Ed Husic (Chifley, Australian Labor Party, Shadow Minister for the Digital Economy) Share this | Hansard source

I would like to follow on from the shadow minister's contribution and also the contribution from the member for Gellibrand on the Treasury Laws Amendment (ASIC Governance) Bill 2018. What you see in this discussion today is a clear disconnect between an expectation that our regulatory bodies would, in particular, target bigger firms that have a wider impact and a much more devastating effect on the general public, versus what we're seeing where the regulators, I would dare say, go for the low-hanging fruit, which are the smaller firms and some of those that rely on ASIC to make quick decisions on implementing regulatory frameworks. The government's got a responsibility for that, and I want to talk about that today and principally what's happening with ASIC, especially in the fin-tech and early-stage innovation space.

There's a lot about what is being debated here today that we would agree with. We certainly support—as we've said from the outset—the ability of this legislation to allow for the creation of a new deputy chairperson of ASIC. We note that the government has made an announcement about who that person would be, and we certainly support that initiative. We think that it will help ASIC in operating much more effectively and efficiently as a regulator and it will help improve the determination of oversight and the way that's conducted. We also think that it will help in terms of engaging with stakeholders. Obviously this will be crucial when considering the fact that ASIC is expanding its role in terms of consulting with stakeholders and providing oversight.

As someone who has watched this with a particular eye to our growing fin-tech sector in this country—that is, those firms that are applying financial technology in a way to create new products and services that will ultimately provide greater choice for consumers as to what's on offer when looking at some of the bigger financial institutions in this country—I note that it's important that they emerge, it's important that new products be offered and it's important that competitive tension is in place, and fin-tech is providing that. I would say, though, that I'm increasingly concerned with the pace of reform in this area. There are a lot of words, a lot of announcements, a lot of media releases and a lot of things being said by the government about what they're doing in this space, but, when you put that against the reality, there's a gulf. I am increasingly being approached by fin-techs that are concerned that the words aren't matching the reality. I want to be able to work through that today, because, as I said, there is increasing frustration about the pace of change.

ASIC is in a difficult spot—I totally get that. The pace of technology, the increasing rate of disruption and the accelerated pace of change are posing a challenge to regulators in the financial services space, not just here but the world over. And it's not just in the financial services space; it's generally dealing with what tech firms are able to trigger, the types of things that you can see emerge, how governments recalibrate their legal frameworks to deal with the disruption that's occurring and the impact it might have on stakeholders. There might be someone who is cheering, but there will be someone who is not, because they're impacted by the change in a way that they feel is altering their ability to make their way in a modern economy. So I do appreciate that there's a big challenge for ASIC.

In the Australian context, the challenge is also in trying to promote innovation, particularly in financial services, but to do so in a way that protects consumers from some of the things that we've been horrified to hear about with respect to some of the big financial players and what they have done to banking and financial services customers. Obviously we are in an environment where the pressure is on to increase protection. I completely and utterly understand that, but some of these smaller firms want to be able to provide an alternative to what the bigger firms have been doing in products and services and in using data in a way that's consumer friendly and actually illuminates and builds awareness about options for consumers. Our fin-tech sector is doing terrific things and we need to see more of it.

There are three areas I want to particularly highlight in my contribution today. If you look at what's happening in the regulatory sandbox in the fin-tech space, if you look at what's happening on equity crowdfunding and you look at what's happening on initial coin offerings and the regulatory response that we're seeing so far, I think that there's a lot to be concerned about. We had a big announcement by the government, I think back in late 2016, or it may have been through the course of last year, that a regulatory sandbox would be created that would allow a much more regulation-light environment in which fin-techs could test out their products. In the time since that was announced we've had fewer than half-a-dozen fin-techs actually use the regulatory arrangements that were set up by the government and ASIC. If you compare that to what has happened in other jurisdictions, there have been a lot of firms that have wanted to use that regulatory space and develop products out of it.

We've been told that we have a much lighter regulatory arrangement than elsewhere, yet we've had hardly any fin-techs using our arrangements. We've been told that other jurisdictions are regulation heavy, but they've got more fin-techs using them. Clearly, something is going on. The government has flagged some changes that will be debated in this place at another time, but what is interesting to see is that the take-up here is low. The question is: what has the government done to see that type of result?

For equity crowdfunding we still don't have a final regime in place to allow a new funding platform to emerge for early-stage innovators in this country. What is notable about that is that five years ago, to this month, Labor referred this issue to the Corporations and Markets Advisory Committee, asking that body—which the coalition wanted to get rid of later that year—to work out what the best regulatory framework was to allow for equity crowdfunding to emerge. That was five years ago this month. Four years ago this month they handed a report to the coalition—four years ago. We had very little happen until last year, when the government put forward a regime that we warned them would not be used. We warned them it would be red-tape heavy. We warned them it would come with extra cost to businesses and, as a result, the patronage of that platform would be low.

