Deborah O'Neill (Robertson, 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, and I ask leave of the House to make a short statement in conjunction with the report.

Leave granted.

The Parliamentary Joint Committee on Corporations and Financial Services continually scrutinises the activities of the Australian Securities and Investments Commission. As the House would be aware, section 243 of the ASIC Act directs the committee to inquire into and report on ASIC's activities and matters relating to those activities to which parliament's attention should be directed. In fulfilment of this statutory function, the committee holds several oversight hearings per year and routinely directs matters of interest to parliament's attention. Today I am pleased to speak to the committee's most recent report, which draws on the evidence obtained through the oversight hearing held in June this year.

With regard to the regulator's response and the collapse of Trio Capital, I have some particular comments that I would like to make. Notably, the hearing provided the committee the opportunity to formally inquire into the commission's activities in response to the committee's inquiry into the collapse of Trio Capital. The committee tabled its report into this corporate collapse in May this year, and it obtained an overview of ASIC's response in relation to the lessons of the Trio Capital collapse.

The Trio Capital inquiry highlighted the need for effective and timely communication between all regulatory agencies supervising Australia's financial market. I can report that the regulators appear to be taking the committee's concerns in this regard very seriously and indeed are enhancing processes they had already in place.

The committee learned that ASIC and the Australian Prudential Regulation Authority are exploring options to further improve information sharing between the two agencies. We were very pleased to hear that. The committee will continue to monitor the coordination between ASIC and APRA, and we look forward to receiving a more detailed overview of the measures that the regulators will take to improve communication.

The adequacy of the threshold requirements regulating access to an Australian financial services licence, known as an AFSL, is a recurring topic of committee discussion with the financial services regulator. This matter was again raised in discussions with ASIC at the June oversight hearing. ASIC advised us that a person banned from holding an AFSL can meet the requirements to be qualified to act as a director of a financial services company. This was of some concern to the committee, and I note that one of my committee members, who was at the hearing, is here in the House this evening. There appears to be a marked disconnect between the qualifications required to be an adviser in a company providing financial advice and the qualifications required to be a director of that same company. I draw the House's attention to the comments by ASIC Chairman, Mr Greg Medcraft:

An ordinary person would probably think that if somebody is banned from financial services they ought to be banned from being a director of financial services company.

The committee notes also that the duties applying to AFSL holders under Australia's corporations law include an obligation to 'do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.' This is not only a legal requirement; it is a community expectation, and with good reason.

Having considered the circumstances surrounding the collapse of Trio Capital, as outlined in its report, the committee concluded that there appears to be a strong case to establish a register of employee representatives from the financial services industry. The committee looks forward to continuing to monitor ASIC's activities to address the pressure points in Australia's financial services system, as identified in the Trio Capital inquiry.

With regard to superannuation, I would like to bring to the attention of the House ASIC's advice regarding the pressures and potential risks associated with the continuing growth of Australia's superannuation pool. While the amount of money we have in superannuation is something of which this country should rightly be proud, it is something that requires careful and close scrutiny to ensure that its integrity is maintained. ASIC advised that the continuing growth of superannuation will be a key pressure area for Australia's financial markets over the coming 12 months and, indeed, the coming decade.

The pressures are particularly acute with regard to the growth of self-managed superannuation funds and increasing SMSF investment in managed investment schemes. The collapse of Trio Capital highlighted areas of potential weakness within Australia's superannuation industry. Many investors who suffered losses as part of the Trio Capital collapse were self-managed superannuation fund investors. This is a sector that is growing very rapidly at the moment. Further, the concern is that those investors were not eligible for compensation for the loss of their funds due to fraud and theft. The committee is pleased that ASIC has advised that this is an area of continuing and high-level focus for the commission. Given its significance to the wellbeing of Australians, particularly those Australians who have worked so hard and are now approaching retirement, the committee will continue to closely monitor ASIC's activities in this area, and will draw relevant matters to the parliament's attention.

Importantly, this afternoon I want to take the opportunity to raise the awareness of those listening to this broadcast, maybe driving home in their car thinking about their retirement, and interested in self-managed super funds. They need to be mindful that, while it is a very effective investment vehicle, it is very, very clear that there is no protection in SMSFs against fraud and theft, and those who are investing need to do so with great care and need to take that very pressing fact into account.

The resources that ASIC currently have at their disposal, the resources available to ASIC, and the continuation of ASIC's expenditures are matters of continuing focus for our committee. In response to the committee's questions, the commission did not provide a detailed explanation of their current budgetary appropriations and own-source revenue. However, they did assure the committee that the commission seeks to optimally use all available resources.

The committee, however, notes that ASIC's areas of responsibility have significantly expanded in recent years. We would be very concerned if the expansion of the commission's responsibilities resulted in a reduction in the quality of regulatory services that ASIC provides because of an unforeseen resourcing shortfall. The committee was also advised that the commission is committed to proactive engagement with the market, and that this commitment is a key driver in the allocation of its resources. I think it is fair to say that in the relevant press there have been significant indications of ASIC's very close attention to the details of what is happening in that sector and very clear advice to and engagement with the sector through the media. The committee approves ASIC's commitment to this proactive engagement with Australia's financial markets. The committee also considers it is appropriate for ASIC, when prioritising its resource allocations, to consider not only the current but the emerging needs of Australia's financial markets. The committee will continue to monitor ASIC's resources.

In conclusion, I would very much like to thank the secretariat for their assistance in preparing the report and for all their assistance to the committee in the important work that we are doing. I advise the House that we will hold our third ASIC oversight hearing for 2012 on 12 September, focusing in particular on issues of market integrity.