Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

I rise on behalf of the coalition to speak on the Corporations Amendment (No. 1) Bill 2010, a bill that was introduced into the House just in the last sitting week. In doing so I represent the shadow assistant treasurer, Senator Cormann, in the other place. The coalition, as you know, has taken a long interest in improving Australia’s corporate legal framework. The previous government initiated the consolidation and clarification of Australia’s corporate framework in the 2001 Corporations Act. Of course, also during the period of the Howard government the coalition oversaw the Corporate Law Economic Reform Program, otherwise known as CLERP, which was an ongoing program of reform to further clarify and strengthen Australia’s law in this area.

This bill aims to move Australia further along the road to stronger and clearer law in this important area. In summary, the bill proposes changes in three main areas. Firstly, it will make it more difficult to obtain access to private information kept on company registers. For instance, the measures will require persons seeking a copy of the company register to apply to the company, stating the purpose for which they will use the register. At the moment, anyone can demand a company’s register, which contains shareholders’ names and contact details. This information can be used to target vulnerable shareholders and purchase their shares at significantly below market prices. So the intent of this bill is to make this predatory pricing practice far more difficult.

Secondly, the bill will increase the criminal penalties associated with the breaches of the insider trading and market misconduct provisions in part 7.10 of the Corporations Act. Increasing the maximum fines is designed to further provide a disincentive for individuals and companies to engage in this activity. The maximum fine for individuals found to have breached the provisions will be increased to 4½ thousand penalty units. The maximum term of imprisonment will be increased to 10 years.

Finally, this bill aims to improve ASIC’s ability to detect market offences such as insider trading. The Australian Federal Police, on behalf of ASIC, will have the power to obtain direct evidence of these offences, having obtained a judge issued warrant. The bill will also permit ASIC to apply for a search warrant without first having to issue a notice to produce the material sought by the warrant. The current arrangements provide those under investigation with an opportunity to destroy incriminating material before a search warrant can be issued. The coalition always promoted any active reforms to improve the law in this area and we strongly support the aim of further improving the Corporations Law. In particular, we support the changes in access to company registers. They will not impede commerce, but they will provide a reasonable protection for vulnerable people. We recognise the aims of increasing penalties and powers, but wherever powers are increased it is important, as I am sure you would agree, Mr Deputy Speaker, that there be very strong scrutiny of those.

We note that the Senate Economics Legislation Committee is currently inquiring into this bill. It is due to report on, I think, 16 November. I am sure my friend and colleague opposite the member for Oxley knows the exact date, having spent a lot of time working in this area. We will await the advice, the findings and the evidence of that committee, because increasing powers always requires the level of scrutiny that we wish to see. We leave open the possibility of amendments and the like in this regard. We want to see the work of that committee, but here in this House we do not oppose this bill.

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

It is a pleasure for me to speak on the Corporations Amendment (No. 1) Bill 2010 as I have some interest in Corporations Law and other such pieces of legislation and regulation in this place, as do many others. I thank the member for Casey for his contribution and his placing on the record his support, and I assume that of his party, for this very good amendment bill. It does a number of things, based on maintaining trust and confidence in our regulatory system and markets of ordinary investors and people in the marketplace and ensuring that, when they make an investment their investment, as far as possible, is protected from unscrupulous people.

It does this in a number of ways. This bill contains two separate but related sets of measures, both aimed squarely at protecting investors and ensuring they can have trust and confidence in our share market. It also sends out a clear signal that the regulator and the government are doing everything they can to ensure that we have a credible and strong system of governance around our markets. It also ensures that we will target misconduct and ensures that the necessary regulations, powers and so forth are in place to deal with those who cheat our system. Interestingly, the member opposite, the member for Casey, commented on supporting this bill but wanting to make sure there were checks and balances in place. I agree and I think we all would agree that while we want to ensure that the regulator, the Australian Securities and Investments Commission, has all of the necessary powers at its disposal—as do other regulators in these areas—those powers are checked against abuse or the wilful nature of their application in any particular way. It is important and we all ought to be conscious of it. But I do not think that in itself ought to detract this parliament or the regulator from the good work they are doing in terms of monitoring market manipulation, ensuring that we have a fair and equitable, properly managed and monitored marketplace—a proper system of regulation.

It is a really difficult market and there is no question about that. Australia has over 1.6 million corporations and it is mostly a self-regulatory system. All the checks and balances you put in place are really there for those that follow the rules and do the right thing. They act as a guide and a regulatory base for all of these things to take place. Where people willingly break the rules, manipulate the market or, for that matter, are involved in a range of other offences there needs to be the right system in place not only to deter them in the first place by having the right penalties and breaches as part of our regulatory system but also there needs to be the correct monitoring and powers for the regulator to deal with these manipulations or this misconduct before they take place. I think it is as important to make sure that the regulator has sufficient powers—regulatory, monitoring and intervention powers—and that those powers span right across the regulatory board to ensure that ASIC and others can do their job properly.