We said that we knew they were going to change that regime, because the Treasurer flagged it himself in his second reading speech for that legislation. At the time I called it 'ScoMo's dodo', because that regime was going to go for one thing and one thing only: extinction. And, sure enough, that's exactly what happened. Six months later, the Treasurer introduced a new regime—the one that should have been brought in earlier last year. Now, what happened? It sat on the books. It wasn't debated. The government didn't prioritise it. Again, the government talk big about how they want to support fin-techs in innovation in this country, but when it comes to doing the hard yards they disappear. It didn't get debated last year. It didn't get debated when we resumed in February, even though we were told that it would come on. At the tail end of March, a few months ago, it hadn't been debated at all. So there's a drag in the way the government prioritises it.

On top of this, there is another drag. The other drag is that they've baked into the legislation a further delay, which says that the new regime will not come into effect until six months after royal assent. This is after they did the same thing in 2017, where they baked in six months of delay. Now they're baking another six months of delay into the new regime that's supposed to fix everything. What's interesting about this is the ping pong that is occurring between ASIC and the government as to why that type of delay needs to be baked in. When you ask ASIC, as we did in estimates earlier this year, in February, 'Why have you got this delay baked in,' their argument is: 'We have to see what the parliament is going to do, and we need to do this for the processes—but we'll wait and see what happens.' When you approach the government on this, it says ASIC needs the time to prepare, even though they've had time previously to do that.

When ASIC were questioned in estimates in February, they said, 'We have to understand the final form of the equity crowdfunding legislation,' because they have to make important changes to their database and information systems. They said that. When Senator Ketter, from the other place, said, 'I'm also led to believe that under the legislation to reform equity crowdfunding there's another six-month delay,' ASIC said they didn't have 'direct knowledge' of that. Really? It's there. We know about it already. They said:

We are aware of that time frame but that time frame is not in our hands …

That is what ASIC said.

The government tells us it's ASIC's concern. ASIC tells us it's in the government's hands. Can someone actually step forward and govern and put this new regime in place, because firms are relying on it to find a new form of funding. We are having that ping-pong put in place. ASIC say they need time to do this. But this week a new initiative put forward by ASIC, 'initial coin offerings' was reported by Yolanda Redrup in TheFin Review. A special task force has been set up to monitor that. These ICOs are now emerging as an alternative to equity crowdfunding. Equity crowdfunding is taking too long to be put in place in this country. So what is happening now is that ICOs are being relied upon as an alternative capital raising mechanism. The Melbourne based Haven Group raised $39 million through this. So instead of having a platform in equity crowdfunding we have to wait for this. We have to see alternatives emerge. They are being talked about increasingly as a way to raise money more quickly, without any of the regulatory oversight that we have seen. ASIC can find a way to put a task force in place there, but they can't find a way to bring to life a regime that has been flagged for over five years and we still can't see anything happen. So who is right? Is the government right in saying ASIC is worried or is ASIC right in saying it's the government's hands? We should be able to see better.

The Turnbull government says it's pro innovation, pro helping small firms and pro helping the fintech community. The Treasurer is always out there spruiking his fintech credentials. With all that, they are slow in bringing in the regime. But one thing they are not slow on is grabbing money; they are not slow at grabbing money at all. Minister O'Dwyer has said that before the regime is even in place they will levy crowdfunding companies $5,000 each. That is what they are flagging they'll do in the near term. So the small firms that want to have access to alternative ways to raise funds are being told that ASIC's compliance costs will flow through to the small firms right away. We see very little action being taken on the big firms. Milk the small firms is the idea of a coalition government that is supposed to be pro business. The government claims credit one day but small firms have to pay for it the next.

We certainly want to see strong regulations in place and we certainly want to see consumers being protected. The government makes a lot of promoting innovation. It puts out the press releases, does the press conferences and tries to claim the credit from stakeholders. But when it comes time for the government to stump up for this and get it happening, it doesn't do it. Our argument now—particularly in the other place, which is debating the equity crowdfunding platform—should be to entirely get rid of the delay that has been baked into that bill. We should ensure that the six-month delay is taken out, that the equity crowdfunding is put in place straightaway in the new financial year, and that ASIC move more quickly and be much more responsive to the concerns of the fintech sector.

The sector is too worried about raising their concerns with ASIC directly—but we are picking up the concerns along the way. If this government is fair dinkum about putting in place the measures that are required to open up competitive alternatives to big financial players, through fintech, they will act more quickly than they are doing right now. They will ensure ASIC is properly staffed to do the job and they will ensure that proper funding support is there so that we can see alternatives to the big banks and big financial players emerge in this nation much more quickly than what is currently occurring.

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