Terri Butler (Griffith, Australian Labor Party, Shadow Assistant Minister for Preventing Family Violence) Share this | Link to this | Hansard source

Of course I rise to support the general thrust of this bill, because it will add to the governance of the Australian Securities and Investments Commission, but I want to make some comments arising from the second reading amendment that the member for Kingsford Smith moved. I think it's important at this juncture, as we reflect on the evidence that's been elicited through the royal commission into the banks and some of the commentary that's been around in respect to that evidence, to give a bit of context around a few things we should have learnt from recent and slightly less-recent circumstances.

There are a few things we should have learnt from the global financial crisis. There are a few things we should have learnt from fees-for-no-service scandals. There are a few things we should be learning now from the banking royal commission. One of those is that we need a strong regulator. Another is that we need strong regulations. A third is that we need to address the power imbalance between consumers and banks. Deputy Speaker Irons, how many times have you heard—and I'm sure it's quite a few, given that you're the chair of the Parliamentary Joint Committee on Corporations and Financial Services—people saying to you, 'You just can't beat the banks'? That's what people in my electorate say to me. They feel powerless in the face of banking misconduct and, more broadly, in the face of banking power. You can see why people might feel that way when you hear scandals like fees for no service or just the everyday price gouging, the fees in relation to ATM use or the very high credit card interest rates. It's no wonder people feel powerless in the face of banking and financial services in Australia.

The reason I want to talk about these three things is that we are dealing with a bill that arises—belatedly, admittedly—from the financial systems inquiry report that was handed down in mid-2014. I know the government gave its reply in October 2015, more than 12 months after the report was handed down. I also know that we are just now, in 2018, looking at some implementation of the recommendations, in respect of banking and financial services regulation, that were made in that 2014 report. I want to make the point that the answer to the problems of neoliberalism, problems like instability and predatory practices, is not more neoliberalism. This is an experiment that has failed.

We are today seeing the legacy of decades of neoliberalism across this world. We are seeing its legacy here in Australia. We are seeing its legacy in the United States and the United Kingdom. And we are seeing its legacy from the global financial crisis that shook the world and became what is known outside Australia as the great recession. Of course, it's not known as that here—because we didn't go into recession during the global financial crisis in Australia. But every other major economy did. The world very briefly started to learn the lessons of that financial crisis and started to turn to greater regulation of financial services. Unfortunately, we have already lost that motivation and momentum to look at greater regulation. That is a very grave shame. If we look back at what's happened in the intervening decades since the global financial crisis, we should all be very worried about the propensity of current systems to lead to further crises.

I want to talk about three things I think we need: a strong regulator, strong regulations for the regulator to enforce, and empowered consumers. I have heard some members of the Liberal and National parties suggesting that somehow it can be laid at the feet of the Australian Securities and Investments Commission that banking and financial services misconduct has been occurring in this country. We all want to see ASIC step up, be a great regulator and enforce the law very well. But let's not make any bones about it, this is a regulator that has had its funding cut. The 2014 budget cut $120.1 million from ASIC over five years. Dribs and drabs of funding have been restored to ASIC since then, but not enough to make up for the cuts that were made in 2014.

We also saw the attempt to remove ASIC and other white-collar regulators from the use of telecommunications data, the metadata regime, when it was overhauled. It was Labor that fought to have white-collar enforcement agencies like ASIC included in the regime. And not only has ASIC been deprived of resourcing; they have also been deprived of the regulatory tool kit that has been recommended for them. One of the things that was recommended in the financial systems inquiry was some additional powers for ASIC, not just for enforcement but for making regulations. And we're finally seeing now, in 2018, almost four years after the financial services inquiry report was handed down, some implementation of those additional powers in relation to the creation of design and distribution obligations and in relation to temporary product intervention. So the government has not only sought to tie ASIC's hands behind it back by reducing resourcing; it has failed to equip ASIC with the tools that even the government's own financial systems inquiry—it was conducted independently but it was commissioned by the government—recommended would be required for ASIC to be able to be a better regulator.

