Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Link to this | Hansard source

These bills represent the second stage of the ASIC Industry Funding Model, and Labor supports their passage. On 1 July 2017, the first stage of the ASIC Industry Funding Model commenced, with the introduction of industry levies to recover the costs of ASIC's regulatory activities. This allowed ASIC to apportion and recoup its regulatory costs from each of the sectors and subsectors that it regulates.

Labor supported the bills to introduce that ASIC Supervisory Cost Recovery Levy. We're supportive of the principle that ASIC, as a regulator, recover regulatory costs that should be borne by those entities that cause the need for the activity that ASIC undertakes in regulating the industry. This is a principle that's been applied in relation to the Australian Prudential Regulation Authority, and this second stage deals with fees for services. It's based on the principle that ASIC's costs for specific regulatory activities requested by an entity should be recovered from that entity. This is to the extent that the fee directly represents the efficient costs of providing the regulatory activity or service, and it's on the basis that such services primarily benefit the entity that sought them.

Under this scheme of bills, these fees will be paid by entities for ASIC's demand-driven services. Some of the services that are intended to be captured by these new arrangements, amongst other things, are document compliance reviews, licence applications or variations by Australian financial services licensees and Australian credit licensees, and applications for registration by managed investment schemes. We understand that the fees attached to ASIC forms relating to updating the ASIC registry are not in the intended scope for this bill. ASIC has released a cost-recovery implementation statement setting out how it proposes to implement these fee-for-service elements of the industry funding model. We also understand that the fee amounts would be reviewed every three years and that these reviews will include, importantly, consultation with the industry.

The minister has assured the House, in her second reading speech, that 'The government has consulted extensively with the industry on the design of the ASIC Industry Funding Model.' But, of course, when it comes to ASIC and financial services regulation, this government, unfortunately, has a very poor record, particularly when it comes to properly funding and resourcing ASIC to do its job. We've seen a litany of scandals in the financial services and banking industry over the course of the last decade in Australia that have led to the loss of millions of dollars for many hardworking Australians and their families and, importantly, small businesses as well.

When it comes to ASIC, the recent history shows quite clearly what the Abbott and Turnbull governments tried to do in terms of gutting the regulator to undermine its ability to uncover and prosecute some of the unconscionable financial services conduct that we've seen over the last number of years. It should never be forgotten that in 2014 the Abbott government slashed ASIC's funding by $120 million. At the Senate estimates after the 2014 budget, the then ASIC chairman, Greg Medcraft, explained how ASIC would deal with that cut of $120 million to its funding model. Among other things, he said:

In particular, our proactive surveillance will substantially reduce across the sectors we regulate and, in some cases, it will stop.

That became the case, unfortunately, and now we're all ruing it and seeing the results of it in the financial services royal commission.

One need look no further than the wealth management scandal at the Commonwealth Bank. Whistleblowers attempted to contact ASIC on three or four occasions, through phone calls and through emails, about what was going on in CommBank and the dodgy financial advice that was being given to Australians and small businesses in that particular organisation. The whistleblowers had to rock up to the ASIC office, risking their livelihoods and their employment, and actually force ASIC to have a look at what was going on in the Commonwealth Bank. That, of course, led to the uncovering of the likes of the so-called dodgy Don Nguyen and the CommBank scandal where literally thousands of customers had been ripped off by poor financial advice. That may not have happened if ASIC had ignored those initial pleas from those whistleblowers, as they initially did; none of this may have been uncovered and people would have gone on losing substantial sums of money.

But Mr Medcraft didn't stop there. He went on to say:

Some examples of the changes in our consumer cluster are the deposit takers, credit and insurance team. There will be reduced proactive surveillance. As a result, they will focus on activity by entities that have the greatest market impact at the expense of smaller entities that have a smaller customer basis.

That says it all about the approach of this government to the regulation of financial services in this country. They've got the backs of big business; we see that through the corporate tax cut they're trying to get through the Senate at the moment. They want to reduce corporate taxes for the biggest businesses in this country—including the big four banks, believe it or not. But there you have it. When the Abbott government cut $120 million from the ASIC budget, where was the first area of proactive surveillance to go? It was in the smaller players; it was the small players who operate in this industry, and that predominantly affects small businesses, local farmers, families that are running businesses in all sorts of industries and, of course, mum-and-dad investors.

