Laura Smyth (La Trobe, Australian Labor Party) Share this | Link to this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the following reports of the committee: the statutory oversight of the Australian Securities and Investments Commission report, March 2012, and the report on the 2010-11 annual reports of bodies established under the ASIC Act.

In accordance with standing order 39(f) the reports were made parliamentary papers.

by leave—I am very pleased to speak to each of these reports today as the representative of the Parliamentary Joint Committee on Corporations and Financial Services. In the report on the statutory oversight of the Australian Securities and Investments Commission, regarding ASIC's key priority area of informing confident and informed investors and financial consumers ASIC told the committee of its success with the MoneySmart website. I know from my experience in my electorate that the website has been very well received and I commend ASIC on its efforts in putting it together. In November 2011 the website won the award for the best government website. The site had had over a million visitors at that stage. Large numbers accessed the associated mobile phone applications, Twitter and Facebook. Of even greater significance is that over 90 per cent of those who accessed the website had followed up with some action in relation to their finances. That is certainly commendable.

ASIC also told the committee of its actions holding gatekeepers to account. There had been 17 enforcement outcomes over the previous six weeks, including six criminal convictions initiated by ASIC. ASIC had issued a consultation paper to investigate research houses with a view to rating them in the same way that agencies are rated. In addition, ASIC informed the committee that it had released a regulatory guide on prospectuses, with the aim of informing consumers and influencing their assessments of financial products. In terms of fair and efficient financial markets, ASIC noted that it is monitoring ASX technology following a recent outage and is reporting on ASX licensees.

In ASIC's recently released annual report, the committee was interested in the allocation of resources against the organisation's objectives. The chairman told the committee that in staff allocation there was roughly an equal balance between deterrence and stakeholder teams, with half the front-line personnel engaged in deterrence. Mr Medcraft noted that the market supervision aspect of their role was working very well, with a particular focus on prosecuting cases of insider trading. The committee commends the high level of deterrence activity completed by ASIC. It remains interested in the relationship between the ASX and ASIC and encourages ASIC to follow up on those matters it has recently identified. The committee certainly commends ASIC on the successful development and implementation of the MoneySmart website. It encourages ASIC to continue to strengthen its educational unit. The committee is interested in gaining further information from ASIC on specific educational activities and flagged this as a topic for examination at a subsequent hearing.

The committee was given further information on ASIC's actions on product disclosure. Australian law does not oblige disclosure at the portfolio level, and Mr Medcraft indicated that Australia is somewhat behind best practice in countries such as the United States, where such disclosure is routine and easily available with current technology. ASIC has raised this issue with the Financial Services Council and the Association of Superannuation Funds of Australia, which I understand are now working on developing industry standards with portfolio-level disclosure.

The committee will continue to monitor the adequacy of ASIC's resources and will consider the allocation of those resources to ensure that a good balance between deterrence and education is maintained. Since the bulk of ASIC's non-taxation revenue comes from business registration fees, the committee recommends that the basis on which company registration fees are set be disclosed and an explanation made as to the process of determining late fees.

Finally in relation to that report, the committee is particularly interested in the matter of defining and dealing with financial crime and determining clear and consistent guidelines as to whether activities are fraudulent. It supports efforts to quantify the extent of criminal activity and acknowledges the difficulty of doing this where terminology may be fluid or categories may be variable. The committee recommends that ASIC take steps to use available information to collate and analyse definitions of, and approaches to, financial crime, with a view to developing standard definitions and classifications that might be used across the Commonwealth.

I turn to the second report, the report on annual reports, which has been prepared in accordance with section 243 of the ASIC Act. The report examines the annual reports of bodies established under that act—namely, the Auditing and Assurance Standards Board; the Australian Accounting Standards Board; the Companies Auditors and Liquidators Disciplinary Board; the Corporations and Markets Advisory Committee; the Financial Reporting Panel; and the Financial Reporting Council. Together with ASIC and the Takeovers Panel, these bodies form the administrative organs of the financial services framework established under the ASIC Act.

In reviewing the annual reports, the committee considers operational matters of key interest. The committee did not hold hearings or seek submissions for the purposes of its review. Overall, the committee was satisfied with these reports. It has made some comments on matters concerning the Companies Auditors and Liquidators Disciplinary Board, to which I will direct my final remarks.

The board hears applications from ASIC or from the Australian Prudential Regulation Authority to cancel the registration of auditors and liquidators. For its review of the board's 2009-10 annual report, the committee noted its concern about the low number of referrals to the board. One year on from the details provided in the 2010-11 annual report, it would appear that the underutilisation of the Companies Auditors and Liquidators Disciplinary Board is continuing. The decline in the board's caseload is somewhat evident when viewed against its caseload in previous years, so the committee will certainly monitor developments in that area.

In reviewing the annual reports, the committee also considers whether there is scope to improve the operation of the ASIC Act. In reviewing the CAMAC annual report, it was noted that section 158 of the ASIC Act allows CAMAC to second staff from an organisation established under the 1989 Australian Securities Commission Act. Needless to say, this act and the organisation have now been repealed. The committee notes the operation of section 158 of the ASIC Act and recommends that the section be reviewed to ensure its accuracy and appropriateness given the current legislative regime.

Finally, I would like to thank the secretariat for their assistance in preparing these reports and certainly the ASIC officials for their continuing cooperation.