Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and associated bills represent minor but welcome regulatory reforms that reduce in a small way the red-tape burden facing Australian business and Australian consumers. On that basis, the Labor Party will support these bills without amendment. The package introduces changes to corporate regulation in the areas of financial services, company reporting obligations, auditor independence, corporate governance, fund raising, takeovers and compliance as well as other initiatives. This bill will reduce some of the regulatory burden on providers of financial services, it will increase access to financial advice and it will make improvements to other aspects of the financial services regulatory framework. The changes include removing the need for the provision of a statement of advice: firstly, where there is no recommendation in relation to a particular financial product and no remuneration; and, secondly, where the amount to which the advice relates is under the prescribed threshold, proposed to be $15,000.

In relation to superannuation, this will be limited to: consolidation into or supplementation of an existing account; refining the circumstances where a financial services guide is not required to be provided, particularly at seminars; and some other measures. In respect of the disclosure documentation issued under the Financial Services Reform Act, generally providers have been issuing advice documents of up to 100 pages. These are costly, complex and unreadable for consumers. I would argue that these documents are counterproductive. They are so thick and so substantial that consumers are not reading them; therefore, while they are intended to improve transparency and assist consumers, they are counterproductive because consumers simply cannot and will not read them.

The measures in this bill represent the second attempt at so-called refinements to reduce red tape and lengthy documents in some areas of disclosure. They do represent a partial reduction on the expansion of lengthy documentation under this government and, accordingly, Labor support them as far as they go. We do say, however, that they should go much further. What is concerning about these reforms is that the government appears to regard them as the be-all and end-all of regulatory reform. The government appears to regard them as a major achievement and it appears to regard them as a substantial reduction in red tape. I say that because I have read the press releases of the Parliamentary Secretary to the Treasurer—and I am glad that he has been able to join us in the chamber—and those press releases present this bill as a substantial achievement.

I must say that I really enjoy the parliamentary secretary’s press releases, and I compliment him on them. You would be particularly unsurprised, Mr Deputy Speaker Jenkins, that I subscribe to the press releases of the Treasurer, the Assistant Treasurer and the parliamentary secretary, and I get a particular giggle when I read the parliamentary secretary’s. They are particularly good. I really like the headings: ‘Pearce delivers consumer benefits and drives reductions in red tape’ and ‘Pearce continues delivering reductions in the red tape burden’. My personal favourite, Mr Deputy Speaker, which is not particularly germane to this bill but I am sure you will not mind, is this one: ‘Pearce delivers major insolvency law reform’. The headings would have you assume that these are major deliverances by the parliamentary secretary, very modest soul that he is: ‘Pearce continues to deliver’, ‘Pearce’s major achievements’. I was drawn to his release a few months ago:

The following item has been released by the Hon. Chris Pearce, Parliamentary Secretary to the Treasurer. Achievements: the parliamentary secretary to the Treasurer has released a new achievements page on his website outlining some of his key portfolio achievements.

I tried to look them up, thinking they would be mentioned under ‘achievements’ on his website but unfortunately it has been removed. Apparently in hindsight there have been no achievements by the parliamentary secretary. I am sure he will have a look at that. I thought it may be under ‘publications’. I looked that up but, unfortunately, there were no publications on the parliamentary secretary’s website. He has not been very busy writing publications, and the ‘achievements’ section has been removed. Apparently in hindsight there have been no achievements.

My other concern relates to the press release ‘Rudd fumbles on policy again’, which he issued after the Leader of the Opposition’s budget reply, where we announced our policy of major regulatory reform, of substantial regulatory reform—not tinkering around the edges. The parliamentary secretary said in his press release:

Mr Rudd has failed to get across the Government’s policy that has been on show for months. I have already announced significant changes to the Financial Services Regime, which are designed to make it easier for Mum and Dad investors to make informed investment decisions ...