I do not think anyone would disagree with that. I do not think that there is any argument against making sure there is no abuse of that power by the regulator itself, but I will be listening closely and monitoring what the opposition do in this area to ensure they do not abuse their role in this place and use either the bureaucracy, the regulator itself or public servants as scapegoats for poor policy on their own behalf. Only just recently I have detected a small tinge of this coming through and it seems that after 12 years of government—some would say that is plenty of opportunity to get some things right—

Stuart Robert (Fadden, Liberal Party, Shadow Minister for Defence Science, Technology and Personnel) Share this | Link to this | Hansard source

Bernie, don’t be like that!

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

I can see some eyes rolling back in their heads, but the reality is that there was ample opportunity to make some of these necessary reforms. I do not mind that some of these things take some time. I acknowledge the good work of all the committee members of the Joint Committee on Corporations and Financial Services. In fact, some of these changes came directly out of that committee’s inquiry, so I thank the members for their work in this area, but note that it is still our responsibility to get the regulations right, which I believe we are doing. It is then the responsibility of the regulator to apply them in the right way, but we need to be conscious that with the realities of the market—1.6 million corporations, basically a self-regulatory system—there will be abuse. Our job is to ensure that we provide the framework to minimise that abuse and to reduce it to, we all hope, zero. Where that cannot be the case we have to make sure the regulator has sufficient powers.

Honourable Member:

And they use them.

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

And that they use those powers, absolutely—that those powers are used fully but correctly. I think we will all monitor that. We will all make sure that that is the case, and certainly the Joint Committee on Corporations and Financial Services will have oversight, in its work, of ASIC in terms of how those powers are actually monitored. But I do not see it—and this is where we may have a point of difference—as a political opportunity. The regulator and other agencies are independent. They should do their work independently. They should have ample scope and be free from fear of the parliament. They should know that the work they do is actually in the national interest and not on behalf of one political party or another. It is not in any political interest; it is in the national interest. It is about the markets. It is about doing the right thing.

I just want to get that on the record in terms of the broader intent of this amending legislation. It does do some very important things, and I will come to those. It is about making sure, firstly, that certain practices need to cease. In the past, unscrupulous operators would very unfairly and unjustifiably seek a listed company’s register and misuse that register of people’s details to write to them. We have all read many articles about the abuse that goes on of vulnerable and ordinary people. Somebody writes to that vulnerable person asking them to sell their shares, often at well below market rates. That practice needs to cease, and these amendments will go a long way to doing that. The bill will change the law and make it improper for someone to obtain a corporate register list for improper purposes. There is now a test, and what it means is that the company can refuse to hand over the list if it is not for proper purposes, and there are a range of penalties associated with that.

In terms of market manipulation, there are a range of activities that this amending legislation will increase the maximum criminal penalty for—from a, let us say, reasonably low basis to quite a substantial position. The bill increases the criminal penalty to a maximum of 10 years imprisonment and/or the greater of 4½ thousand penalty units, which equals about $495,000 or three times the profit gained or loss avoided, for things such as insider trading; market manipulation; false trading and market rigging, which is creating a false or misleading appearance of active trading; false trading and market rigging in artificially maintaining a trading price; the dissemination of information about illegal transactions; false or misleading statements; inducing persons to deal in financial products; and dishonest conduct in relation to a financial service or product. It is, really, the whole gamut of misconduct and misuse of information in what is a very complex market. With technology, with the way that people operate and with the ability for people to understand our rules and work around those rules, it is very necessary to send out very strong signals, not only for individuals with regard to the maximum criminal penalties involved, which are quite substantial, but also for body corporates that breach those same principles of market manipulation, insider trading and so on. Those increased penalties will now be 45,000 penalty units, or $4.95 million, or three times the profit made or loss avoided, or 10 per cent of annual turnover during the relevant period.

This bill enhances Australia’s very good pillars of corporate governance of market regulation and continues the good work that we in government have done since 2007, since being elected. I commend the bill to the House.

David Bradbury (Lindsay, Australian Labor Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

by leave—I will begin by thanking the honourable members who have participated in the debate on the Corporations Amendment (No. 1) Bill 2010. I acknowledge the contributions of the member for Casey and the member for Oxley, who is well known around this place and in broader circles for his contribution to matters relating to corporate law.

This bill will protect vulnerable investors through reform to the ways in which people can have access to information contained on company registers. It will strengthen the deterrent effect of market offences in the Corporations Act and will enhance the investigative powers of the Australian Securities and Investments Commission. The bill will improve the enforcement capability of ASIC and will ensure that the penalties for breaches of serious market related offences are commensurate with the potential benefits of contravening the law. The bill will also ensure that vulnerable investors are protected from businesses seeking to profit by purchasing their shares for less than their value. On behalf of the government, I would like to thank the stakeholders for their contributions at the various stages of the debate.

In conclusion, this bill will improve the enforcement powers of ASIC, enable the courts to impose more appropriate penalties on persons who breach the market manipulation provisions in the Corporations Act and will increase the protection of investors in public companies and registered schemes.

Question agreed to.

Bill read a second time.

Ordered that the bill be reported to the House without amendment.