Dana Wortley (SA, Australian Labor Party) Share this | Link to this | Hansard source

My question is to Senator Coonan, Minister representing the Assistant Treasurer. Can the minister confirm that the $300 million worth of losses suffered by 4,000 mum-and-dad investors in the Westpoint collapse were largely due to a loophole in the government’s laws exempting promissory notes greater than $50,000 from the Corporations Act? Is the minister aware that the then Parliamentary Secretary to the Treasurer, Senator Ian Campbell, said about this issue, as long ago as January 2003:

If there is a vacuum we are making sure it is closed quickly.

Didn’t Senator Campbell also indicate, in May 2003, that ASIC had commenced regulatory action in relation to Westpoint and that the government would consider legislative change should any regulatory gap be identified? Did Senator Campbell ever follow up on his promise to close this regulatory gap or did Senator Campbell simply allow the loophole in the Corporations Act to remain, resulting in investors losing hundreds of millions of dollars through the Westpoint scandal?

Paul Calvert (President) Share this | Link to this | Hansard source

Order! That is another very long question. I remind people asking questions to observe—

Opposition Senators:

Opposition senators interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! That was well over a minute.

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Thank you to Senator Wortley for the question. I assume that Senator Wortley is referring to an article in the Financial Review, because that is where the Labor Party usually gets its inspiration for these sorts of questions. But it is wrong; there is no legal loophole. In 2003, ASIC engaged Westpoint in discussions about structuring its fundraisings as regulated offerings and subsequently started court action in the Supreme Court of Western Australia when those discussions failed. The Supreme Court of Western Australia ruled that the fundraising activities of Westpoint in question amounted to the offering of interest in managed investment schemes. Managed investment schemes are in fact fully regulated through a separate chapter, 5C, in the Corporations Act 2001. Managed investment schemes are already financial products as defined in the act and therefore fall under the licensing and disclosure requirements contained in chapter 7 of the act.

The recent appeal decision of the Supreme Court of Western Australia has not changed the situation with regard to Westpoint type schemes that are subject to the current law—that is, there is no loophole. ASIC does have the powers it needs to ensure that proper disclosure of information to retail investors is provided and that such schemes are competently run in the interests of members. The regulation of financial services has been substantially reformed since the Westpoint schemes were first offered but, based on these court decisions, there is no apparent regulatory gap under the current law.

Dana Wortley (SA, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Is the minister aware that ASIC indicated in the Australian Financial Review on 16 June 2006 that it would be powerless to shut down another Westpoint style scheme due to regulatory loopholes which still remain under this government’s laws? Why, three years after Senator Campbell’s promise to act quickly, is the government still refusing to act to close this loophole to protect mum-and-dad investors from Westpoint style schemes? Do we have to see another scandal of the magnitude of the Westpoint collapse before there is any action?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

I do not know on what possible basis Senator Wortley could have based that series of supplementary questions when I have said that there is no current loophole.

Opposition Senators:

Opposition senators interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! Senator Brown, I would remind you of standing order 185.