That's what we saw happen in the financial services royal commission—a royal commission that Labor's been calling for for many years and which was opposed by those opposite. When I spoke earlier about who they're backing and who they've got the backs of, again it's evidenced in their approach to the royal commission. They didn't want it. They wanted to protect the banks. They wanted to protect their mates in banking—where a lot of them come from, including the Prime Minister. The result of the $120 million cut in funding was, not surprisingly, a devastating loss of staff and expertise, with a significant effect on the ability of the corporate and financial services regulator to address misconduct. It was a further kick in the guts to those who'd been the victims of financial rip-offs over recent years.

Despite the depths of the cuts to ASIC and their massive impact, the government took zero action and only partially unwound the cuts when Labor began to shine a light on the industry and, typically, when these issues began to be uncovered by the media. It really took the media to uncover the scandal before the government did anything. The government ignored the representations that, no doubt, their MPs were getting from constituents about what was going on; ignored the findings of several Senate and joint committee inquiries and reports into what was going on in financial services; ignored the media reports and uncovering of these issues by several investigative reporters; and ignored the impact of collapses of companies like Trio Capital, Storm Financial, Timbercorp and the like, and the pleas of their victims, for 600 days. But, when the big four banks wrote to Malcolm Turnbull and said, 'Yes, it's okay to hold a royal commission now. We've got no choice. You're going to have to do it,' he rolled over and that's exactly what he did. That was on the back of cutting the funding to ASIC, the watchdog that was keeping an eye on these activities going on in the industry.

Millions of Australians have been let down by this government when it comes to regulation of financial services. The government only sought to backtrack on these cuts after Labor began calling for a royal commission, in 2016. But the impact on ASIC of the cuts to it cannot be undone so easily. These were cuts to the capability of the corporate regulator, and a free pass for financial services misconduct. It's consistent with the attitude of this government, which spent 601 days resisting the urgent need for a royal commission into the banking and financial services sector. Labor have been fully vindicated in our prosecution of the case for a royal commission into financial services and banks in Australia. Despite the government's claims that we were misleading the Australian people, trying to undermine trust in the financial services industry and trying to undermine the superannuation balances of Australians—the wealth creation vehicles of hardworking Australians—the hypocrisy of this government has been exposed.

In responding to the financial systems inquiry, the government promised to update the ASIC statement of expectations by mid-2016. It took until 2018 for the minister to announce a new statement, after pressure from Labor in Senate estimates. It's really only when Labor puts pressure on the government, or if the media come asking, and shines a light on what's going on in financial services that the government acts, because they don't want to act against the interests of those that they seek to represent in this place—those, indeed, from which many of them have come. The statement of expectations is an important document. It sets out the government's expectations of how ASIC will fulfil its mandate. In the meantime, they left the Abbott-era 2014 statement of expectations in place—and a lot has changed in this industry since 2014, as we've seen—which focused a lot on red-tape reduction and very little on ensuring good consumer outcomes. Again, it goes to the philosophy of this government when it comes to financial services regulation.

If you want to comprehend what I'm talking about, Mr Deputy Speaker Vasta, then you need look no further than the current government's approach to the Future of Financial Advice legislation. It should never be forgotten. The coalition's opposition to the FOFA laws and its attempts to hollow them out really were rank hypocrisy. After the high-profile collapses of schemes like Trio Capital, Westpoint and Opes Prime, the then Labor government decided those outside the industry deserved protection from unscrupulous financial advisers. The FOFA legislation gave ASIC important tools to regulate those particular industries. Those laws were introduced to help prevent the same scandalous behaviour driven by greed and distorted financial incentives that we're unfortunately still seeing today and that are the subject of a lot of evidence before the royal commission.

