Bernie Ripoll (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee’s report, Statutory Oversight of the Australian Securities and Investments Commission, together with evidence received by the committee.

Ordered that the report be made a parliamentary paper.

I want to begin by thanking all the committee members for their hard work and effort in making this report a reality. I also want to welcome the new members to the committee, Senator Helen Coonan, Senator Mark Arbib and Senator Gavin Marshall, and to thank the departing members, Senator Grant Chapman, Senator Andrew Murray, Senator Linda Kirk and Senator Ruth Webber for all of their hard work on the committee over many years. I also want to thank the secretariat, Mr Geoff Dawson, Mr Andrew Bomm and Ms Laurie Cassidy for all their hard work and effort in all the work that the committee does.

The report covers a number of issues relating to ASIC’s regulatory responsibilities. These include their regulation of financial markets, ASIC’s recent strategic review, their continuing response to property investment scheme collapses, financial planner issues and banking and credit regulation.

In particular in relation to financial market regulation, a topic of some great attention in recent times, share market volatility has brought a lot of attention to short selling and margin lending practices, and whether ASIC is monitoring these issues adequately. ASIC told the committee that they had issued public warnings about false and misleading rumours on share trading, and recommended improved disclosure rules on short selling, which the government has agreed to. The committee has encouraged ASIC to maintain greater cooperation with the ASX to crack down more effectively on insider trading and market manipulation.

ASIC is in the process of making some changes to the organisation following its recent strategic review. The committee supports these restructuring plans. They are aimed at making ASIC more responsive to emerging regulatory challenges by better understanding the markets they regulate and taking a more far-sighted and less reactive approach. This is to be achieved by reordering priorities and shifting resources to where they are most needed. ASIC told the committee that they would seek to meet their objectives within the existing budgetary allocation, but may need increased funding if they are given additional regulatory responsibilities.

ASIC has also put a number of measures in place to reduce the chances of another Westpoint-style property investment scheme collapse along with a range of others that took place at that time. These include tougher restrictions on debenture advertising, requiring issuers to disclose against eight benchmarks on an ‘if not why not’ basis, and posting issuers’ disclosure documents on their website. It is encouraging to see ASIC giving this issue the serious attention it deserves, though it has been tardy in doing so in the past, and something that I know consumers will be very appreciative to see change.

In terms of financial planners, a number of issues relating to financial planners were discussed with ASIC, such as the compulsory professional indemnity insurance for planners which has been introduced, and ASIC told the committee that the availability of insurance cover in the marketplace has so far been adequate. The adequacy of compensation available to investors under the Financial Industry Complaints Service was again raised. ASIC suggested that the limit should be raised from $150,000 to $280,000. ASIC has now also responded to the committee’s requests to conduct another shadow-shopping survey on superannuation advice from financial planners. In our view it should not have taken so long, but will now be conducted in the 2009-10 financial year, and the committee asked ASIC a range of questions around that.

In the area of banking and credit regulation, the government’s green paper on financial services and credit regulation posed a number of queries about the effect it will have on ASIC and a number of options.

Finally, reverse mortgages were again raised with ASIC. They told the committee that although there had been few complaints to the regulator about them, likely problems with these products have yet to emerge. But the committee believes that any exposure ASIC can give to this issue in the mainstream press would also be beneficial.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

ASIC is Australia’s corporate, markets and financial services regulator, and I rise to speak to the recent ASIC report. ASIC, of course, is an independent Commonwealth government body set up to administer the Australian Securities and Investments Commission Act, which requires them to improve the performance of the financial system and the entities within it.

The Parliamentary Joint Committee on Corporations and Financial Services held a public inquiry on 18 June, which included a range of discussions with respect to ASIC’s regulatory responsibilities. Five key areas were covered. The first was the regulation of financial markets, and particularly of issues relating to short selling and margin loans. ASIC informed the committee that it was working with the ASX to hasten action regarding alleged misconduct within and by the ASX. Questions still surround the effectiveness of ASIC, especially regarding margin lending, directors’ compliance in letting the market know about their margin lends, short selling, share loaning, disclosure and, of course, targeted short selling to cover margin calls and the manipulation of the market to cover such calls.

Secondly, ASIC shared its strategic review, including the next three to five years. It will focus on better understanding the stock market, looking further ahead to assess risk, better explaining its actions, getting clearer priorities and making a range of changes to ensure this occurs—all of which the committee supports.

Thirdly, ASIC explained its response to a recent property investment scheme collapse. It responded by implementing more stringent measures to protect consumers, focusing on better disclosure and improved advertising standards for issuers of unlisted and underrated debentures. Whilst this is applauded, it is important that parliament understands that ASIC has been slow to act. The committee is looking forward to ASIC taking a more strategic role in protecting investors in the future.

The fourth area that was covered related to the regulation of financial planners and the introduction of professional indemnity insurance for negligent advice. Compulsory PI insurance for financial planners has been introduced, although concerns remain over the adequacy of cover that will be available in the insurance market. From 1 July this year until 1 July 2010, licensees must hold a minimum standard of cover. This is pleasing, and the committee looks forward to continued ASIC oversight in this area.

Lastly, the fifth issue raised by ASIC concerned banking and credit regulation and the implementation of the government’s green paper proposals. The government’s green paper on financial services and credit regulation has outlined options for a federal takeover of consumer credit regulations. The options include a federal takeover of the regulation of all credit products; regulating mortgages and leaving consumer credit to the states; or maintaining the status quo. The transfer of regulatory control will require the states’ agreement. But the fact that this discussion is being had is an indictment of the Labor states; they have failed spectacularly in their oversight task in this area. If this is indicative of what wall-to-wall Labor can produce, I cringe for the future of regulatory and financial oversight in the country.

I look forward to the committee’s further oversight of ASIC and especially to ASIC’s oversight to deal with the issues of short selling and margin loans. The committee will continue to provide oversight of ASIC.