Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I move:

That the Senate take note of the answer given by the Minister for Finance (Senator Cormann) to a question without notice asked by Senator Whish-Wilson today relating to the regulation of financial services.

On the 7.30 report last night there was a long piece on almost 300 Australians who are going to lose their homes today. Korda Mentha and ANZ are liquidators for the collapse of Timbercorp, a managed investment scheme, which had been leveraged. Not only did people have their life savings put into managed investment schemes; they were also leveraged into these schemes by financial planners and their accountants. So they lost their life savings and now they are going to have their assets foreclosed or removed today.

I met two of these unfortunate people yesterday. Timbercorp is just one of many managed investment schemes that have collapsed and failed in this country—and quite spectacularly—with catastrophic results for those investors who are put into these things. The reason that this happened is that what we classify as 'general advice' was provided—in other words, financial planners received commissions, but they did not have to take into account the personal circumstances of the investors concerned, nor did they have to put the best interests of the client ahead of their own interests.

The FoFA—future of financial advice—laws in this country were brought in by Labor. I have dealt with these issues. They were designed to try to prevent this type of catastrophe from occurring again. The reason I asked a question in question time today is that, apart from these 300 Australians who are going to lose their homes today, this issue is about to be revived, in the sense that the government is trying to bring in amendments to the FoFA laws, a set of reforms, which weaken the protections that were put in place.

I asked Senator Cormann today why the government are planning to overturn bans on commissions for general advice. It is unfortunate that he chose to play the man rather than the ball and tried to discredit my question by referring to some sort of obscure ABC fact check, saying that there was no such thing as the removal of bans or exemptions on conflicted remuneration to do with general advice.

I have here in front of me the explanatory memorandum relating to the FoFA reforms, which were before the House of Representatives. It makes it very clear that the bill includes the following amendments. The final amendment reads:

… providing a targeted exemption for general advice from the ban on conflicted remuneration in certain circumstances.

On page 27, there is a summary of the new law. It states:

The Bill amends the Corporations Act to broaden and clarify exemptions from the ban on conflicted remuneration. Specifically, the amendments:

Further, on page 41, under 'The right to work and rights in work,' it states:

This Bill increases the number of avenues through which certain employees in the financial services industry can earn commissions.

It could not be any clearer; there it is. Senator Cormann either misled the Senate in his answer to me or has not read his own explanatory memorandum in relation to these FoFA amendments.

I then asked, very clearly, when this legislation was going to come to the Senate and, if it did not get through, would the government be introducing regulations to ensure the big banks and financial houses are not forced to comply with the FoFA laws, because they are due to kick in on 1 July? I know from the Senate Economics Legislation Committee inquiry, which I was on, that the Australian Bankers' Association said they had had an assurance from the government that they would get these laws changed prior to 1 July—there was obviously some sort of deal behind closed doors—because it was going to cost them a significant amount to change their compliance systems.

These are very real questions and it is a shame I did not get a direct answer from Senator Cormann on this today. If there is going to be a watering down of things such as a ban on commissions on general advice, then I would like to see the detail on that so that it can, at least, be debated in parliament. The Greens have very clearly said in their dissenting report of the Senate committee that we would not be accepting the amendments to the FoFA laws. I think the Labor Party has said the same.

But what I thought was most serious and of most concern today was that Senator Cormann still believes that it is only a few bad eggs that are causing problems in the financial services industry. Greg Medcraft, the chairman of ASIC, has very clearly said that it is a cultural issue. It is a culture that needs to be changed and most of the stakeholders in the FoFA inquiry said that it is the culture that needs to change, not just a few bad eggs. (Time expired)

Question agreed to.