Lisa Singh (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Attorney General) Share this | Link to this | Hansard source

In speaking to the second reading of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2014, I indicate that Labor will be supporting this bill and that Labor supports the establishment of a retail corporate bond market in Australia. A well-performing and efficient retail corporate bond market will provide an alternative source of funding for Australian companies and increase competitive pressure on lending rates to businesses. This bond market is a significant source of funds for many Australian financial and non-financial corporations. Correspondingly, this financing activity provides investment opportunities for Australians and non-residents. Indeed, the establishment of a deep and liquid retail corporate bond market in Australia was a key priority for the former Labor government and was subject to some significant and ongoing work over a number of years.

On 26 September 2008, the Minister for Financial Services, Mr Bowen, established the Australian Financial Centre Forum, the AFCF, to progress the government's initiative to position Australia as a leading financial services centre in the region. Mr Mark Johnson was the chairman of this partnership of government and industry, which also comprised six senior financial sector representatives, a Treasury task force and a reference group. The AFCF looked at a broad range of policy settings including, but not limited to, financial sector regulation; taxation; improving Australia's skill and talent pool through education and immigration policies; and promotion of Australia's financial services industry.

The final report, known colloquially as the Johnson report and formally as the Australia as a financial centre: building on our strengths report was handed down in November 2009 and included examination of the lack of liquidity and diversity in Australia's corporate bond market. It also discussed why this lack of liquidity was a significant weakness in the overall assessment of Australia's financial system. At the retail level, it was considered that one action the government could take to overcome this weakness was to introduce regulatory changes that could assist with developing the market.

In December 2010, as part of its Competitive and Sustainable Banking System initiative, the former Labor government signalled it would be introducing changes to facilitate the development of a deeper and more liquid corporate bond market in Australia. These changes included launching the trading of Commonwealth government securities on financial markets to be accessible to retail investors and reducing the regulatory burden associated with issuing corporate bonds to retail investors, including streamlining disclosure requirements and prospectus liability regulations.

The bill that is before the Senate today seeks to reduce the regulatory burden of companies offering relatively simple, or so-called 'vanilla', corporate bonds to retail investors, while at the same time ensuring that appropriate standards of consumer protection are maintained. The bill increases offerings of corporate bonds to retail investors in Australia by streamlining the disclosure regime for issuers; changing the civil liability regime in respect to retail corporate bonds; and clarifying the application of the requirement to take 'reasonable steps' in respect of misleading and deceptive statements and omissions in disclosure documents relating to retail corporate bonds.

This bill follows the passage of the former Labor government's legislation to facilitate retail trading in Commonwealth government securities, CGS, in 2012. Having an active retail market in Commonwealth government securities is an important step in establishing a wider retail corporate bonds market by providing a visible pricing benchmark for retail investors in corporate bonds. This bill will deliver on the former Labor government's commitment to reduce regulatory burdens and barriers for offers of corporate bonds to retail investors.

The bill contains three major elements. First, under current arrangements, the issuance of corporate bonds to retail investors requires the provision of a full prospectus. Under the changes in this bill, the issuance of certain corporate bonds to retail investors will require the provision of a two-part simple corporate bond prospectus. Second, under current arrangements, simple retail corporate bonds, like other bonds, can be traded directly but are not able to be traded as depository interests. Under this bill, simple corporate bonds will be able to be traded using simple retail corporate bonds depository interests. Third, under current arrangements, directors and proposed directors of a body making an offer have liability for any misstatement in, or omission from, the disclosure document whether or not that director was involved in a contravention of subsection 728(1). This bill makes changes so that directors and proposed directors of a body making an offer have liability for any misstatement in, or omission from, the disclosure document only where they are involved in a contravention of subsection 728(1).

Labor had introduced the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013 which lapsed. Schedule 1 of that bill is virtually identical to the bill we are debating today. There is one minor change between schedule 1 of Labor's 2013 bill, which lapsed, and proposed section 713A paragraph 22 of the new bill. The old bill specified that securities must be for a fixed term of not more than 10 years. This has been changed to a fixed term of not more than 15 years in the new bill.

The measures in this new bill are another major initiative that the former Labor government was delivering on in its long-term commitment to encourage the development of a deep and liquid bond market in Australia. The measures provide companies with another source of fundraising and signal that it is their time to contribute to the development of Australia's corporate bond market.

We often hear much rhetoric from those on the opposite side of the chamber about red tape and regulation. Here is an example of good measures of the former Labor government to reduce red tape and the regulatory burden. We are pleased that the new government has continued the good work of Labor in office and, with that, Labor will be supporting this bill.

Brett Mason (Queensland, Liberal Party, Parliamentary Secretary to the Minister for Foreign Affairs) Share this | Link to this | Hansard source

This bill is further evidence of the government's commitment to reduce regulatory burdens and unnecessary costs on business. The reforms in this bill will boost the development of Australia's retail corporate bond market by reducing costs for bond issuers and giving company directors more certainty. I thank Senator Singh for her eloquent contribution and commend the bill to the Senate.

Question agreed to.

Bill read a second time.