At the heart of FOFA was the best-interest test for clients. Believe it or not, up until Labor introduced this best-interest test in the FOFA legislation there was no legal requirement for a financial services adviser to act in the best interests of their client—and guess what? In many cases, they simply didn't. And we saw the results of that in many of the cases that I mentioned earlier. At the heart of these financial advice reforms was the best-interest test, a legal obligation for financial advisers to do the right thing by their customers. Now, it's hard to believe but prior to FOFA there was no such legal obligation for financial advisers to act in the best interests of their customers, and many didn't. FOFA also required an opt-in requirement, meaning that financial advisers and clients with ongoing fee arrangements must agree to opt in to that service on an ongoing basis, and the relationship must continue—and that happens every two years.

It must be pointed out that, in opposition, those opposite voted against these reforms. That's right, the members of the government voted against a best-interest duty, particularly the catch-all provision at the end of the duty and the opt-in provisions every two years. They came in here and spouted to the public that this was unnecessary red tape, it was overregulation and it was a financial burden on those poor banks. That poor AMP! I remember reading the inquiry report that was handed down by the joint parliamentary committee that initially looked at the FOFA legislation, and the dissenting report. The dissenting report was authored by none other than the current Minister for Finance, Senator Cormann, who, believe it or not, used the evidence of AMP in his report to say why the Future of Financial Advice reforms should not be passed. Yes, that's right: he used the advice of AMP. Have a look at what AMP have done. No wonder AMP came to the Joint Parliamentary Committee on Corporations and Financial Services and argued that FOFA shouldn't go through. We all know why now! It's been uncovered in the royal commission the reason why they didn't want FOFA to be implemented. In fact, they said it would result in the loss of 30,000 jobs in the financial services industry. Have a guess who picked it up and used it in his report? The finance minister, Senator Cormann. He quoted them and said, 'This is what will occur and we're going to back AMP on this.'

Now you see members of the government coming out and saying: 'What a shock it is, this evidence being uncovered in the royal commission. This is unacceptable and this behaviour must stop.' Guess what? If the government had their way, none of this would be illegal. It wouldn't be illegal at all, because the catch-all provision, the best-interest duty and the opt-in provision wouldn't exist and none of this behaviour that we're uncovering in the royal commission would be illegal. In fact, when they got elected to government in 2013, one of their first acts was to try to water down and undermine the best-interest duty in the Future of Financial Advice reforms. They actually got it through this parliament—so all of those opposite voted for it—and they got it through the Senate. It was only with a rescission motion that we were able to unwind that.

So, when they come in here and talk about bolstering funding for ASIC, when they come in here and talk about being tough on the banks and when they come in here and talk about supporting a royal commission, it's nothing more than rank hypocrisy, because their records speak for themselves. They opposed the royal commission all the way, they voted against the Future of Financial Advice reforms and they tried to undermine them when they came to office, and then they cut funding for ASIC in their first budget. At the time, Senator Cormann said that FOFA legislation went too far by having a legal obligation requiring the financial advisers to take reasonable steps in their clients' best interests.

In government, they tried to gut FOFA, first by legislation and then by regulation. ASIC identified FOFA requirements as being significant in helping uncover the massive fees-for-no-service scandal that we saw in the financial services industry, in which clients were charged by the big banks and AMP for advice that was never provided—and I mentioned AMP earlier. These are the people that the government sought to protect against the interests of mum-and-dad investors and small businesses. If this government had its way, there would be no laws against what the banks and the likes of AMP have been doing to hardworking Australians. It would simply be a bad look for them. Ultimately, there would be none of the accountability to the Australian people that we're getting in the royal commission at the moment

Yet we now see, of course, the same Liberal and Nationals MPs expressing outrage at the behaviour that has been uncovered by the royal commission.

It is beyond me to comprehend why anyone would want to water down laws that say that a financial adviser has to act in the best interests of their client. But that is exactly what this government tried to do when they tried to water down the FOFA requirements. The heart-wrenching stories of mum-and-dad investors losing everything in a string of financial scandals in the wake of the global financial crisis was not enough to stop the coalition removing protection for customers from dodgy financial advisers. That says everything about this government's approach to financial services regulation. The hypocrisy of this government knows no bounds when it comes to the issues of the royal commission into FOFA and, indeed, the funding of ASIC.

