Alannah Mactiernan (Perth, Australian Labor Party) Share this | Hansard source

It has been most interesting listening to some of the contributions from the other side because it would appear that they think the legislation that is now being amended somehow or other arose in some sort of vacuum and was just a manifestation of a Labor government wanting to introduce a nanny state. There seems to have been a complete corporate white-out of the disastrous events that led to the various parliamentary inquiries, the recommendations that came out of those inquiries and the legislative measures that were put in place to try to reduce the prospect of some of the worst features of the collapse of Storm and Westpoint from happening again.

I agree with the previous speaker, the member for Forde, that no legislative change is ever going to absolutely guarantee that we will not have some problems. But when we have disastrous regimes in place—when we see literally thousands and thousands of investors losing their life savings, losing their superannuation—and we have a parliamentary inquiry where very clear recommendations come out as to what we need to do to improve the system, then it is incumbent on us to reflect very deeply on the changes now being proposed that would water down those protections that were introduced.

These were not insignificant events. Westpoint was one that particularly affected Western Australians. We saw with Westpoint that in the end there was around $400 million of savings, of Australian savings and superannuation, that was lost by more than 4,000 small investors. Many hundreds of those, if not thousands of them, were Western Australians because this was a company that had its origins there. I was very surprised—or disappointed I guess—when I heard the member for Hasluck making references at the beginning of his speech to how, as adults, as part of growing up, we need to accept responsibility for the decisions that we make. I think he was very much reflecting on the decisions that were made by investors to invest in projects like Westpoint—projects which appeared to have been approved under a regulatory framework and which obviously collapsed.

The member for Hasluck spoke of gross regulatory overreach. Again, unfortunately, there is this complete failure of memory, complete disconnect, about what led us to introduce this legislation into the parliament in the first instance. It was in fact because we had regulation that failed. And it is important for us to understand when we are talking about caveat emptor—that is, the buyer should beware—that part of the problem is that we have a regulated industry, and people feel that if they are dealing with people who have been regulated they then feel they have a certain measure of protection and they feel a certain measure of confidence that we have a regulatory regime that is going to provide them a certain amount of protection. So while it cannot guarantee a particular interest rate, it certainly leads people to believe that they can have some sense of security because we have got a regulatory regime in place. So when that regulatory regime fails, as it did so spectacularly in the Westpoint case, leaving more than 4,000 people without their life savings and their superannuation, then we have to go in and ensure that we tighten that regulatory framework.

This is not regulatory overreach; it is what we need to do as a decent society to ensure that people going out there in the marketplace and investing their money have got a reasonable prospect that these funds will be secure. We know in the case of Westpoint that it is a very clear example of financial planners being enticed into these mezzanine schemes: the returns for them were incredibly good and they, by all accounts, appear to have put their own interest before that of their clients in making these very enthusiastic recommendations.

Indeed, I am looking at an article that appeared in TheWest Australian last year that pointed out the failures that we saw with ASIC. In the case of Westpoint it is very unfortunate that as early as April 2000, ASIC officers in Perth were concerned about the high-interest high-risk financing schemes that Mr Carey, the chief proponent of Westpoint, had been making. The ASIC officers in Perth had their concerns and the files were handed over to the ASIC officers in Melbourne. Those ASIC officers subsequently let Mr Carey's lawyers in Perth know that they had completed their review and did not have any plans for regulatory action. Neale Prior from The West Australian goes on to say this gave eager product floggers in financial planning firms across Australia a green light to connect big commissions for putting their clients into Westpoint schemes.

So quite clearly the regulatory regime failed. It was not that this company had not come to the attention of ASIC but the regulatory regime that we had in place allowed these financial planners then to move and to take those very high commissions from the mezzanine financing outfit. It is quite a sorry story that goes on. The company and the financial planners continued to operate unabated and by the time any action was really taken in around 2005 already $250 million was owing to investors in seven different schemes. Indeed, by the time the whole thing collapsed, over $400 million had been lost by Australians.

We have seen precisely this same failure to accept. The failure that we saw, I have to say, all happened on the Howard government's watch. There were years and years of warning that this was happening, with no regulation and a failure to regulate. We saw exactly the same with the financial brokers in Western Australia in much the same way throughout the second half of the 1990s. We saw these schemes that involved finance brokers, valuers and real estate agents colluding and selling these very deceptive products to investors, and really targeting the elderly. As a result of that, again, hundreds of millions of dollars were lost by thousands of investors when we had been drawing the Liberal government's attention to this. But their desire not to engage in regulatory overreach led to absolutely the same inertia in relation to the financial planners. When Labor got into government we immediately commissioned inquiries and a royal commission to ensure that at least we changed the legislation and put in place the protections that were necessary to give greater security and greater control over people acting against the interests of their client.

I say to those members of the government that are presenting this series of amendments, as if this is a completely unwarranted case of regulatory overreach, to actually consider the circumstances, consider that this arose out of a gross regulatory failure that has left thousands and thousands of Australians in a perilous financial position. The principles in the original bill came out of a parliamentary inquiry and a very detailed investigation of what was needed to put this industry on a firmer path. I guess we are very concerned that once again the conservative government is playing into the hands of big business and is prepared to put the interests of big business before the interest of ordinary Australians.

See this speech in context