Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

I present the report of the Parliamentary Joint Committee on Corporations and Financial Services on the Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and two related bills, together with the Hansard record of proceedings and documents presented to the committee.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

I am pleased to speak in support of this unanimous report of the Parliamentary Joint Committee on Corporations and Financial Services.

The report relates to the package of simpler regulatory system bills forming the current tranche of the government’s corporations reform agenda.

The committee is unanimous in supporting the major policy objectives of the bills, which include introducing greater access to affordable financial advice for consumers, removing unnecessary regulatory burdens and modernising compliance and reporting frameworks for companies.

Many of the measures contained in the bills were the subject of a consultation process which extends back to October 2005, when the task force chaired by Mr Gary Banks was appointed to examine the regulatory burden on business.

A consultation paper, informed by the findings of the Banks review, was released in April 2006, and received over 80 submissions from industry stakeholders.

These processes, in turn, informed the proposals paper which was released in November last year, and on which many of the measures contained in these bills are based.

That is why I am somewhat bewildered and bemused by the minority report by opposition members of this committee to the report being tabled today.

On the one hand the opposition members agree with the recommendations of the committee, especially the first that clearly recommends that government and industry stakeholders consult further and devise ways to reduce the length and complexity of statements of advice and product disclosure statements; and on the other hand they complain about it.

Had Labor had any convictions of sound and strong policy making, the opposition members of the committee would have come up with strategies to address their concerns.

Agreeing to a recommendation because you have not got alternative policies and then whingeing about it reflects a basic lack of policies and strategies.

This legislation is neither rushed nor ad hoc as Labor claims in its minority report. The simpler regulatory system bill reflects the government’s response to a number of recommendations of the Rethinking regulation report of the Banks regulation task force of January 2006. The bill offers initiatives for financial reporting, financial reporting thresholds for proprietary companies—which will improve business efficiency and reduce compliance costs—yet Labor calls it rushed and ad hoc.

Perhaps I ought not to be bewildered—as clearly the minority report reflects the depths of Labor’s inexperience and the risk they would pose to our prosperity, in government.

Perhaps the most notable indicator of the seriousness with which the government has consulted stakeholders is the decision to defer proposal 1.1 of the proposals paper and the creation of a new category of financial services advice to deal with product sales recommendations. No agreed view was reached between Treasury and key stakeholders in developing the proposal, and it was not included in the bills before the Senate.

In deciding to hold a short inquiry into the bills the committee was mindful of the long and comprehensive consultation process already undertaken—in contrast to what is alleged in Labor’s minority report. The committee focused its attention on identifying any outstanding issues for financial services practitioners, regulators and industry stakeholders.

While the committee sought comment on all the features of the bills, the majority of feedback addressed those provisions that seek to simplify the way financial advisers give advice to consumers.

The underlying sentiment of both the submissions and the testimony given by witnesses at the committee’s hearing last Wednesday was positive. The bills offer significant improvements for the financial adviser through simplified and reduced disclosure compliance. They also offer easier and cheaper access to financial advice for consumers with both a little and a lot to invest. They make it easier for financial advisers to do their job, and they make it easier for those with savings to deploy them to their advantage.

The bills were popular and the reforms worthwhile. That fact was clear because much of the commentary in the submissions took the form of suggestions for enhancement rather than outright criticism.

One feature which did elicit some concern on the part of some stakeholders was the inclusion of advice relating to superannuation in the simplified advice framework. The legislation aims to help people with the process of consolidating their super accounts, but concerns were raised that simplified disclosures might result in poorer quality advice being given, particularly in relation to exit fees and the loss of valuable insurance cover through the consolidation process.

The committee recognises the legitimacy of these concerns but can find no compelling evidence that simplified disclosure would result in inferior advice. Rather, the committee sees the increased availability of advice, particularly to people for whom professional advice would otherwise not be viable, as a feature of the legislation which makes it more attractive rather than less.

Other notable features of the legislation include a new method for advisers to identify investors who have enough experience and expertise to safely escape some of the disclosure requirements which would otherwise apply. This measure will supplement existing methods of determining sophisticated investors but will allow experienced investors dealing in smaller amounts to have their expertise recognised.

The legislation also removes onerous and unnecessary requirements relating to companies involved in takeover bids.

The arrangements will now be more in keeping with the contemporary corporate environment.

The bills also modernise arrangements for companies seeking to distribute their annual reports, which for the first time will be able to be sent electronically, depending on company and investor preference.

In some cases involving a share issue on a small scale, the need to generate a prospectus will be disposed of.

Similar improvements are made to the issuing of company charges, which will be able to be lodged electronically, and to the requirement to lodge company particulars.

Taken together, these measures represent a significant saving to a significant proportion of Australian businesses.

During the inquiry, the committee was mindful of the dual regulatory objectives in relation to financial services.

On the one hand, the government is keen to protect consumers from unscrupulous practices and to ensure that they hold all the information they need to make informed choices about their financial affairs.

On the other hand, regulators seek not to overstep the mark, making financial advice too expensive and difficult to obtain and understand. These objectives must be balanced in striving for an effective and efficient financial services regime, and the committee believes that these bills strike that balance.

The committee recommends that the government continue to work with stakeholder groups to find ways to make product disclosure statements and other disclosure documents shorter and less complex.

The improved readability of disclosure documents lies at the heart of achieving some of the key objectives of this legislation.

I thank our committee secretary, David Sullivan, researcher Tim Watling and the other committee staff for their invaluable assistance in our consideration of these bills.

The committee notes the strong support for the bills from major financial services, accounting and, with a few exceptions, superannuation stakeholders. This overwhelming support reinforces in the minds of the committee members the importance of passing this legislation as soon as possible. Accordingly, the committee urges the Senate to pass this package of bills unamended.

Question agreed to.