So he thinks his reforms are the same as the ones Labor announced. He thinks they go as far as the reforms that Labor has announced. They go less than one-tenth as far as those that Labor has announced but he says, ‘Now we can put up our feet on the table and relax because we have delivered’—as his press release would say—‘major reform.’ They have done nothing of the sort: this is tinkering at the edges. What we need is major reform, like that the Leader of the Opposition announced in his reply to the budget on 10 May: Labor will introduce simple, standard disclosure forms for financial services products.

The government’s new financial services disclosure regime has resulted in consumers being physically issued with long and complex documents of up to 100 pages long. It has created an administrative nightmare for businesses and consumers. Labor’s standard disclosure form will be no more than three or four pages in length, containing core information. Financial services providers will be required to have any further disclosure information on their websites, another practical initiative for business. That is a long way from what this parliamentary secretary, as he would describe it in his press release, has ‘delivered’. It is a long way from that; it goes much further than what the government is proposing in this bill—which is welcome but which is tinkering at the edges.

I have spoken to a lot of financial services providers over the last few weeks as I consulted on this bill and other matters, and I do not think any financial services provider in this country would regard this as a really serious and major reform, despite the rhetoric in the parliamentary secretary’s regular press releases—but I do encourage him to keep them up; they always provide me with amusement. When I get the email saying that the Hon. Chris Pearce has released a press release, I always have a good chuckle at the heading because I look to see what Pearce has delivered today. What Pearce has delivered today is minor, technical tinkering at the edges. What he should be doing is delivering major and substantial reform to the red-tape burden in this country. That is not what he is doing. I call on the Parliamentary Secretary to the Treasurer to adopt Labor’s package, to adopt the reforms—because, if you do not, we may just have to later in the year. Should we form a government later in the year, we will have to do it, because the parliamentary secretary, who has been in office now three years, has singularly failed to do it.

This is very important: I have had financial services providers in my electorate close down their businesses because the red-tape burden is just too high. The burden of the FSR is just too much. I hazard a guess that if I went to them today and said, ‘Have a look at these reforms; would these reforms have stopped you from closing your business down, because the red-tape burden is too high?’ they would giggle too. They would laugh too, and they would say, ‘This delivers nothing for us. We would have had to close down our business anyway.’ This is a very important matter: there are businesses closing in the financial services area because of the red-tape burden on them. Labor has a plan to reduce that burden, to assist those businesses and, just as importantly, to assist consumers—to give consumers readable information encompassed not in 100-page documents but in much shorter documents which give them the key information that they need, and if they wish to read more information then they can refer to a website.

In the area of corporate governance there are a number of changes, including reporting requirements for executive remuneration and a change in the definition of ‘a large proprietary company’, which has implications on the threshold for reporting. Executive remuneration reporting requirements for individual directors and executives in listed companies will, under the accounting standards in the Coporations Act, now be streamlined so that these obligations are contained in one act. This is sensible, and we support that. Companies must also disclose their policy on executives hedging their incentive remuneration and how this will be enforced. The Australian Council of Super Investors and the Australian Stock Exchange have already called for these steps to be taken to prevent hedging of unvested share options, and this is supported by the opposition.

There will also be changes to the definition of ‘a large proprietary company’, which will have an impact on the company disclosure thresholds. The proprietary company will be defined as ‘large’ if its consolidated operating revenue for the financial year of the company and the entities it controls is $25 million or more; the value of the consolidated gross assets for the financial year of the company and the entities it controls is $12.5 million or more; and the company or the entities it controls have 50 or more employees at the end of the financial year.

The threshold for proprietary companies has not been changed since 1995, the year that the threshold was first introduced. In order to ensure that the threshold remains relevant, this legislation allows that future changes to the threshold can be prescribed by legislation—again, a sensible minor measure which we have no objection to. Labor recognise the need for flexibility in the regulatory regime and therefore we support this reform.