It was Labor that was strong on the royal commission. It was Labor that forced through the Future of Financial Advice reforms to protect people in the unregulated market, particularly when it came to superannuation. It was Labor that bolstered our superannuation laws in Australia. It's Labor that's been pushing for improved reform and additional requirements on financial advisers in this country. Importantly, it was Labor that criticised the government and pushed the government to ensure that they properly funded ASIC, although there were job losses and a loss of expertise and they haven't fully recovered all the funding that the government cut in that original 2014 budget.

This reform is something that Labor does support, because the cost-recovery model to ensure that ASIC is properly funded and can do its work, particularly, in the area of prevention of financial scandals is something that we need to see more of. It's just a shame that it took the royal commission, that it took all of the pain and suffering of many in this area—particularly mum-and-dad investors and small businesses—and that it took media interest and several inquiries for the government to work out that they'd made a mistake and did the wrong thing in cutting ASIC's funding. I commend these bills the House.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I rise today to support the Corporations (Fees) Amendment (ASIC Fees) Bill 2018 and related bills. This legislation will allow the Australian Securities and Investments Commission, otherwise known as ASIC, to operate in a more efficient and effective manner. Corporate governance and the enforcement of sensible regulations are key to a functioning society and financial sector. We only have to look back as far as 2008 to the fallout of the global financial crisis to see the impact that poor accountability in governance can have on public confidence in the financial system and its ability to operate in a sustainable manner. This initiative is one part of this government's commitment to ensuring that the Australian people have trust and confidence in the financial system and the likes of ASIC. Only through improving the manner in which ASIC operates and the transparency of its actions can we look to safeguard trust in our institutions and their ability to function.

The bill will increase fee caps to allow ASIC to recover the costs it incurs when providing regulatory services. This is in conjunction with expanding the definition of 'chargeable matters' and clarifying fee regulations regarding what constitutes a chargeable matter. The bill has been devised in consultation with stakeholders and follows acceptance of the April 2016 recommendation of financial system inquiry to introduce an industry funding model for ASIC. Thorough consultation is essential to good government, and a functioning democracy and the implementation of the inquiry's recommendations are a testament to this.

At the core of the bill is a focus on equity and accountability. Gone are the days of nominal fees that are subsidised by taxpayers. Now the recipients of a government activity will be the ones that solely bear its costs. Taxpayers will be saved from their burden by the introduction of a fee for service which differs depending on the time and effort involved in the task. The bill will make ASIC more accountable and increase stakeholder awareness regarding how much a government activity costs. The industry-funding model's introduction will also help to encourage regulatory compliance and improve ASIC's resource allocation. A more accountable ASIC, acting as a strong and fair corporate regulator, is undoubtedly a good thing. Australians deserve to know why charges are made and where the money goes.

The Liberal Party is committed to promoting efficiency and reducing red tape. Unnecessary bureaucracy kills investment and the confidence of individuals to take a risk through entrepreneurship. Our economy is built on individual Australians and businesses having a go and being confident enough to build towards a better future. While the Labor Party seeks to destroy innovation and entrepreneurship through their mantra of big government, we, as Liberals, are committed to ensuring that Australians are given the opportunity to pursue their ambitions. However, when there is a role for regulation and corporate regulators such as ASIC, it is our firm belief, as Liberals, that such regulation should be effective and transparent. There is no point in having an independent Australian government body and corporate regulator that cannot act as it was intended to act.

Good governance and the equitable enforcement of regulations are paramount to the viability and long-term performance of our industries. ASIC plays an important role in this by acting as Australia's corporate regulator. Efficient and transparent governance is an essential tenet of a functioning democracy, with independent government bodies ensuring that regulations are enforced properly, regardless of how the political landscape is playing out. Independent bodies are a core tenet of a liberal society and system of governance and inspire confidence in our system. Ensuring that ASIC can set and has the means to set appropriate changes will allow it to maintain the rule of law and enforce regulations in the company and financial sectors. The bill, and the funding model that it proposes, will improve consumer outcomes by allowing ASIC to better predict, monitor and respond to market risks and allow for the redirection of hundreds of millions of taxpayer dollars towards activities that benefit more taxpayers. Government has a responsibility to ensure that taxpayer dollars are spent wisely and in an equitable manner, and this bill builds towards that end goal.