And it's not just that the government has failed to properly deal with the cuts that were made back in 2014, it's not just about the very slow movement when it comes to equipping ASIC with those powers that were proposed in the financial systems inquiry. It's also that the government has basically said to ASIC: 'Keep your hands off the banks'—in big glaring letters. In 2014 the then new government gave ASIC a statement of expectations. What was in that statement? The very final concluding paragraph summarised what the government wanted from ASIC. It said that the government wanted ASIC to 'reduce compliance costs for business'. That's what the government wanted ASIC to do.

That statement of expectations had very little to say about consumer protection but a lot to say about 'risk based enforcement'. Risk based enforcement means: 'Don't enforce the law against everyone, just go after some big fish.' It also spoke about 'principles based regulation'. That means: 'Hands off, light touch, be general, don't be prescriptive.' So with those three things in it—the direction to reduce compliance cost for business, risk based enforcement and principles based regulation—and the failure to have a focus on consumer protection, the statement of expectations basically said to ASIC: 'Be a light-touch regulator. Hands off. Let the market do its work. Work with the regulated population.' Of course ASIC should have a relationship with those it seeks to regulate, of course it should understand the industry; but there's always a trade-off, isn't there?

The closer you get to industry the better you may understand it, but the closer you are to an industry the more difficult it can become to be a tough cop on the beat in respect of that industry.

ASIC was told to engage in this very light-touch, hands-off approach by the then Treasurer in 2014. For this government to now stand up and say, 'Well, ASIC should have been a firmer hand; it should have been a stronger regulator; it should have been a tougher cop,' sits a bit ill in the mouth of a government that failed to create a statement of expectations that told ASIC to do those things. The Financial System Inquiry recommended a new statement of expectations be issued back in 2014, and in 2015 the government said, 'Yes, we'll do that by mid-2016.' When was it announced? It was announced in March 2018. That's when that new statement of expectations was announced. The government, having been dragged to looking at the actions of ASIC by the royal commission into the banks and by the work of Labor and others, finally got around to saying, 'We're so happy to make an announcement. We've finally settled on a new statement of expectations.' Well, that's great. That's fantastic—you were told about this in 2014! Four years is a long time for people to have to wait for the government to finally take some action on that.

Do you know what it reminds me of? It reminds me of the government's approach to the banking royal commission. We had 601 days of excuses, delays, obfuscations and refusal before we finally got a banking royal commission. After Labor campaigned so hard for it and kept pushing for it in this parliament and after members of the community demanded it, we finally got a banking royal commission—and thank goodness we did. I know there would be people out there watching it very closely and seeing some of the stories—stories about charging fees to people after they have died, more stories about misconduct and more stories about poor behaviour.

I'm very pleased that we finally have a banking royal commission. I'm sad that it took 601 days. I think it was pretty gobsmacking for the Prime Minister to say, 'I'm sorry; it obviously was a political mistake to oppose the royal commission.' How out of touch do you have to be to think that the main problem with refusing to support the royal commission was the political cost to the government? This isn't about the government. It's not about the polls. It's not about how popular the government is. It's about the fact that this conduct could have been exposed sooner, that this royal commission could have commenced sooner, that this pressure to finally take action to enforce the law, to equip the regulator with powers, to work on creating the competition mandate—another thing that's been under discussion for a very long time—and to work on creating the product intervention powers and the disclosure and distribution obligations could have commenced sooner. The pressure to do all of the things that the government said back in 2015 that it would do could have come on sooner if the banking royal commission had started a little sooner.

These ideas about how to make our regulator stronger have to be situated within the broader context of changing the way we think about financial services and banking regulation. The light-touch, hands-off approach isn't working. It's certainly not working now, if it ever worked. I'm pleased to see that the competition mandate has been conferred on ASIC. I'm pleased to see that ASIC will be explicitly required to consider whether there is enough competition in the banking and financial sector. As you know, Deputy Speaker, the previous chair of ASIC said very clearly before our committee that he didn't think there was enough competition within the banking and financial sector.

