Luke Hartsuyker (Cowper, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

I move:

That the amendment be agreed to.

This is quite a simple amendment. It relates to division 6 of the bill—Additional protections for retail clients, and specifically relates to section 738ZD—Cooling off rights for retail clients. The section reads:

If a person who is a retail client in relation to a CSF offer makes an application pursuant to the offer, the person may withdraw the application within 48 hours after the application is made.

The effect of this amendment is to increase that 48-hour period to five business days. It is a very simple amendment, increasing the duration from 48 hours to five business days, and I certainly commend it.

Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Link to this | Hansard source

With the cooperation of the minister at the table, the Assistant Minister to the Deputy Prime Minister, I would like to give an extended response, if I may, to this issue, given it is the introduction of a new financing platform particularly targeted to small business and to start-ups. The minister has referred to an amendment that the opposition put up in the Senate to strengthen the investor protection integrity around this entirely new financing platform, but I cannot neglect the opportunity that is presented by this period of debate to reflect on this bill.

On our side, we have been very firm advocates and very big supporters of bringing in equity crowdfunding—to ensure that small enterprises and start-ups that are in need of capital injection to either kick off or grow have access to this new mechanism. It was Labor that, when in government, provided the reference to the Corporations and Markets Advisory Committee to allow the work of examining how we would allow equity crowdfunding to occur in this nation, as it was starting to operate in others. In 2012, for instance, the US government put in its JOBS Act that allowed for the emergence of equity crowdfunding in the American jurisdiction. Literally a year later, Labor, when in office, provided that reference to see CAMAC. CAMAC went away and started working, and they handed their final report to the then Abbott government in May 2014.

I am not going to go through all the history, but CAMAC put forward some recommendations that we were not comfortable with and I know the government was not comfortable with. It was largely around this whole notion of an unlisted public company. In a lot of our discussions with the start-up sector, they said they would not accept this. This bill, despite coming in two iterations to this place, continues to maintain this restriction. In fact, this bill achieves one thing and one thing only—a headline. The government wants a headline that says they brought it in. After having advice delivered three years ago on what to do with the system, this system puts a massive barrier between small businesses and start-ups and access to finance. The demands of the Turnbull government compelling business to completely change their model of business just to access equity crowdfunding represent the most restrictive conditions to be set on equity crowdfunding in any jurisdiction on the planet. It is so bad that people like Dr Marina Nehme from the University of New South Wales law faculty have said that the bill currently excludes over 99.7 per cent of companies from accessing crowdsource funding, and that:

Such a reality defeats the purpose for introducing legislation to facilitate CSF as only a very small minority of companies will be able to raise funds through this mode of finance.

That is what people have been saying. That is the barrier that is put into place. The government knows this is bad. They did not care. They were so desperate for any legislation to go through that they put this through. How do I know it is bad? Because a few weeks ago in this place the Treasurer at that place said they were going to change it. They said that they would make changes to this bill that is now about to receive royal assent—that in a few months time we will have a series of changes made to this that will make it redundant. Worse still, after saying that they would change it the finance minister, on Monday in the Senate, admitted that they had not even started consultation on the bill that will tidy this bill up—none; it has not even commenced. Like everything else with this government, this will be stuff-up that takes a long time to fix. The government has not just let down the start-up community with this bill—they have let down the start-up community badly with this bill. (Extension of time granted) What is more surprising is how badly the start-up community has been let down by representatives of the start-up community themselves; groups like—I have to say, and I am sorry to say—FinTech Australia. It should be pointed out that this group, which received $200,000 in funding from the Turnbull government last year, hardly raised a peep about this massive barrier that will prevent so many of their members accessing equity crowdfunding—not a word. The only thing that FinTech Australia took umbrage at was the improved investor protections that have been flagged by the minister at the table. The extension of the cooling off period from 48 days to five days was the only thing—

Luke Hartsuyker (Cowper, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

It is 48 hours.

Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Link to this | Hansard source

Forty-eight hours—thank you for the assistance, Minister. The only thing they took umbrage at was the improved protection for retail investors that will be engaging with the system for the first time. There was nothing about their members being prevented from accessing crowdsourced funding, but they were big on weakening investor protection. When the issue of the crowdsourced equity funding regime locking out 99 per cent of start-ups was raised, FinTech Australia said:

It's very easy for the startup community to become very self-focused. It's not really targeted as much to startups …

So, bizarrely, FinTech Australia says this bill—which is about to go through this place and which has always been talked about as helping start-ups—is not aimed at start-ups. Maybe the government has muzzled FinTech Australia with the usual conditions a coalition attaches to funds. Who knows? But let us take at face value what they have said. If FinTech Australia says this is not about start-ups, let us look at a body entirely funded by the government and see what they said. That body is the Australian Small Business and Family Enterprise Ombudsman, Kate Carnell, who, I might add, has not been a card-carrying member of this side of the House, but is an ideological soul mate of their side. So what did Kate Carnell, the ombudsman, say about this bill that we are now debating or reflecting on the amendments that have been made to the bill in the other place? This is what she said:

As noted in the prior consultation papers about 99 per cent of Australian companies are proprietary companies and a majority are small businesses.

That is step one. Step two:

This means that the vast majority of potential small business users of the new framework must wait for another, soon-to-be-announced round of amendments and regulations before they can begin to make the necessary decisions and adaptations, including possibly taking the decision to switch legal structures and become a public company.

But critically, the ombudsman said:

… we believe it would be simpler, more certain and more straightforward for small business if the current amendments were held off so the full package of amendments were introduced at the same time.

That is by the ombudsman. FinTech Australia say, weirdly, that this is not about start-ups—it is about other small businesses. Then you go to the body that actually represents them and it says that this bill should not proceed. We demand to know what constraints the Turnbull government has forced upon FinTech Australia. It is clear that no logical person could argue for what FinTech Australia is arguing. They have simply been intimidated into the position. What is the only other thing that FinTech Australia spoke on? The only thing that FinTech Australia spoke on was not the barriers to this bill. What they spoke about was this amendment from the other place that the minister has advised the House. That is, they spoke against Labor's moves to ensure that investor protections were strengthened. That is what they did.

FinTech Australia need to ask themselves, are they properly representing the interests of members—not the handful of members. You could probably count on one hand the number of crowdfunding platforms that FinTech Australia are representing in this debate. They have other FinTech players who will need alternative finance but who have not had the benefit of FinTech Australia speaking up for them. They have had the ombudsman speak up for them to ensure there is access to finance, but they have not had FinTech Australia say it. That is wrong. This is why I am always suspect about funds being granted to groups in this way: it prevents them from doing the proper job of speaking up on behalf of the people they should be representing.

We have now had a suggestion that FinTech Australia will be in consultation with the government. As I said before, we have this entirely new system of finance. We need to ensure that it actually works for the betterment of the end user that it was intended to be put in place for. We need industry associations to rightly point out what they expect will be done on behalf of and for the benefit of their members. They should not be cowed, they should not be silenced from being able to express those views, because it not only runs against the interests of their own members; it runs against the interests of the government, who should be getting a good system in place. They should benefit from frank and fearless advice about what is required to be done.

So I would say that, while FinTech Australia have argued that they have begun consultation, the bell has been well and truly rung on that. We have had the admission from the finance minister in the other place on Monday that that has not even started. The other thing is that this will make sure that we have a delay in the new system, even though, weirdly enough, once this bill gets passed it will still be six months before we even get to that point. So we have all this time that has been built in. Instead of having this bill come through, we should have waited and had the consultation. We extended the government a commitment to bipartisanship to fix it up. We had even offered on a mechanism to fix this up. It was not done.

Frankly, I think that what should have happened is that it was done the first time. It has not. It has gone through the Senate now and we have had this change. But we hope, and this is the important point I will end on, that another set of arrangements is going to be put forward some time down the track. Industry should recognise that this is the final chance they have to get the proper system in place. We hope that they properly represent their members and make sure a system is put in place that will work for everyone, and that the bill will be a solid one into the future.

Question agreed to.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.