We live in pressing times when the very structures of our democratic institutions are under threat. The recent phenomena of fake news and alternative facts have led to the promotion of a mindset that objective thought and our very democracy are crumbling. The line between fact and fiction has been blurred. These circumstances provide all the more reason for the reassertion of the value of transparency and its importance to democratic institutions and, in particular, market institutions. The key ideal that separates liberal democracies from systems of centralised governance and authoritarianism is an emphasis on openness and accountability. As American attorney and orator Patrick Henry reminds us:

The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them.

Trust in government in the West has also recently hit all-time lows. The Pew Research Centre found that only 18 per cent of Americans say they can trust the government in Washington to do what is right just about always or most of the time. Contrast this to the 1958 national election study, which found that 75 per cent of Americans strongly trusted Washington to get it right.

Australia is not necessarily fairing much better. The 2018 Edelman Trust Barometer, which measures public trust in four types of institutions across 28 countries, found that the percentage of Australians who say they have trust in their governments has declined to 35 per cent. This puts Australia on the same level as Spain, Ireland, the UK and Japan. As Steve Spurr, CEO of Edelman Australia commented:

It is deeply troubling that a majority of Australians believe their government is broken.

Such an emotive description of government as 'broken' may be a stretch too far. The rise of parties and figures outside the historically predominant Liberal, National and Labor groupings does indicate a changing political landscape in Australia. While some will blame these trends on the 24-hour news cycle or increasingly cynical populations, it is clear that there has been a shift in views on government.

The fall of the Roman Republic lends some interesting lessons on the deterioration of institutions. Richard Alston, a professor of Roman history at the University of London, wrote the renowned book Rome's Revolution: Death of the Republic and Birth of the Empire. The rise of the Roman Empire and fall of the democratic republic were in part due to the decay and corruption of age-old institutions weakened by special interests and a lack of accountability. For Rome, the greatest threat to republicanism wasn't outside forces but internal power grabs cloaked in the rhetoric of populist government. The likes of Caesar and Octavian knew how to play the system and its people.

Australia is not at risk of descending from democracy to dictatorship like the old Roman Empire but there are still important lessons on transparency and government accountability to be heeded. Government should be trying to do all it can to ensure it supports transparent processes so as to rebuild voter trust and confidence in democratic and market institutions. This support is vital to the continuing existence of our democratic system and the ability of our society to function harmoniously. If government cannot be open and trust the people to keep it accountable, then what chance is there for the people to trust in government?

This bill will breed confidence and promote investment. Public reaction to the recent banking royal commission has demonstrated that increasingly large numbers of Australians feel at odds with our banking and financial sectors. Now more than ever it is imperative that Australians be reminded that structures and bodies such as ASIC are in place and are being supported in their role of promoting proper conduct and enforcing laws. Only through having a strong, transparent and equitable financial sector can we hope to continue attracting vital foreign investment and ensure that companies want to come to Australia and employ Australians.

As of December 2017, Australia is ranked 14th in received foreign direct investment stock, ahead of the likes of Italy and Russia, but behind the likes of Belgium and Canada. It has often been said one of the major attractions of Australia to foreign investors is its stable political and financial institutions, and transparent governance systems. This will only continue to be the case if the government is committed to ensuring that Australian government standards are high and our financial sector is fair and transparent, and this government is committed.

There is too much at stake for us to rest on our laurels. In this day and age of fiercer than ever global competition, if investors do not deem Australia a suitable destination for their money, they will look elsewhere. The value of ensuring Australia has a functioning, open and fair financial sector is there for all to see. We the government must do all we can to support independent bodies such as ASIC and provide the framework for them to operate efficiently and equitably. This bill will serve as an important step to improving ASIC and its capacity to raise funds and charge fees in a transparent manner. Crucially, the bill will demonstrate this government's commitment to good governance and public taxpayer money being spent fairly, sensibly and effectively. These are notions that all Australians should support; hence I am proud to support this bill and I commend it to the House.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

Yet another sitting week and yet another piece of legislation dealing with ASIC, it is almost as if the government thinks it can convince the public that by having a separate piece of legislation for every sitting week that we come here that has something to do with an economic regulator that they might just think that they are going to get tough on the banks and tough on financial regulation. Before I get into the substantive remarks of my speech, can I just commend the member for Mackellar for giving an absolute textbook workshop on how to speak about absolutely nothing to do with the bill and somehow top and tail his speech to make it vaguely relevant. I really want to commend him for that effort.

