Mark Furner (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Superannuation and Corporate Law, Senator Sherry. Can the minister update the Senate on any major new steps to be implemented by the government to further bolster our national financial markets at this time of international turmoil?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

As senators and, I am sure, those listening are aware, I have commented extensively on the global financial crisis, which had its origins in the United States as a consequence of what is known as the US subprime, which has consequently, in a range of areas, infected the financial systems of most countries around the world. Whilst the Australian economy is sound, we are not immune from the global slowdown and the recessions that are possibly emerging in some countries around the world. There are no easy solutions or quick fixes to this global financial crisis, but today the Rudd Labor government has announced two important steps—critical steps—to make a safe regulatory system safer in this current environment.

Today I have announced two major reforms that relate to the regulation of short selling and that activity in the Australian markets, and strict new controls on the behaviour of credit rating agencies. Short selling is defined, most simply, as selling shares that usually an individual or entity does not own on the assumption that you buy them back with a fall in value and make a profit. A naked short sale is the same but, in this case, the short seller does not own the shares, has not borrowed and usually does not have a pathway to obtain the shares they are selling. The market and the community across Australia and the world have taken action to better regulate short selling, usually with temporary bans, which have been put in place in Australia, the US, the UK and across Europe. After coming to government, we identified a gap in the Corporations Act in respect of the regulation and supervision of short selling in Australia. That gap was left open—

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

So you are not going to ban it?

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

If Senator Abetz will be patient, I will get to the banning. He, obviously, is very unfamiliar with the issue. That gap was left open since 2001. As a result of that gap, there is currently no legislatively backed and system-wide disclosure of covered short selling. This has created uncertainty and is damaging to market confidence, which has been magnified by the current volatility and uncertainty that we have seen. So today I have announced that we are actually going to close this gap.

The Corporations Amendment (Short Selling) Bill 2008 includes a number of key measures: firstly, a legislative ban—and Senator Abetz is not listening—on naked short selling and a comprehensive disclosure regime for permitted covered short selling, including placing a positive obligation on brokers to inquire of their client whether a sale is a covered short sale when the client places an order. Further, we will be expanding the powers of ASIC, the regulator, to enable to it to impose regulations on transactions that are substantially similar in effect to short selling.

The government has taken the decision to place a blanket ban on naked short selling. We are taking this action to make a stronger system even stronger. Naked short selling is currently banned under temporary actions taken by ASIC and the ASX—both of which strongly support this legislative ban.

Eric Abetz (Tasmania, Liberal Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Senator Abetz interjecting—

Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Link to this | Hansard source

Senator Abetz again fails to understand the distinction between covered short selling and naked short selling. You should listen and learn. Through you, Mr President: he should listen and learn. I call on those opposite to support this package.

Further, in the context of the global financial crisis, today I have announced new regulatory and supervisory provisions in respect of the conduct of credit rating agencies. Credit rating agencies were identified as a critical failure to supervise adequately the financial markets in the United States and the assessment of exotic investment options. (Time expired)