I'm very pleased that there will be a specific focus on competition, but it's not enough, is it? With the size of this market and the regulation that we have now, we will tend towards an oligopoly. We know we will, because we have—we can see the evidence before us when we look at the financial services sector. We have to take a new approach, and that means saying, 'In Australia, we believe that the banking and financial services sector should serve the people.' It's an industry that is so important to our entire economy. It's important, of course, as an export. It's important that we reach out to other nations with the great financial services that we can offer. But, most importantly, it's important for our domestic economy that we have confidence in the financial sector. To have confidence, we need regulation that will ensure that the banking and financial sector acts in a way that serves the interests of the community. We need to remove perverse incentives to engage in wrongdoing, misconduct or just garden-variety predatory behaviour.

As I said at the outset, we need consumers to be stronger. It's time for a much stronger consumer protection focus. It is just a nonsense to say that a small-business owner can negotiate on equal footing with one of the big four banks. It is just a nonsense to say that a pensioner can negotiate on equal footing with one of the big four banks. It is just a nonsense to say that a kid out of high school can negotiate on equal footing with one of the big four banks. We need to improve consumer protection in this country. Consumer protection should be at the heart of what we do when we look at how to improve the way that ASIC operates, that banking and finance regulation operates and that general approaches to the market in this country operate. It's not good enough to say: 'We'll leave it to the invisible hand of the market. People's enlightened self-interest will lead to optimal outcomes.' It's not the case. We know it's not the case because we've got decades of neoliberalism to look back on in this country. We know it's not the case because of the evidence that's coming out before the royal commission right now. I appreciate the bill, I respect the moves for greater governance and I hope that things get a little better. (Time expired)

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

The Treasury Laws Amendment (ASIC Governance) Bill 2018 amends the ASIC Act to provide the Governor-General with the discretion to appoint a second deputy chairperson of ASIC. Labor supports this bill. This bill forms part of what I see as the first tranche of legislation that this government is belatedly bringing forward to implement changes to our financial services regulatory framework in reaction to the royal commission, which it avoided holding for so long. The regulation and the regulatory framework are something that it has avoided changing and improving for so long.

We note that the government has announced its intention to nominate Daniel Crennan QC to fill this new deputy chairperson role, and an excellent appointment he will be. But why have we ended up at this place? It all comes back to an issue that the outgoing chairperson of ASIC identified some time ago, which is that we have a fundamental failure in the way in which ASIC is regarded, not just by the public at large and not just by those that it seeks to regulate but, critically, by its international colleagues around the world. It is not seen properly as a law enforcement agency. ASIC cannot just be some cuddly regulator working closely with those companies, organisations and individuals that it seeks to regulate, gently pushing them and prodding them towards better behaviour. It has to carry a big stick as well. It may walk quietly, but, without that big stick of actually being a proper law enforcement agency, that gentle cajoling ultimately will have no effect. This change—introducing a second deputy chairperson role and making sure that the head of enforcement fills that role—is a very positive change to create a better perception of ASIC in this country.

But, as I said: how has this all come about? It has come about because the government has realised it suddenly has a problem on its hands. Suddenly it sees it as a political issue. Now that we've finally got to a situation where we are having a banking royal commission and issues are starting to come out, the government needs to make sure it has strong and effective regulators to back the strong and effective—oh no; we're still waiting for the laws to come. Not only do we need to have a strong and effective regulator that is a proper law enforcement agency; we need to make sure that it has the powers to do its job properly. In particular, we need to make sure that it has the penalties to back up the offences that it's trying to go after. But I will come to that again towards the end of my speech.

If we go back and look at ASIC under the term of this government and why it's ended up in this predicament reputationally, a lot of it goes back to the government's 2014 budget, its first budget, where it moved to slash the funding to ASIC, where it gutted our key corporate regulator. And then, in an effort to forestall and avoid holding a royal commission, the government said, 'Nay, wait: it's okay; we'll restore the funding.' But, as we've seen in numerous committees that I've sat on, and others, it takes quite a time once ASIC gets its funding restored for it to bring its capability back up to scratch, and even now there is a question mark over whether that capability is still fully there. So we still suffer the consequences of those cuts back in 2014 by this government.

