Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

This bill, the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018, amends the Corporations Act to introduce design and distribution obligations in relation to financial products, and a product intervention power for the Australian Securities and Investments Commission to prevent or respond to significant consumer detriment. Labor is backing these measures. We'll back any measures that protect consumers from harm caused by dodgy financial advice or financial products that are sold by unscrupulous financial advisors—and that's why we are supporting this bill.

We have to get this right and we have to do this properly. We need to understand the genesis of this reform and some of the other reforms that have been introduced into this place by the government. A lot of those measures have been knee-jerk reactions to the fact that the government, for many years, opposed a royal commission. This measure, the BEAR and others have been rushed and have been hurried through the parliament without proper consultation in the view of many that work within the industry, including those that have been harmed by the financial misselling of products. This was all to avoid a royal commission. We all know that the now Prime Minister, as Treasurer, opposed a royal commission up hill and down dale, saying that there was no need for one and that those calling for one were being overly dramatic in doing so. That's why we want to get this piece of legislation right and we want to make sure that it acts in the interests of customers and consumers. That's why Labor has referred this bill to the other place for inquiry.

Labor has been listening when it comes to the unscrupulous advice of financial advisors, the dodgy products that have been pushed on consumers and people being forced into products that aren't in their best interests. Labor has been listening for many, many years, and we've acted. We acted when we were in government, through the FOFA reforms. We acted in opposition in calling for a royal commission. We've also been out there defending the funding and the resources of the regulator, the Australian Securities and Investments Commission predominantly, to ensure that they have the necessary resources and are a tough cop on the beat to crack down on the misselling of products that are aimed at in this bill. ASIC has asked for other amendments, through the exposure draft process, that haven't been incorporated into this bill.

Again, I will say that it has been rushed, including regarding the buy now, pay later providers and having at look at whether or not they should be brought within the scope of the bill. We should look at consumer credit and funeral expense products being covered by the design and distribution obligations. But, of course, the Abbott-Turnbull-Morrison government has given no encouragement to one of our key regulators. They have tried their best to gut ASIC and to undermine its ability to uncover and prosecute unconscionable conduct. We all know what occurred in the Abbott government's first budget in 2014, where they dramatically cut the funding for ASIC. That resulted in job losses and resulted in a loss of expertise for people who were grounded in the pros and cons of identifying financial fraud, the misselling of products and dodgy behaviour and a loss of expertise in making prosecutions. A lot of the people left the organisation in the wake of those 2014 budget cuts.

It's clear now, after some of the evidence that has been uncovered this week by the Labor Party through estimates, that the Liberals have cut nearly $200 million from the ASIC budget in five years. That is $200 million of funding cut from the regulator whose job it is to police the financial services sector. That was after all of the scandals and rip-offs, after the CommInsure rip-offs, after the dodgy behaviour that was going on in the Commonwealth Bank in their wealth management arms and after all of the banks being involved in bad advice for wealth management and having to go into reviews of their financial advice and their products. That was after the banks having to pay back customers, having people banned, having to pay fines, having to enter into enforceable undertakings, having the AUSTRAC allegations against the Commonwealth Bank and having the largest corporate fine in Australia levelled against the Commonwealth Bank. After all of these scandals that we've had in financial services sector over the course of the last decade, this government goes and cuts ASIC's budget by $200 million. They cut the budget of effectively the police who look after this industry, and yet they want to come in here and talk about reforms such as this and say that they're listening to the people who have been the victims of financial fraud in this country.

I'll tell you who the frauds are: it's those people who sit opposite in this place, particularly those National Party MPs. It blows me away that some of them have the hide to be interviewed by TV stations and radio stations about them being the ones who have been calling for a royal commission into banking and financial services in this country when they've come in here and, on 26 occasions, voted against a royal commission into banking and financial services in this country. Yet they slink back off to their electorates in the bush and, when they're confronted with those facts about voting against a royal commission, they say: 'Oh, no. That's not us. That's the Liberals, you see? That's the Libs. They don't want a royal commission. We want a royal commission. We're tough on financial fraud and financial services. We want a royal commission.' But they're spreading mistruths because they came in here and they voted against a royal commission. They joined with their coalition colleagues in voting against a royal commission on 26 occasions. That's the reason why we've had rushed legislation such as this. It was done to avoid a royal commission. The government put in place a number of reforms simply to avoid a royal commission.