As a result of other changes to company reporting, companies will no longer have to provide hard copies of reports to their members on request if a copy is provided on a website which is publicly accessible. However, the current methods of distributing annual reports will still be available.

Consistent with the Banks review, the restriction on employment relationships between an auditor and an audit client will no longer apply to a former partner or former audit company director who has left the firm or the audit company for five years. Currently, employment relationships between an auditor and an audit client should include a prohibition on more than one former partner of an audit firm at any time being a director of or taking a senior management position with the client. Again, we support that: it is a recommendation of the Banks review and it is very sensible.

The Labor Party expresses some concern over the changes which will allow the removal of the requirement for a member approval of related party transactions at or below a prescribed level. We believe that there is a case to be made as to why directors should be permitted to give shareholder funds to related parties without seeking shareholder approval. Labor notes that the government’s amendments reduce disclosure requirements in relation to small sums—the amount is flagged by the government as being $5,000—and further that the prescribed amount for which approval will no longer be required will be in the regulation. Labor will be closely examining those regulations in regard to the prescribed amounts when they are tabled. While we express some concern we do not intend to press the point today, but we put on the record that we will be watching developments in that field particularly closely.

Several changes will also be made to fundraising. A prospectus or product disclosure statement will no longer be required for rights issued for quoted securities and other financial products. However, a cleansing notice to the market is required which would include information relating to the potential effect of the rights issue on the control of the entity. For small-scale offerings, chapter 6D and chapter 7 definitions of professional and sophisticated investors will now be aligned. Currently, chapter 7 definitions are much broader than those in chapter 6D. The total amount of money that can be raised under an offer information statement will be $10 million instead of $5 million. Disclosure relief for controllers of listed entities will be available for secondary sales of securities and other financial products, subject to cleansing requirements of both the controller and the entity that issued the shares. Secondary sales without disclosure will be possible for securities and other financial products quoted for a minimum of three months rather than the current 12 months. The reduced disclosure requirements applying to the continuously quoted securities and other financial products will be available after they have been quoted for a minimum of three months.

Importantly, employee share schemes and contribution plans will be relieved from a specific range of licensing and hawking requirements of the Corporations Act. That is something that we support. We think that there is a place for employee share ownership schemes in this country. I note that the government had a target to increase subscriptions to employee share ownership schemes and that the Prime Minister said many years ago that he would like to see Australia as one of the great share-owning democracies, and that target has not been met. Frankly, we have not come close to meeting it. Employee share ownership schemes can play an important role in boosting productivity, and we need all the help we can get there. Our productivity growth has declined, the gap between us and the United States has expanded and employee share ownership schemes can play a role. Again, these minor reforms are welcome. Personally, I believe much more needs to be done on employee share ownership schemes. Prospectus advertising requirements will be aligned with those for product disclosure statements except for advertising prior to the lodgement of a prospectus. Labor supports the reform of business regulation to ensure lower costs for business and a more effective regulatory regime. The objective here is to have regulatory reform without letting important standards slip, and this is achieved by eliminating overlap, duplication and outdated business regulation. Labor supports these initiatives contained in the bill.

But this bill goes nowhere near far enough. The parliamentary secretary might put this on his achievements page when it gets put back up—when he decides to say, ‘In hindsight maybe I do have some achievements’—but it is a very hollow achievement indeed. If he had achieved real financial services regulatory reform maybe the government would let him put his achievements page back on his website. Maybe then he could issue a press release entitled ‘Pearce delivers major reform’ without being greeted with guffaws of laughter from the financial services industry, let alone the opposition. Maybe then, when he puts out those regular press releases entitled ‘Pearce delivers again’ and ‘Pearce’s great day of achievement again’, people would actually take it seriously. Until that happens these great protestations of achievement will not be taken seriously, because they are laughable. These are minor reforms which are welcome, but for anyone to call them a major achievement is a joke. Until we have real financial services reform in this country, small business, big business and consumers will continue to bear the burden.

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