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 entitled Statutory oversight of the Australian Securities and Investments Commission together with evidence received by the committee.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—I am pleased to speak to the August 2011 report of the Joint Committee on Corporations and Financial Services on the statutory oversight of the Australian Securities and Investment Commission. Section 243 of the ASIC Act directs the committee to inquire into— (Quorum formed)

I would like to thank not only all of my colleagues for coming in to listen to my speech on the report but also members of the opposition who have so kindly come in to help us to attain the quorum much quicker than otherwise possible.

Section 243 of the ASIC Act directs that the committee is to inquire into and report on ASIC's activities, and matters relating to those activities, to which parliament's attention should be directed. In preparing the report, the committee held hearings with ASIC officials, representatives from the Rule of Law Institute and Professor Comerton-Forde of the Australian National University. I would like to thank ASIC for their continuing cooperation and assistance and the representatives from the Rule of Law Institute and Professor Comerton-Forde for the additional insight they provided.

The hearings in June 2011 were the first opportunity for the committee to speak to Mr Medcraft in his new role as chairman of ASIC. Mr Medcraft explained to the committee how ASIC's activities are guided by a strategic framework with three priorities: confident and informed investors and financial markets, fair and efficient financial markets, and efficient registration and licensing. Guiding the development of this framework are four key factors—namely, legislative responsibilities, systemic or regulatory risk, stakeholder expectations and government policy.

The committee notes, with approval, ASIC's approach to the development of its strategic framework and particularly approves ASIC's commitment to identifying areas of potential risk. On the basis of the information provided to the committee, it is apparent that ASIC recognises the importance of the commission's educative role in promoting prudent and fully informed self-regulation by market participants. The committee considers that the suite of financial literacy initiatives that ASIC provides is a necessary part of promoting confident and informed market participation and is a key tool to assist gatekeepers and investors to self-manage their activities.

The committee was also pleased to hear of the formation of ASIC's Emerging Risk Committee. There is clear merit in the continual analysis of the system to identify areas of potential risk. Such analysis is a core element of maintaining and improving Australia's financial system that is part of ASIC's legislative objectives. This will be an area that the committee will focus on at future oversight hearings.

In turning to supervision of the stock market, a key priority for the committee is to track the transfer of responsibility for supervision of real-time trading on Australia's domestic licensed markets from the Australian Securities Exchange to ASIC.

Yvette D'Ath (Petrie, Australian Labor Party) Share this | Link to this | Hansard source

Order! Could those at the table have their conversation a little more quietly so the member for Oxley could be heard. Thank you.

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

ASIC previously advised that, since the transfer of responsibility, the time from problem identification to formal investigation has decreased. The committee is particularly pleased to see that this trend has continued and trusts that it will continue to do so in the future. It will form the basis of ongoing inquiry.

It is clear though that there are other emerging issues that may affect the performance of Australia's domestic licensed markets, including dark pools, high frequency trading and white-label or indirect brokers. We are extremely interested in these and other areas of potential risk and so will continue to seek ASIC's assessment of emerging risks, and the development of regulations to address them. To assist with notifying the market about risk, the committee considers it appropriate for ASIC to continue to publish six-monthly reports regarding the Commission's supervision of markets and participants.

In relation to Australian financial services licenses, the committee continues an interest in this particular area. The awarding of and subsequent use of Australian financial services licenses continues to be a significant focus for the committee. The committee was informed that the Corporations Act contains a presumption in favour of granting applicants an Australian financial services licence and that sometimes there is a perception that some inappropriate people are granted one of these very special licenses. However, on the basis of evidence provided to the committee, it was not clear that the presumption in favour of granting a licence does undermine market integrity in any particular way.

What did concern us was the potential for misperceptions, amongst investors and consumers, of the significance of an AFSL, which may result from licensees claiming their product or advice is ASIC approved—the moral hazard in having the ASIC approval stamp on a product, when having that licence or stamp does not in any way give any favour to approval or otherwise of the merits of that particular product; it only shows only that the product complies with regulation and law. For this reason, the committee has recommended in this report that ASIC amend its website to include an explanation of the meaning and significance of holding an Australian financial services licence and what that means to people making assessments about the people who hold them, the type of investments they make or the recommendations that may come from people who are the holders of an AFSL.

In conclusion, the committee holds its next hearing with ASIC in October and looks forward to the opportunity to discuss these and other issues further. I would like to particularly thank the secretariat for their assistance in preparing this report and other reports and their ongoing good work in the complex and sometimes difficult matters that the committee deals with.