Jim Turnour (Leichhardt, Australian Labor Party) Share this | Hansard source

This legislation is urgently needed, and the Leader of the Opposition stands condemned for trying to delay it. Schedule 1 to the bill amends the Corporations Act to clarify ASIC’s power to regulate short selling. The Corporations Act grants ASIC the general power to omit, modify or vary certain parts of the Corporations Act through declarations. These amendments will specify how this general power applies to short selling.

The amendments make it clear that ASIC has the power to regulate all aspects of short selling including prohibiting these transactions and imposing or varying requirements on these transactions. The amendments also expressly state that the short-selling declarations made by ASIC earlier this year were within the scope of ASIC’s general power.

ASIC took action. We supported the regulators. The opposition has not supported the regulators this year. We support them and we are now moving legislation to ensure that that is recognised. These amendments provide both ASIC and industry with certainty over the scope of ASIC’s powers in relation to short selling.

Schedule 2 to the bill amends the Corporations Act to prohibit naked short sale transactions. A naked short sale is a transaction where the seller does not have a presently exercisable and unconditional right to vest the product in the seller at the time of sale. The amendments repeal the existing sections in the Corporations Act that allow for naked short sales.

Various concerns have been expressed in relation to naked short selling. Naked short selling has a higher risk of failure. Effectively, it is people selling shares they do not own. It can distort the market and potentially allow market manipulation. The perceived activity of naked short sellers may damage market confidence, particularly among retail investors. For these reasons the Rudd government is moving to ban naked short selling under the Corporations Act.

However, ASIC has the power to allow naked short sale transactions if it considers it appropriate. It is envisaged that ASIC will use this power to allow some non-speculative naked short selling to ensure the continued ordinary operation of Australian financial markets. We are leaving it to ASIC to manage these exemptions, because, as I said, we have confidence in our regulators. We back our regulators, unlike the opposition, who continue to undermine them and the Australian economy—as they sought to do earlier by delaying this bill.

Schedule 3 of the bill amends the Corporations Act to establish a disclosure regime for covered short sales. We want to improve transparency in the market. Covered short sales are sales supported by securities obtained under a legally binding securities lending agreement. So there is some ownership or some contract in relation to these sales. Under the proposed disclosure regime, a seller will be required to disclose covered short sales to their broker. The broker will in turn be required to disclose this information to the market operator. Brokers trading on their own behalf will be required to disclose covered short sales directly to the market operator. So we are increasing transparency in the market through this legislation. We are banning naked short selling but we are improving transparency when it comes to covered short selling.

It is critically important that we return confidence to the Australian equity and financial markets. These amendments are just another tool in the Rudd government’s comprehensive approach to tackling this global financial crisis. The Rudd government has acted swiftly and decisively in response to this crisis and we will continue to take any measures we deem necessary to protect Australian businesses and working families. We are a responsible government focused on the long-term interest of the nation. I urge the opposition to stop playing short-term politics and get out of the way of the Rudd government, because we are determined to steer this nation through these difficult economic times.

I see in the lead-up to question time that the Leader of the Opposition has come into this House. He sought to delay this legislation. He has had the member for Calare standing up to try to defend him but it was short-term merchant banker greed that got us into this financial crisis, and short-term merchant banker politics is not going to get us out of it. I see the Leader of the Opposition smiling about this, but this is serious legislation. You tried to delay it. You want to play politics with it but we are going to get on with implementing this legislation.

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