Ed Husic (Chifley, Australian Labor Party) Share this | Hansard source

It is outrageous, as the member for Throsby indicates. He received a loan of $1.2 million despite having no capacity to repay the loan. Another affected investor, retiree Ian Jones, is reported to have asked his lender for a copy of his home loan application. He discovered that his income had been hugely overstated in order to secure margin loans of $700,000. These bills will now ban advisers charging a fee based on the percentage of client funds which are borrowed. This will discourage advisers recklessly advising clients to borrow against their investment in the manner of the types of cases I have just related to the House.

While much emphasis has been placed on the consumer protection measures, these bills have many other elements that are designed to give certainty to the industry and to minimise the financial impact of these new laws. The renewal obligation will apply only to new arrangements after 1 July this year and will not include existing relationships. Again, it is trying to balance out those clients who are already in the system against the new relationships that will be set up. I am assured that these bills will have minimal financial impact on financial advisers. Of course, where an adviser has no ongoing contact with the client there will be a small administrative cost to have the client renew their arrangement with the adviser. There is obviously no way you can get around that.

I should note that the collapse of Storm Financial affected not only investors but also people who owned and operated Storm Financial franchises. One such franchisee, Wally Fullerton-Smith, lost $1.8 million he had invested in his Storm franchise on the Gold Coast in Queensland, the state of the member for Ryan, who is in the chamber. Proof of debts submitted to Storm liquidator Worrells reveals that 12 franchisees owed $23.2 million when Storm collapsed. The Corporations Amendment (Future of Financial Advice) Bill 2011 is a win-win for advisers and consumers. Certainly, not every single person will agree with every single aspect of the reforms we are putting forward. But what everyone will agree on is that mum and dad investors should not lose to the tune of millions of dollars and that small businesses that have invested in good faith, thinking that they would be able to enhance and grow the business and provide a future for themselves, should not see their future disappear before their eyes because of the type of collapse that we have experienced previously. As I said at the start of my contribution: we need always to remember what events brought us to this point and that we are trying to minimise the chance of this occurring again and impacting on families in the devastating way it has in years past.

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