years has been required by new developments in technology, markets, demography, societal expectations or government policy.

The public interest should be the fundamental motivation of regulatory decision-making in the market sphere. In particular, will consumers benefit from regulation? A test for successful regulation should therefore hinge on a broad test of consumer interest. Ultimately consumers endure the burden of both failed regulation either as victims of market failure or increased prices resulting from compliance costs.

Whilst it is important for government to consider the cost of regulation on all business, nevertheless, the guiding motivation underpinning any regulation or government reform should always be the public benefit. Again, in their submission to the task force, Choice argued:

The public interest should be the fundamental motivation of regulatory decision-making in the market sphere. In particular, will consumers benefit from regulation? A test for successful regulation should therefore hinge on a broad test of consumer interest. Ultimately consumers endure the burden of both failed regulation either as victims of market failure or increased prices resulting from compliance costs.

This bill seeks to simplify the provision of SOAs. This is welcome. However, it is not enough. The current system is not working well. Consumers are bombarded with enormously complex disclosure documents that seem to cause confusion as opposed to clarity. Again I defer to Choice. They argue:

Much regulation in financial services is founded on the basis of an assumption that consumers and businesses will use information optimally. As a result, there is a strong tendency towards ‘disclosure’ as the regulatory answer to market problems in financial services. If a market problem emerges, it can simply be addressed by providing more information to consumers, who will use that information optimally in decision making. If the problem persists, then it must be because the quantity or type of disclosure was inadequate, so the regulatory response is to require more disclosure or to engage in endless tinkering with the disclosure requirements. New market failures can also be addressed by more disclosure. In effect a huge burden has been placed on disclosure to solve a wide range of complex market problems.

Ironically, having vigorously supported disclosure as the main tool in addressing information asymmetry, industry and government now recognise that there is such a thing as over-disclosure. A Rudd Labor government will be committed to an efficient and responsive disclosure regime. We also recognise that mere tinkering with disclosure standards is not enough to empower consumers. Consumer empowerment requires strong disclosure standards. It also requires strong laws that deal with unfair contracts, unconscionable conduct, misleading and deceptive behaviour, quick and easy access to compensation and refunds where industry is found to be in breach of the law, as well as access to dispute resolution. Labor supports this bill’s intention for the provision of simplified statements of advice.

Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

in reply—I would like to thank very much those honourable members who have taken part in this debate on the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and the supporting bills. This government is serious about ensuring that unnecessary regulatory requirements do not hold Australia’s businesses back. The creation of the Office of Best Practice Regulation and the changes to the processes for making new regulations such as regulatory impact assessment are helping to refine future regulatory proposals and better inform regulatory decision making.

In the field of corporate and financial services regulation, maintaining market confidence and integrity is a critical priority. In cutting red tape in this area, the interests of investors remain a central focus. The simpler regulatory system bills bring together in one package a number of diverse initiatives in the corporate and financial services fields that will reduce red tape for business, while retaining—and I stress this—important protections for investors.

The bill is the result of a process that involved engaging stakeholders at an early stage. In April 2006 a consultation paper was prepared, raising a number of issues, which led to a proposals paper in November 2006. Over 100 submissions on the proposals paper helped in refining the detailed proposals to the point of converting them into this legislative package. The Australian Securities and Investments Commission also made a significant contribution to finetuning a number of the proposals.

I want to take this opportunity to thank all stakeholders for their contributions and for helping to ensure that the initiatives in the bill achieve the important balance—that ever-important balance—between, on the one hand, maintaining investor protection and, on the other hand, enhancing business productivity. The current inquiry by the Parliamentary Joint Committee on Corporations and Financial Services into the package presents an opportunity for stakeholders to comment on the details of the bill. I look forward to the committee presenting its report in a timely manner.

We have heard from the member for Reid and the member for Prospect. Whilst I did find the member for Prospect’s contribution to be very disappointing, cynical, supercilious and negative—as you know, Mr Deputy Speaker, I am an optimist and I am a positive person, so I would like to respond in a positive sense—I would like to mention some of the key areas that he touched on. He talked about the financial services industry apparently not thinking that this bill was very serious or very important. I find that surprising, because since I introduced this package into the parliament I have received overwhelming positive feedback from stakeholders. For example, the Business Council of Australia welcomed the introduction of the bills and the review process, which involved extensive consultation. Let me quote just a little of what the BCA said. They said:

This is a good example of a review of existing legislation to determine whether it remains effective and efficient, with amendments to ensure that unnecessary costs are not imposed on business ...

I was also surprised that the member for Prospect was so ferocious in his comments, because the Investment and Financial Services Association has issued a press release welcoming the reforms, the Financial Planning Association of Australia has issued a media release welcoming the reforms, the Australian Bankers Association has issued a media release welcoming the reforms, and the Securities and Derivatives Industry Association of Australia has issued a release welcoming the reforms. Unfortunately, I think what the member for Prospect has demonstrated through his diatribe is actually his lack of understanding about the industry. I am not sure who it is he has been chatting with, but he is clearly out of touch.

The member for Prospect also talked about the Leader of the Opposition’s plan for reducing red tape. With the greatest of respect and, again, without wanting to be negative, all we have heard from the Leader of the Opposition is a bunch of words—empty words—no detail whatsoever: no detail as to how, when, where or who would be involved in these so-called wonderful reforms that they put forward. Fundamentally, the difference between the Liberal-National coalition government and the ALP is that we are actually doing something. We are actually getting on with the business of protecting Australian consumers and ensuring that Australian businesses can continue to grow and prosper.

This package offers a combination of measures that simplify and streamline processes. They will produce reduced compliance costs and, therefore, greater business efficiency. It is important to stress again that they will do this while at the same time improving access to financial advice and enhancing investor participation. The key initiatives involved in reducing costs are associated with distributing annual reports—they do this by better enabling companies to distribute them through the internet—and reducing the costs associated with providing financial advice, particularly for relatively small-scale investments. Other measures target removing unnecessary burdens in the areas of fund raising, takeovers, financial reporting and overall corporate governance.

Again I want to thank all of the stakeholders who have helped form this particular bill. I also want to take this opportunity to thank the departmental officials, many of whom are in the chamber today. I thank them very much for all of their hard and dedicated work, as I thank my own personal staff in my office. They have all worked well together to come up with this package of reforms that are major and substantial. In conclusion, the initiatives in this package will allow Australia’s companies to spend more time on productive activities that contribute to our nation’s economic growth and prosperity. The government would like the package to pass the parliament swiftly. We want this to happen so that the benefits of the streamlined, simpler framework can be realised as soon as possible. I commend the bill to the House.

Question agreed to.

Bill read a second time.