Last month, it was revealed that ASIC asked the federal government for more funding to embed its own staff into the big banks, the intention being to ensure the banks are complying with—wait for it—the law, the rules and regulations. This comes following allegations of misconduct by the biggest banks in Australia and the financial advisers that work for them. Considering the appalling stories that we have heard come out of the royal commission into banking, this is a strategy that, I believe, should be supported. The misconduct by the nation's biggest banks and financial advisers is clearly inexcusable. People have lost their homes, their businesses, their life savings. Customers have been charged fees for nothing. It seems not even death will stop some of our financial institutions from charging you a fee. In the most recent sittings of the royal commission, we heard about people losing their homes and businesses due to poor financial advice. We heard about banks knowingly taking advantage of guarantors who were not capable of making educated financial decisions themselves and were being misled. That's only been unlawful in this country for around 30-odd years but we still see that conduct. So I do support ASIC embedding supervisors inside some of the country's largest financial institutions because, clearly, there is a lot of work to be done in changing their culture and attitude and because, when left to their devices, following the law seems to be quite beyond them. We need to ensure that these previous misdemeanours—and 'misdemeanours' is putting it lightly—are never repeated.

I understand that, along with onsite supervision by ASIC—staff being placed in these organisations when required—it is also proposed that staff will work off-site at ASIC, continuing to conduct surveillance and data collection. These activities would be determined by necessity and re-evaluated periodically as required. With the vast majority of the banking market in the clutches of the big four banks—in fact, nearly 80 per cent of banking business occurs between those four—valuable insights would be gained from data collection and analysis, and one would hope that this would serve as an ongoing reminder, to ensure previous malefactions are never repeated.

ASIC is in negotiation with the government to secure this funding, for what I believe is a very valid cause. The new Chair of ASIC, Mr Shipton, revealed in Senate estimates that he had already met with the Treasurer and the financial services minister, and they'd both responded positively, apparently, to this request for funding.

It seems that the Treasurer is forgetting, though, his own industry funding model, specifically designed for ASIC, which, of course, we debate now in this bill. In 2016, the industry funding model was proposed and designed to ensure that financial institutions—including the banks, auditors, insolvency practitioners and credit licensees—would pay to ASIC certain levies to fund its work to hold them to account. In theory, the better behaved these financial institutions are as a whole, the less work ASIC will need to do, and that will of course reduce the bill that these financial institutions need to pay. It's pretty simple, and that's why Labor supported that legislation—though, at the time, I do recall remarking that, as with so many pieces of the government's legislation, I suspected there might be a few ways that they could improve it, pointing to some of the other industry funding models that already exist for other regulators. So I find it interesting that, now, we have this legislation, and we also have a process where ASIC has approached government saying that they need more financial support. It seems to suggest that the industry funding model is deficient to provide the money that ASIC requires to do its job.

The bill that we now debate is part of this furtherance of the industry funding model. This is the fee-for-services phase, and it's based on the principle that ASIC's costs for specific regulatory activities to do with an entity should be fully recovered from that particular entity. This bill is to ensure that those financial institutions pay, effectively, for their bad behaviour and regulation. So if the government is considering funding ASIC's plan to embed staff in these big banks then clearly it has no faith in its own industry funding model. Why would the government consider charging the taxpayer to keep an eye on the banks when—and I think this is quite apparent to everyone—the banks are more than capable of footing the bill themselves?

In 2017, the first stage of ASIC's industry funding model was implemented, with the introduction of industry levies to recover the costs of ASIC's regulatory activities. This was supported by Labor at the time, and we are supportive of this bill as well. The principle is that ASIC's regulatory costs should be borne by those entities it regulates and oversees.