We've all seen through the process of the royal commission the powers that they've had to get to the bottom of what has really been going on in financial services in this country over the course of the last decade. The government's response was: 'It's okay. We'll just empower the House of Representatives economics committee. They'll be able to do the job of a royal commission. We'll get the bank executives in once a year and we'll give the House of Reps economics committee the opportunity to question them.' Some of the evidence that came out of those inquiries was insightful. We had one last week. But what was uncovered was that that committee didn't have the probity powers or the time to really delve into what has been going in financial services in this country and provide the opportunity for victims to have their say and for justice to be done. That's the great beauty of this royal commission. They've had the necessary time, the powers and, indeed, the expertise of the royal commissioner and the counsel assisting to really delve into what is going on in financial services in the country.

Despite the depth of the ASIC cuts and their curtailed ability to help police financial services, this government continued to cut their budget and take zero action when it came to looking at a royal commission. We know that this government is out of touch. That's evident from the results of the weekend by-election. But it's desperately evident that they're out of touch on this issue of financial fraud and financial services. How could they be otherwise in opposing the FOFA reforms when they were originally planned, in saying there was no need for a royal commission and then in rushing legislation before the parliament before the royal commission has had an opportunity to report?

Australians will never forget that this government resisted those urgent calls for a royal commission into banking and financial services for 600 days. For 600 days, they opposed a royal commission. It was only after they got the green light from their mates in the banking sector that the Liberals and Nationals reluctantly relented and agreed to a short, sharp royal commission. Even now, there have been further calls from some of those victims. There have been thousands of submissions to the royal commission—9,000 to 10,000 submissions. Only 27 victims have had opportunity to put their case. If we're going to restore confidence and trust in banking and financial services, what do we say to those thousands who haven't had the chance to verbally put their case before the royal commission and have their concerns listen to? How are we going to restore that trust and confidence without the opportunity for those people to have their say? That's why Labor has been calling on the Prime Minister and government to consider extending the terms of reference to allow all of those Australians who have been the victims of these shocking rip-offs and financial fraud to have their say in the commission.

This government has a history on issues such as this of opposing the necessary reforms to crack down on dodgy financial advice. When Labor was in government, there were numerous inquiries into some of the collapses that occurred in this area. Trio Capital, Westpoint, Opes Prime, Timbercorp—there were all of these financial collapses where thousands of Australians lost their life savings. In some cases they'd retired and put all of their super into these products, maybe re-mortgaged their houses to go into further hock, on the advice of these financial advisers, and they lost the lot. They lost not only their retirement savings but their kids' inheritance as well.

In the wake of that, Labor acted, and acted strongly, in implementing the FOFA, Future of Financial Advice, reforms. What did the member for Warringah do at the time, and the likes of Senator Cormann, who was part of the inquiry that looked at the FOFA reforms? They opposed them. They opposed the catch-all provision—in the best interests duty—that ensures financial advisers act in the best interests of their clients. Believe it or not, up until that time there was no legal obligation on financial advisers and banks to act in the best interests of their clients. Guess what? Many of them didn't. And we're seeing the consequences of that now. Labor proposed that you had to act in the best interests of your client, and we put that in legislation.

We also proposed that a client had to opt in to the continuation of a financial service or financial advice on a two-yearly basis. Again, part of that provision was opposed by this government and its members. They voted against it in the committee inquiry and in the parliament. Do you know whose evidence they relied on in their argument, Mr Deputy Speaker? You can go and have a look at the dissenting report, which was drafted by Senator Cormann and other senators, from when the Parliamentary Joint Committee on Corporations and Financial Services looked at this issue. They relied on the evidence of AMP. They said: AMP believe this would be disastrous for financial services in this country and would result in 30,000 jobs going in the industry. Well, we now know why! We now know why, after the evidence of AMP that was uncovered in the royal commission—of charging fees to dead people; of providing ongoing advice through legacy products when people weren't getting any services at all, and then having that looked at by a law firm on an independent basis and seeking to change the report that was going to ASIC. As a result of that, they had the royal commission recommend criminal charges.

That was the sort of evidence—from those sorts of people—that the government relied on to justify their arguments against FOFA. It says everything about their approach to protecting consumers and acting in the best interests of Australian bank customers and those seeking financial advice in this country. We know that when it comes to proper regulation, when it comes to cracking down on their mates in the banking industry, their heart's not in it, because it's not in their DNA to do that sort of thing, to regulate that sort of behaviour.

Today, here we go again. We've had ASIC and consumer groups calling for the government to have a look at this. There's going to be a Senate inquiry, and we encourage those who have issues with this piece of legislation to have their say. They've raised some concerns about the exclusions in the bill. They're asking why consumer-facing financial services are excluded from both design and distribution obligations, along with product intervention powers. Even the likes of Afterpay, a multimillion-dollar company, have reversed their position and are now calling to be covered by the legislation, yet the Abbott-Turnbull-Morrison government has given up on this issue. Only Labor is listening to the victims and to our corporate regulator and key stakeholders. Only Labor is acting in the interests of Australian consumers and financial product clients.

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