And those cuts can't be just seen in isolation. I thought it was astounding that we saw the Treasurer go out and say that we need to make sure that we effectively throw the book at corporate crime and the crimes that may have been committed by the big banks in this country after some of the revelations that have come out through the banking royal commission. I thought about that, as a former federal prosecutor myself: how is he going to do that? He might say, 'I've restored the funding to ASIC,' and he may well say, 'Look, I've got a tough cop on the beat and I'm going to make the head of enforcement the deputy chair of ASIC.' But who's going to prosecute it? The government has cut funding. It has slashed and burned through the Commonwealth Director of Public Prosecutions office. When we look at yesterday's budget, the government has said, 'We'll give the Commonwealth prosecutor an extra $3 million in about three years time so it can do some enforcement around the illegal importation of tobacco.' But it hasn't given any extra funding to prosecute the crimes that the Treasurer himself has said should be prosecuted coming out of the banking royal commission. He's all bark and no bite, this Treasurer. So we see that the government is consistent when it comes to funding its law enforcement agencies; it's just consistent in the wrong way.

Related to this, after the Financial System Inquiry, the government promised to update the ASIC statement of expectations. It said it would do that by mid-2016. But it took until this year, 2018, for the minister to announce that new statement, and the minister did that only after a significant amount of pressure applied by Labor through the Senate estimates process. This is quite an important document. We're talking about ASIC governance in this legislation, and this document goes to the heart of the government's expectations about how ASIC will fulfil its mandate. In the meantime, up until this point we've been left with the Abbott-era statement of expectations from 2014—remember, that's the period when ASIC had its resources gutted.

If we also turn back and look at what the priorities were for the Abbott Liberal government at that time, let's look at FoFA. The Future of Financial Advice reforms that were introduced by the former Labor government were of course opposed by the coalition, who voted against them at every opportunity. Then, when they got into government, they tried to repeal them, and then they tried to stop them from operating through regulation. When they couldn't do that, because we successfully disallowed those regulations in the Senate, the Minister for Finance cooked up a great little scheme with ASIC where they said, 'Well, let's just use your power to defer the operation for two years so that we can let the industry adjust'—an industry that had already had about two years to adjust when Labor passed the legislation in the first place. This has of course meant that we had more time during which improper fees were charged to Australian consumers. Indeed, ASIC has worked out that the amount of fees that have improperly been charged to consumers is effectively over $200 million—and that's not including interest.

Then there's the FoFA opt-in requirement—again, introduced by Labor—which would mean that financial advice clients with ongoing fee arrangements would have to opt in to that relationship advice, and pay for it, every two years. It seemed quite reasonable—unless, of course, you're the coalition; they're not really into this transparency with the customer. ASIC subsequently concluded that this reform significantly reduces the likelihood that customers will continue to pay fees for ongoing advice services if they do not wish to receive those services or pay those fees. Well, that sounds quite good. But, instead, a number of financial services and entities decided they would just charge the fees regardless of whether they gave any advice—indeed, they would charge them even after people died.

I mentioned tougher penalties earlier. ASIC's been onto this for quite a while. ASIC first asked this government for tougher corporate penalties back in 2013—some five years ago. Indeed, if we look at some of the revelations that have come out of the banking royal commission recently, some of the conduct which the commissioner said is likely criminal would have incurred these higher penalties if the government had got around to introducing the higher penalties when the regulator asked for them in the first place. That's not to mention the impact that the government says is going to clean all of this up—that's its Banking Executive Accountability Regime. The Treasurer has mentioned this quite a bit recently. I think he even mentioned it in his budget speech last night. But the thing I don't understand is that the Treasurer says this is going to clean up all this behaviour when the legislation clearly says that it has nothing to do with consumer outcomes—it's all about prudential regulation. It actually has nothing to do with this. I and Labor have been quite critical of this. In fact a parliamentary committee report handed down recently—a consensus report across all parties—said the Banking Executive Accountability Regime should be extended to apply to bad behaviour towards consumers by the banks and financial services. That's what they did in the United Kingdom, and that's what this regime is apparently based off, but the government can't even do copying properly.