The bills before us today take this, as I say, a step further. This stage deals with fees for services. This is on the basis that those services primarily benefit that entity that has sought them, and they include document compliance reviews, licence applications or variations for various Australian financial services licences and credit licensees. ASIC has released a cost-recovery implementation settlement, setting out how it proposes to implement these fees-and-services elements of its industry funding. The overarching motive is that it creates more incentive for self-regulation and to improve the behaviour of those operating in the financial services sector. We understand that those fees will be reviewed every three years. The minister has assured the House that the government has consulted extensively with industry on the design of this funding model—and no doubt industry is probably pretty happy with it, because it seems like those that are making the most money out of the financial services regulatory system, the banks, won't even have to pay to have people embedded in them to make sure that they follow the law. I'm sure industry is pretty happy with that!

I hope the government really has done its homework here and that it does manage these changes appropriately because, when it comes to ASIC and financial services regulation, frankly, this government has a pretty shoddy record. In 2014, this government's budget made significant cuts to ASIC's funding. At estimates the same year, the then chairman, Greg Medcraft, explained that ASIC's 'proactive surveillance' would 'substantially reduce across the sectors' that they regulated because of those cuts, and that, in some cases, it would even stop!

ASIC said that it would be forced to focus on activity by entities that have the greatest market impact and that it would have to be at the expense of smaller entities with smaller customer bases. It took two years for the government to backtrack on those cuts.

Of course, this was all after Labor started making these calls for the obviously much-needed and required banking royal commission, but the impact of those cuts on ASIC could not be easily undone. In fact, ASIC gave evidence before the House economics committee, of which I am a member, that it has taken it quite a while, even when such funding was restored, to be able to restore the staffing levels that were cut as a result of it losing that funding. It created the situation, effectively, where we find ourselves now, where we had to hold a royal commission into the banking sector—a royal commission that this government resisted holding for more than 600 days.

In responding to the financial systems inquiry, the government promised to update ASIC's statement of expectations by mid-2016 as part of reviewing its overall regulatory approach of ASIC. True to government form, I suppose it did pretty well by actually getting around to doing it by 2018. If you compare it to delivering the NBN, that's exceedingly quick when it comes to a rollout, compared to some of the other processes this government has undertaken. But by 2018 we finally got around to seeing the new statement of expectations.

Up until that time, though, we were stuck with the Abbott-era 2014 statement of expectations, which was focused on what this government likes to call 'red tape reduction', which they say is to the detriment of consumer outcomes. Another name for red tape would be 'appropriate regulation to protect consumers from the big banks ripping them off'. We can never forget, of course, that this is the government which, when in opposition, opposed Labor's Future of Financial Advice laws and which has attempted to hollow them out ever since coming into government.

The FOFA legislation was to give ASIC the important tools it needed to make sure that the financial services industry was properly regulated. It included a new test: the best-interest test, a legal obligation for financial advisers to do the right thing by their customers. A novel concept. It was a concept so novel that those now in government opposed it. And, of course, the importance of that test has been so clearly highlighted by the evidence coming out of the banking royal commission.

When in opposition, the government opposed the FOFA—it voted against it—and when in government, the Liberal Party tried to gut it. It tried to stop it; it tried to delay it—first by legislation, then by regulation and then by having ASIC delay and defer its implementation. Luckily for Australians—for Australian financial services consumers, who are, let's face it, nearly every Australian—Labor has prevailed in the Senate to stop the government's actions in trying to stop these laws from being in force. ASIC has subsequently identified the FOFA requirements as being significant in helping to uncover the massive fees-for-no-service scandal unveiled prior to and during the royal commission, in which clients were charged by the big banks for advice which they never provided.

