Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

My question is to Senator Coonan, the Minister representing the Minister for Revenue and Assistant Treasurer. I refer to the Westpoint scandal—one of a string of property investment structures that have collapsed over the past two years, costing 20,000 mainly elderly investors up to $1 billion worth of their savings, much of it superannuation. Wasn’t the Westpoint collapse in part due to a loophole exempting promissory notes greater than $50,000 under the Corporations Act? Can the minister confirm that the figure was set in 1981 and some 26 years later has not been increased? Why did the minister, in her answer of 22 June last year, deny time and again that any loophole existed? Can the minister now indicate, almost a year after being questioned on the matter, what action has been taken to close the loophole?

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

I thank Senator Sherry for the question. I am representing the Assistant Treasurer, and I am advised that there is no gap in the law. The Supreme Court of Western Australia handed down its decision on the nature of the investments offered by Westpoint last year. The court has confirmed that the fundraising activities of Westpoint amounted to the offering of an interest in managed investment schemes. The law covers this area quite clearly. Managed investment schemes are fully regulated through chapter 5C in the Corporations Act. The act imposes a number of duties on managed investment schemes, including meeting a number of licensing and conduct requirements. Because managed investment schemes are a financial product, as defined in the act, they are also subject to the licensing and disclosure requirements of the act.

Investors are entitled to a product disclosure statement which contains all the information required for them to make an informed decision, including details about commissions. It appears that those running Westpoint chose to structure their fundraising activities so as to avoid the disclosure requirements of the Corporations Act. ASIC has commenced action against a number of Westpoint directors, including the freezing of assets for the benefit of creditors. In December 2006, charges were laid against a Mr Neil Burnard in relation to his fundraising activities. The charges include dishonest, false and misleading statements. The government expects the full force of the law to be applied to those people who deliberately mislead investors.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Isn’t it true that the former chair of ASIC, Mr Lucy, has himself referred to this as a loophole since that case you referred to. Why hasn’t the government lifted a finger to close this loophole? Is the minister aware that it is now four years since her former Senate colleague Ian Campbell, the then Parliamentary Secretary to the Treasurer, promised in January 2003 to close the loophole quickly? When will the government act to improve regulatory oversight and improve the protection of the savings of Australians? How many more collapses will it take before the government closes this loophole?

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

My former answer stands, but I understand that Mr D’Aloisio, who now heads up ASIC, has identified a number of priorities and he wishes to work through any issues that arise in relation to this case and indeed others more recent. So my brief, which is current, says that as the law currently stands there is no loophole. That is not to say that Mr D’Aloisio is not cognisant of the matters raised in relation to the case and has identified a number of priorities, one of which is this matter.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

Mr President, I ask that further questions be placed on the Notice Paper.