Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

This bill, the Treasury Laws Amendment (2018 Measures No. 2) Bill 2019, increases the length and widens the scope of exemptions that the Australian Securities and Investments Commission can grant for new entrants to the market from having to hold a financial licence. Under this bill, new entrants will be able to be granted a financial licence exemption for up to 24 months, up from an existing 12 months. And, under this bill, financial licence exemptions will be able to be provided for a much wider range of products, including consumer credit.

I want to point out to senators—especially those who were in the chamber for the legislation that we've just passed on the Hayne royal commission bill—the irony and the contradiction that, before us now, we have a piece of legislation that's going to deregulate financial markets and increase risk for investors and consumers. Have we learnt nothing? It was interesting seeing the government put up a number of speakers who got up and waxed lyrical about what a great job they are now doing bringing forward legislation to this place to protect consumers of financial products and investors in financial products. What's this? A regulatory sandbox, providing a more flexible environment for entrepreneurs to develop sophisticated financial products. You know what that spells to me? One word: risk. These kinds of initiatives will be like burley to sharks.

Why are we loosening regulations around investments and the licensing of advisers on products like this? I have absolutely nothing against the fintech industry, and I totally get the argument for developing new credit products that will help break down the power of the big banks and financial services companies and break open the market, which, of course, will have potential long-term benefits for consumers of financial products. But why are we making it easier for this industry and for potential spivs coming into this industry to rip off more Australians? Despite a royal commission, which we've all just talked about, that laid bare the horrors of 30 years of deregulation in the banking system, here we are again loosening the rules that government financial markets and those who are entrusted with other people's money for a vested interest—which is, of course, the fintech operators, fintech entrepreneurs and fintech advisers who want to flog and sell these products. This time around it's not the wonders of a perfectly free market delivering a Utopia to consumers in humankind in general; this time around it's the wonders of the digital age which, with more deregulation, will unlock potential and deliver us Nirvana. I've heard the spiel, believe me. So fintech's here to save us, and a fintech sandbox is where it's at.

Anyone who understands finance and economics 101 knows that with more complex products, with more sophistication, we get potential higher risks. We've heard all about the dangers—'Buyer beware'—in buyers being informed about financial products, and that's from licensed financial advisers. What we're looking at doing here is loosening the licensing arrangements on the sale of these potentially very sophisticated and very high-risk products. I've always had a view that I have absolutely no problem with people investing in high-risk products and developing new industries, allowing research and development and entrepreneurial flair to deliver new products in new markets. But there are sophisticated investors out there who understand the risks and who have a diversified approach to investing in high-risk products: angel investors, equity investors—people who know what they're doing. I don't want to see a high-risk market opened up to more mums and dads, to more retail investors, that's going to lead to potential risk.

Let's boil it down to a nutshell: if we could name anything that was uniform throughout the Hayne royal commission, it's simply human nature: wanting to make more money, greed and the incentive structures that led to a culture of profits before people. Humans don't always behave the way we want them to. What kind of regulations are we putting in place in this set of regulations in the legislation before us to crack down on the kinds of unscrupulous operators that, as I know from my experience working as a young stockbroker when I started my first job out of university, will be coming into this kind of market? Very soon—I'm probably going to run out of time—I will finish my contribution by giving you some examples of fintech companies that have already failed, with hundreds of millions of dollars lost to investors.

These kinds of products should be sold to sophisticated investors. We shouldn't be opening up and deregulating licensing arrangements to allow more products that, by their very nature, are high-risk products. Yes, they have high return and high potential pay-off. High risk means high return—another fundamental concept in finance. But what we're doing here is opening up high-risk, high-return products to potentially unscrupulous advisers and operators. This is not reducing the licensing arrangements for the companies themselves, the actual sellers of these products. Rather, it is reducing the licensing arrangements for those advisers and operators.

I challenge any senators who've been here during all the inquiries the Senate has held in the last 10 years, when we have heard from victims of financial crime, victims of the banks, victims of financial services companies, victims of managed investment schemes—just one example is Storm Financial—and even victims of the global financial crisis. I know there are some senators in here who have finance backgrounds, who understand economics. There are plenty of examples of highly innovative financial products that have led to catastrophe. I lay before you the global financial crisis. Remember collateralised debt obligations, CDOs—financial engineering and financial innovation at its finest. That essentially came close to collapsing our global economy. Remember the kind of suffering and devastation we saw, especially in the United States, from financial innovation. High-risk, complex, difficult-to-understand products were being churned out and sold by, in many cases, unscrupulous advisers and being sold to unwary and unwilling buyers.