We saw in the budget this May that ASIC's funding has been cut again. Even in this industry-funding environment, there was a cut by government of $26 million over the next three years. I thought industry funding was supposed to make sure ASIC was adequately funded. Of course, then we also saw that there's no guarantee of funding for the Serious Financial Crime Taskforce beyond 30 June next year. It is quite clear that, for all of the talk—for all of the bark—that we get from this government, there is no bite when it comes to financial services regulation. They talk a big game. They say, even after we've seen these things revealed at the royal commission, 'That's okay, we're gonna throw the book at this lot.' And what do they actually do? What book are they going to throw? The increased penalties ASIC asked for five years ago still haven't appeared. Then, when we look at what the resources are to make sure that these big banks and other financial services are held to account—wait for it!—they've cut $26 million in funding over the next three years from the corporate regulator, the one that's now supposed to be industry funded. And they haven't provided any additional funds. In fact, funds have been cut from the Commonwealth DPP, which is the entity that actually has to pursue these prosecutions when they eventuate.

This is in stark contrast to Labor's approach, which would set up a $25 million special task force in the Office of the Director of Public Prosecutions to make sure those who need to be held to account are properly held to account, with prosecutions being pursued as we see the findings come out of this royal commission. It is quite clear that only Labor will continue the work of the royal commission in making sure that it delivers justice so that those who have suffered from financial misconduct can be vindicated and those who have caused those financial crimes to be committed against them will be held to account. It is only Labor that will make sure there is appropriate regulation of our banks, that there is proper funding of our financial regulators to ensure that the people that caused this pain to so many Australians are properly held to account, and that the right thing is done to make sure that we have a proper and sustainable footing for our economy going forward that people can have trust in.

Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Link to this | Hansard source

Firstly, I'd like to thank those members who have contributed to this debate. Strong and effective financial regulators go hand in hand with a strong and effective financial system. This was one of the reasons the government commissioned the Financial System Inquiry in 2013. This review resulted in recommendations to strengthen the Australian Securities and Investments Commission, the corporate market's financial services and consumer credit regulator. The Corporations (Fees) Amendment (ASIC Fees) Bill 2018 and associated bills implement a recommendation from this review—the introduction of an industry funding model for ASIC.

The industry funding model's introduction has significant benefits, including improving equity, as the costs of regulation are borne by those who have created the need for it rather than Australian taxpayers; encouraging regulatory compliance, as good conduct will reduce supervisory levies; improving ASIC's resource allocation, by providing ASIC with richer data to better identify emerging risks; and enhancing ASIC's transparency and accountability. The government is committed to ensuring that ASIC has the resources and powers it needs to combat misconduct in Australia's financial services industry and bolster consumer confidence in the sector.

Consistent with this commitment, the government has introduced legislation on the second phase of the ASIC industry funding model—the introduction of ASIC fees for service. Under the ASIC industry funding model, from 1 July 2018 fees for service will be introduced to recover ASIC regulatory costs that are directly attributable to a specific entity, such as the processing of a licence application. Currently the fees associated with these activities do not reflect the costs to ASIC of undertaking these activities. Traditionally many of these activities have only attracted a nominal fee, which has not been subject to any review, resulting in the cost of these activities being subsidised by taxpayers. This measure fulfils the government's commitment in accepting recommendation 29 of the Financial System Inquiry.

This measure builds on the other key initiatives undertaken by the government to ensure that ASIC has the powers it needs to promote trust and confidence in the financial system, including establishing and implementing the recommendations of the ASIC Enforcement Review Taskforce to substantially increase the penalties available to ASIC and to boost its regulatory toolkit; appointing a new ASIC chairman, James Shipton, who brings deep regulatory and financial market knowledge to the role; creating a second deputy-chairman role, with a focus on enforcement, and appointing the highly regarded Daniel Crennan QC to this position; legislating to remove ASIC employees from the Public Service Act to enhance ASIC's ability to attract and retain the best staff; and legislating to include competition considerations within ASIC's mandate.

In conclusion, the introduction of the second and final phase of the ASIC industry funding model is a critical component of the government's reforms to strengthen ASIC and better protect Australian consumers. Industry funding ensures that the costs of regulation are borne by those that created the need for it rather than the Australian public. These amendments allow ASIC to better align its fees by enabling ASIC to charge a cost-reflective fee for the services it provides for a specific entity. I commend the bill to the House.

Question agreed to.

Bill read a second time.