House debates

Monday, 22 February 2010


Corporations and Financial Services Committee; Report

8:36 pm

Photo of Bernie RipollBernie Ripoll (Oxley, Australian Labor Party) Share this | | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee’s report entitled Statutory oversight of the Australian Securities and Investments Commission, together with evidence received by the committee.

Ordered that the report be made a parliamentary paper.

I am pleased to speak to the February 2010 report of the Parliamentary Joint Committee on Corporations and Financial Services on the statutory oversight of ASIC and the report on the 2008-09 annual reports of bodies established under the ASIC Act.

I would like to firstly thank the secretariat for their assistance in preparing these reports and I thank ASIC officials for their continuing cooperation with the committee. The ASIC oversight report covers a number of issues, including ASIC’s processes for handling complaints, credit regulation and frozen mortgage funds. The committee explored a recommendation ASIC issued in its 2009 report on financial products and services, for a professional standards board. ASIC’s failed One.Tel prosecutions and insolvency matters were also discussed.

In terms of complaint handling, the committee’s 2009 inquiry into financial products and services raised a number of concerns about ASIC’s investigative processes. Of particular interest to the committee was ASIC’s process of handling complaints received about misconduct and suspected legislative breaches. At the committee’s hearing on 25 November 2009, ASIC stated that complaints are addressed by 98 full-time employees and that they had met their target of turning around 70 per cent of complaints within 28 days during the last reporting period. The committee remains keen to learn more about ASIC’s capacity to receive and resolve complaints and will be carrying out a site visit to the ASIC complaints headquarters in Traralgon, Victoria in the first half of 2010. We are in the process of doing that. It is somewhat complicated trying to get a whole committee and ASIC officials to Traralgon, but we are certainly on our way to achieving it in our nominated time frame.

ASIC gained a number of additional responsibilities with the 2009 consumer credit reforms. These responsibilities include licensing consumer credit providers and being the national regulator of the new code. The committee has noted ASIC’s efforts to prepare for the legislation by 1 July this year; however, there is concern that this is a substantial task to add to ASIC’s existing workload. The committee will be seeking information from ASIC at future oversight hearings about how it is balancing its new responsibilities.

In terms of frozen mortgage funds, a freeze on redemptions from cash management trusts and mortgage funds continues. ASIC has reported that hardship payments have been made to some 2,293 applicants, yet frozen funds still amount to around $17 billion to $20 billion. The committee also heard that the freeze has restricted a fund’s ability to attract new investment. ASIC has been asked to provide the committee with updates on this at future oversight hearings.

In terms of the professional standards board—which I think was a key platform, certainly one of the 11 recommendations that the committee made during its recent inquiry—the committee’s 2009 report on financial products and services recommended the establishment of an independent professional standards board in conjunction with ASIC, to regulate financial advisers. The board would oversee nomenclature, competency and conduct standards for the industry. ASIC agreed with the recommendation but noted that the idea would require further investigation. The committee looks forward to being advised on how the proposal could be actioned in the future.

In terms of some criticism of ASIC-initiated court actions, recent events have led to criticism in the media and in the industry of ASIC’s prosecution processes. For example, at the conclusion of its case against two One.Tel directors, the New South Wales Supreme Court stated that ASIC had failed to prove any aspect of its case. The committee acknowledges that it is not realistic to assume that all such cases will be successful. Nevertheless, the recent events suggest that there is still room for improvement and that ASIC could do better in these areas. This matter will be further discussed with ASIC at future oversight hearings.

Finally, in terms of insolvency matters, ASIC is responsible for enforcing the provisions of the Corporations Act, including those pertaining to insolvency matters. The committee was interested in ASIC’s handling of complaints about the conduct of insolvency practitioners, and it continues to be so given that there is currently an inquiry by the Senate Economics References Committee into that very matter.

The committee also welcomes ASIC’s efforts to proactively identify for additional scrutiny directors who have been involved in multiple company failures. I thank the committee for its hard work not only in the previous inquiry but also in the workload for this year, including a restructure of the way that we will be dealing with oversight hearings. I look forward to the cooperative approach that this committee has enjoyed and the bipartisan manner in which all members have participated in the national interest. I thank all committee members for that.

8:42 pm

Photo of Stuart RobertStuart Robert (Fadden, Liberal Party, Shadow Parliamentary Secretary for Defence) Share this | | Hansard source

I rise to join the member for Oxley in thanking the Parliamentary Joint Committee on Corporations and Financial Services and, indeed, ASIC for their support in the inquiry into the statutory oversight of the Australian Securities and Investments Commission. Seven specific issues were raised with ASIC, including complaints handling, credit regulation, professional indemnity insurance, frozen mortgage funds, professional standards boards, ASIC-initiated court actions and, of course, insolvency matters. ASIC continues to perform its statutory oversight function well. ASIC is, of course, one of the great pillars of our financial services regime. Others are APRA, the independence of the Reserve Bank board and the ACCC. Any commentator can see that the nation withstood the global financial crisis particularly well, and it was due in part to the guidance of the four pillars—one of them being ASIC.

I wish to comment on four specific issues, starting with the frozen mortgage funds and cash management funds. In response to the unlimited bank guarantee, funds were being drained from mortgage funds and cash management funds into the perceived security of major banks, to the point where the majority of mortgage funds were frozen. In fact, funds worth $17.268 billion were frozen and continue to be frozen. ASIC has received 3,385 hardship applications, of which 81 per cent have been successful. About $67 million has been laid out. The committee will continue to receive updates on the frozen mortgage funds and the issue of hardship cases and the percentages of them being paid out.

As the chair of the committee, the member for Oxley, pointed out, one of the key recommendations of the committee is the establishment of a professional standards board. The committee was concerned about the collapse of Storm Financial, Opes Prime and others and that there was no overarching standards body that would decide the standards of financial planners and financial advisers. ASIC has agreed to the recommendation in principle, yet to date little action has occurred. The committee will look forward with interest in the coming months to ASIC scoping out exactly how a standards board would look and briefing the committee on their proposal and recommendations for such a board. We believe this recommendation to be of such importance that this issue needs to be raised to a high priority.

The media has shown some criticism of ASIC through a range of court initiated actions, including some failures of court initiated actions. The committee remains concerned about those, and of course there is always room for improvement. We note that ASIC will be coming back again to discuss further a range of these issues, their approach and where they are going.

With respect to insolvency in the 2008-09 financial year, 45 directors were banned. ASIC’s role, though, continues to be seen in a reactive form rather than a proactive form. The committee is looking forward to ASIC stepping up the proactive stance in looking at a range of directors who have been involved in multiple failures of corporations, working with them and, if need be, banning them from their functions.

The committee has done, I think, a very good job in providing oversight to ASIC for the 2009 financial year and in looking forward to the 2010 financial year. Again, let me join the member for Oxley in thanking the committee, the secretariat and ASIC for their hard work, diligence, cooperation and interest.

Photo of Janelle SaffinJanelle Saffin (Page, Australian Labor Party) Share this | | Hansard source

The time allotted for statements on this report has expired. Does the member for Oxley wish to move a motion in connection with the report to enable it to be debated on a later occasion?

8:46 pm

Photo of Ms Anna BurkeMs Anna Burke (Chisholm, Deputy-Speaker) Share this | | Hansard source

I move:

That the House take note of the report.

In accordance with standing order 39, the debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.