Then, just today, we have seen that the Commonwealth Bank have finally settled their bank bill swap rate case with ASIC. They've settled that by admitting to a number of cases of unconscionable conduct and manipulating the bank bill swap rate. They will pay a penalty and donations to financial service literacy organisations of $20 million. It sounds like a lot of money until you compare it to the tax cut this government wants to give them. But I will commend ASIC for taking the hard line when it came to the bank bill hard line swap rate cases. It took all four banks to court in relation to that matter. It has settled with three of them so far and obtained some significant penalties. However, it is concerning that the state of the law, and the state of ASIC's resources and the Commonwealth DPP's resources, has meant criminal charges were not brought to bear in relation to any of that conduct.

In relation to all of these things we have seen critical failures by the government. They have allowed a situation to exist where there is effectively no confidence in our corporate regulator. It is good that they are bringing forth this bill. It is good that they will elevate the role of enforcement to the level of the deputy chairperson of ASIC, and we support that. We support them in making sure there are tougher penalties. We support them in making sure ASIC has more powers; that it has the powers it needs to be the tough cop on the beat of corporate crime in Australia. We need to make sure not only that that happens here but also that it's seen to happen overseas, because there is criticism of ASIC such that other law enforcement agencies in this area will not give full cooperation with ASIC because they don't regard them as a law enforcement agency. This is very concerning, and the government needs to address it, as it does with so many other matters.

When it comes to this specific piece of legislation, well done, government—eventually, years later, you have got around to fixing a small problem. We look forward to you eventually fixing some others.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I commend the member for Burt for his great contribution and the great work that he's done in making sure regulators do the right thing. Like the member for Burt, I'm happy to speak on this Treasury Laws Amendment (ASIC Governance) Bill 2018, a bill that amends the Australian Securities and Investments Commission Act to provide the Governor-General with the discretion to appoint a second deputy chairperson of ASIC.

The shortened version of this speech is that Labor supports an additional deputy chairperson. Why? Because of the important work that ASIC does. They have the responsibility for regulating Australian companies, financial markets, finance services organisations and professionals who deal in and advise on investments, superannuation—I'll return to that in a minute—insurance, deposit-taking and credit and have responsibility for consumer protection and conduct regulation. I particularly mention superannuation because I noted this week that former Prime Minister Bob Hawke was a bit crook. I want to wish him well and thank him for the great work that he and Paul Keating did in bringing in superannuation for everyday Australians. Now, at the end of the last quarter, we have $2.6 trillion in superannuation funds largely due to the efforts of Bob Hawke and Paul Keating and the trade union movement, obviously, in bringing in superannuation. My understanding is that's the third largest managed fund in the world. It's amazing to think of what a simple idea can blossom into.

As I said, we've learnt one thing over the last few weeks—that is, corporate governance is important, especially in the finance sector. I know the trade union movement takes its role very seriously, especially when it comes to those industry boards, where it's normally a fifty-fifty split of employers and employees. I know they do great work. We need strong and effective regulators. Why? If you don't have them, the cowboys or the crooked culture will spring up like mushrooms after rain. If you don't have a good cop on the beat, making sure they're doing the right thing, bad behaviour creeps in. Having an additional deputy chairperson will assist ASIC to be a stronger and more effective regulator, to undertake its functions with more flexibility and to engage with stakeholders. If ASIC is not able to effectively carry out the responsibility assigned to it as a regulator, it's not just the top end of town that has a hiccup; we all lose. ASIC has already been given new powers of oversight, and the Turnbull government has proposed that further responsibilities be given to ASIC, such as the management of expected additional disclosures following reforms to whistleblowing laws and administering the new Asia Region Funds Passport regime. To properly carry out these new responsibilities, ASIC must have the resources it needs to operate effectively. Labor supports this bill because Labor supports appropriate regulation of Australian companies, Australian financial services and Australian markets. We believe in good governments and in sensible governments, and all would do so.

