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

I rise on behalf of the member for North Sydney, the shadow Treasurer, to speak on the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013. The bill has two schedules. The first deals with amending the Corporations Act to facilitate improved trading of retail corporate bonds in Australia. These measures were part of the Treasurer's banking plan, announced back in December 2010. As members would be aware, the shadow Treasurer has been calling for the establishment of a deep and liquid corporate bond market in Australia since October 2010. We note that it has taken the Treasurer almost three years to bring forward this legislation. The coalition will, as part of its financial services inquiry and commitment to a reduction in red tape for business, monitor the progress of this legislation.

The government claims that the changes contained in schedule 1 will establish a strong and liquid retail debt market in Australia by facilitating increased offerings of corporate bonds to retail investors in Australia through a streamlined disclosure process, changes to civil liability provisions in respect to corporate bonds issued to retail investors and clarifying the application of the defences in respect of misleading and deceptive statements and omissions in disclosure documents relating to corporate bonds issued to retail investors.

The Corporations Act governs the fundraising practices of corporate entities in Australia. Currently the act requires a corporation to prepare a full prospectus for the offer of corporate bonds to retail investors. In a full prospectus a corporation is required to disclose all of the information that investors and their professional advisers may reasonably require to make an informed assessment. While the issue of corporate bonds to retail investors requires a full prospectus, the issue of corporate bonds to sophisticated or professional investors—commonly referred to as wholesale investors—does not require a disclosure document such as a prospectus, on the basis that wholesale investors are considered to have sufficient resources and bargaining power to evaluate investments.

The amendments in schedule 1 introduce a mandatory two-part prospectus for certain bond issuances to simplify the disclosure obligations. While the framework of the two-part prospectus will be contained in the act, the content and structure of it will be specified by regulations. Directors and proposed directors of a body making an offer have liability for any misstatement in or omission from the document where they are involved in a contravention of subsection 728(1). The amendments to the directors' liabilities have been designed to reduce the burden on directors when issuing corporate bonds to retail investors under the two-part prospectus.

The second schedule deals with issues that are a legacy of the 2009 inquiry into financial products and services in Australia by the Joint Committee of Corporations and Financial Services, which considered a variety of issues associated with corporate collapses, including Storm and Opes Prime. Schedule 2 seeks to amend the Corporations Act in order to restrict the use of the terms 'financial planner' and 'financial adviser' and terms of like import, taking effect from 1 July 2013. The government argues that by restricting these it will be able to provide consumers with certainty that a person using the term is authorised to do so under a licence.

The act defines and restricts the use of a number of other terms—for example, 'stockbroker', 'futures broker' and 'issuance broker'—however, there have been no specific restrictions on the terms 'financial planner' and 'financial adviser'. The government argues that restricting the use of terms 'financial planner' and 'financial adviser' enable the corporate regulator, ASIC, to take specific action against persons who hold themselves out to be either of those without being able to do so under a licence. The changes within schedule 2 make it an offence for a person to assume or use the terms or terms of similar importance unless they meet the statutory criteria of the bill.

The coalition is committed to striking the right balance between improving consumer protection on the one hand while keeping costly red tape to a minimum so that access to high-quality financial advice remains available and as affordable possible. The change to enshrine the definition of these terms in the legislation is unlikely to make much of a positive difference from the current position. The law already requires anyone providing financial advice to hold an appropriate Australian Financial Services Licence through ASIC. To provide advice without such an AFSL is already an offence.

The coalition cautions against the risk of further regulatory expansion of the regime from the platform of enshrinement of the terms 'financial planner' and 'financial adviser'. Other terms in the finance industry are not enshrined—terms like 'accountant' are not. Through the pursuit of high professional standards by various accounting bodies, the industry has effectively self-regulated and achieved public trust for that profession. Accountants use accreditation by industry bodies, such as the CPA or Chartered Accountants, to signal their professional standing or bona fides. At best the coalition considers enshrinement will make little difference. Clearly the dividing line in policy terms between what ought to be enshrined and what ought not to be is difficult to agree upon even within the industry. There was some evidence of that through some recent inquiries. I point out, in addition, the Association of Financial Advisers have argued for mandatory sign-plating. An example is for offices and business cards to also be a requirement of this legislation.

The legislation should not be the first step towards more red tape and complexity, with costs of business compliance being passed on to consumers for very little protection. I point that out because some in the industry are foreshadowing future changes. Indeed, in the FPA submission the Industry Super Network was quoted as saying that the legislation should include regulation-making powers to provide flexibility in the future to identify additional requirements which would need to be met in order to make use of the restricted terms and ensure it extends to the use of terms when providing advice and online tools.

The coalition will keep a watching brief on the implementation of this legislation and any flow-on consequences it may have, particularly for unnecessary regulatory burdens with minimal policy outcomes. The coalition will not be opposing the passage of this bill.

Deborah O'Neill (Robertson, Australian Labor Party) Share this | Link to this | Hansard source

I rise to address the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013. The matters are covered in two schedules. Firstly, with regard to the issuing of retail corporate bonds we had an excellent hearing with the sector, which provided some considerable feedback to us. With the establishment of this piece of legislation the bond market will be able to expand, and that will provide investment opportunity for Australian residents and nonresidents and improve access to the simple corporate or vanilla bonds. The second schedule deals with the terms 'financial planner' and 'financial adviser'. Sadly, some unlicensed people or unscrupulous people have been exploiting those who thought they were getting careful financial advice and personal financial advice but found that not to be the case. This tightens up the naming of people who call themselves financial advisers. In effect, it will definitely help consumers by clarifying where you can go to get excellent financial advice. That should improve consumer confidence. I commend the bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I present a replacement explanatory memorandum for the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013. I thank honourable members for their contributions to the debate on this bill. The establishment of a deep and liquid retail corporate bond market in Australia is a key priority for the Gillard government. A well-performing and efficient retail corporate bond market will provide an alternative funding source for Australian companies and increase competitive pressure on lending rates.

The reforms in schedule 1 of the bill reduce the regulatory burden on issuers of corporate bonds, while at the same time ensuring that appropriate standards of consumer protection are maintained. The reforms follow on from the recent reforms that led to the commencement of retail trading of the Australian Government Bonds, AGB, on the ASX on 21 May 2013. They deliver on our commitment to reduce regulatory burdens and barriers for offers of corporate bonds to retail investors. There are clear benefits in growing the size of the retail corporate bond market. For Australians living longer, simple corporate bonds provide an appropriate alternative for managing longevity risk, which is of particular interest to self-managed superannuation fund trustees.

The reforms in schedule 1 enable companies to offer simple corporate bonds by releasing a shorter offer-specific prospectus, as long as they have lodged a base prospectus with ASIC for the purposes of making an offer under the new two-part simple corporate bond market.

In addition to these critical reforms, the bill also facilitates future parallel trading of simple corporate bonds into wholesale and retail markets. In streamlining the disclosure requirements, we will help build investor confidence and establish a strong foundation for future growth.

The other measures in the bill contain a schedule to amend the Corporations Act 2001 to define in law the terms 'financial planner' and 'financial adviser'. The amendments will also make sure we can allow ASIC to take action against property spruikers and other individuals who seek to deceive Australian consumers by holding themselves out as genuine providers of financial product advice when they are actually not.

These reforms are strongly supported by stakeholders in the industry. I commend the legislation to the House.

Question agreed to.

Bill read a second time.