However, it is worth remembering that, unfortunately, in the 2014 budget, the coalition government made significant cuts to the resources of ASIC—and this was while the member for Wentworth was a member of the Abbott cabinet. Some of these cuts were restored when the government was facing down a banking royal commission, but I remember them making the cuts in the first place. And, sadly, the damage has already been done. As you would expect, if you reduce the capabilities of a regulator, they can't properly regulate. The result is a financial sector where misconduct has become the norm. You see a race to the bottom, where cowboys and crooks set the standards. Anyone that does want to do the right thing will unfortunately have the cowboys and crooks say, 'No, no, we're undercutting that person.'

The Abbott and Turnbull governments have shown complete contempt for the important role that ASIC plays in Australia's corporate sector. In response to the financial system inquiry report, released in December 2014, the government promised to update the statements setting out the government's expectations for how ASIC will fulfil its mandate. They promised they would be updated by mid 2016, but it took until 2018 for them to do this. That is totally unacceptable. We know where the Turnbull government's priorities lie. It's not hard to see. It was again evidenced in the budget last night, when they confirmed their $80 billion tax giveaway to big business. Remember: $17 billion of that taxpayer giveaway will go to the banks.

For 601 days we saw the Turnbull government running a protection racket for the big banks by resisting the Labor Party's calls for a banking royal commission. They were very quick to declare royal commissions when they came into office but not so quick when it came to something that will benefit the Australian people. They were happy to go after a government scheme that was rolled out during the financial crisis and they were happy to go after Labor leaders, calling up what may or may not have happened 20 years before or the like. Bill Shorten was hammered with question after question for a political process, some might say. For 601 days, the Turnbull government resisted calling a royal commission, when financial misconduct continued unabated and in fact actually blossomed. For 601 days Australian mums and dads and small businesses were being ripped off mercilessly. For 601 days the Prime Minister continued to argue that there was no need for a royal commission. It was only when the big four banks themselves wrote to the Treasurer and told him that the government should call a royal commission into the banking sector that finally Prime Minister Turnbull relented. The banks told him when to jump and how high. It was unbelievable that a Prime Minister of this country could be dictated to by the banks. Surely nobody would now dare argue that there was no need for a royal commission into the banking, superannuation and financial services industry. I haven't seen any apologies from those opposite, saying why there were 601 days of delay. Who knows what heartbreak we may have avoided if they hadn't needlessly delayed for 601 days?

This is not the first time the coalition has been riding shotgun for the banks and financial sector. When Labor was in government, the coalition was in fierce opposition to Labor's Future of Financial Advice laws. I see the member for Oxley in the chamber. I know he's very passionate about some of the small lenders and the shonky practices that go on in this area. Those laws gave ASIC important new powers to rein in poor financial advice, but this coalition voted against those laws in the House and the Senate. When they got into government, they then tried to gut them. It was only the continued resistance of Labor that stopped the government from decimating the Future of Financial Advice laws. There is no doubt that these laws have proved their value. ASIC has been able to identify $200 million in fees that the big four banks and AMP have been taking from customers despite providing no service at all. Imagine that: $200 million taken from everyday people without providing anything at all—even, as we've heard, after the customers are actually dead. The ASIC report Financial advice: fees for no service, delivered in October 2016, found that although great systems were in place to record what money was coming in, there was no system to establish what customers were getting in return—in many cases, nothing at all. As a lawyer, you're used to charging for your advice. As a paediatrician, you're used to being paid for a service.

Dr Freelander interjecting —

What's your seat name?

Mike Freelander (Macarthur, Australian Labor Party) Share this | Link to this | Hansard source

Macarthur.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

The member for Macarthur here is a former paediatrician. Imagine still being paid for the delivery of a child when they're 30 years old—it'd be a great lurk if you could do it—or, as a lawyer, giving out advice and then being paid 30 years later for the advice you gave on that day. One of the reforms Labor introduced as part of its Future of Financial Advice laws was the opt-in requirement. This requires ongoing financial advice clients to opt in to fee arrangements every two years. That simple opt-in requirement, which I believe could've been tougher, was opposed by the coalition even then. The member for Higgins, now Minister O'Dwyer, said at the time:

The opt-in provisions must be removed. There is no other marketplace in the world whereby an opt-in process is implemented.

ASIC, however, in their 2016 report praised this opt-in measure:

This reform significantly reduces the likelihood that customers will continue to pay fees for ongoing advice services if they do not wish to receive those services or pay those fees.

Whether in government or in opposition, the coalition have consistently fought against measures that would protect customers from misconduct in the banking industry. They fought against protections for customers in the face of numerous horrendous instances of banking misconduct—misconduct ignored by the Turnbull government even when the government's own regulator, ASIC, reported it to them. Just last year, two of the big banks, NAB and ANZ, both settled cases with ASIC for $50 million each. I think today I heard that CBA had also settled a similar case. Justice Jagot of the Federal Court was reported to have said:

… the conduct of the traders were a gross departure from basic standards of commercial decency, honesty and fairness, and that the Australian public had a right to be shocked, dismayed and disgusted at what took place …

This was not a judge talking about drug dealers; this was a judge talking about people that represent some of the strongest pillars of our economic society. The ASIC commissioner, Greg Medcraft, understands this is a shocking, systemic problem. He said earlier this year:

Stop saying it's a few bad apples. At some point you've got to look at the damn tree and say, what's wrong with us as an organisation?

From what we've seen so far in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, this tree has serious rot in the trunk. We have seen headlines in the past few days about directors resigning, despite continuing to deny any wrongdoing. I always love that. The royal commission has heard that AMP was forced to confess that it made almost 20 false or misleading statements to the corporate regulator regarding fees for no service that they applied to customers after their financial adviser retired. This was a conscious policy taken by the company to charge customers fees for 90 days after they no longer were receiving any service. It's shocking that this would occur at all, but it is more shocking that it was a policy of the company and known by those with authority within the company.

AMP is not alone in this misconduct. The Commonwealth Bank's financial advisers had been charging dead clients for financial advice—no complaints from those customers, obviously!

In one case, the adviser knew that the client had died in 2004 and continued to charge service fees for a decade after the client's death. Again, this was not an isolated case. There were many former clients who were deceased who were being charged service fees for years after they had died.

In other evidence to the royal commission, we heard that home loans were being approved based on fraudulent material provided by brokers. There were real consequences of this behaviour. In one instance, a family had already paid out significant funds to the builder and had their home loan collapse due to the misconduct of the broker. At the same time, the family was facing the devastating loss of their baby. These are real families with real lives. These are real tragedies, with people being treated as playthings by the financial sector. Claims have been made that NAB staff accepted bribes of $2,800 in order to look the other way and accept loans based on fraudulent documents. NAB staff were incentivised to engage in this misconduct by bonuses that were available to them if they reached certain loan targets. I would point out that I don't begrudge the poor staff, who were often held to ransom rather than incentivised, I would suggest, by their bosses and supervisors.

I thank the Finance Sector Union and the union movement generally for pointing out some of the flaws built into these remuneration systems. The banks and their staff have been getting richer at the expense of ordinary Australians, many of whom have been left devastated. Ordinary Australians have lost their homes, ordinary Australians have been left bankrupt and ordinary Australians, I'm sad to say, have even taken their own lives—all because of the exploitive lending practices and just plain greed of the big banks. The conduct of banks and the financial sector affects each and every one of us. We all have those constituents.

It's impossible to go through life and not have some relationship with a financial institution. If you hold a bank account, use a credit card, apply for a home loan, hold insurance or are a member of a superannuation fund, you'll have a commercial relationship with a financial institution. You rely on your bank or financial institution to act responsibly with your money and to do so in your interests. We've all assumed up until now that that is what they were doing. The sad reality that we're now all aware of, thanks to the banking royal commission, is that they've been playing us for mugs. Even worse, they've been playing us for mugs and the Turnbull government has been protecting them.

Prime Minister Malcolm Turnbull was brought kicking and screaming to having a banking royal commission. He didn't want it. His team didn't want it. They tried everything they could to avoid it and, in the end, they only called it when the banks told the Prime Minister to do so. We know that the Turnbull government will always look after the big end of town. His background is in banking, as it is for so many of the frontbench.

Labor will do all it can to make sure that ordinary Australians have the protection they need, that the culture of misconduct in banking is stamped out and that our financial institutions serve the nation, not the interests of a greedy few. Labor supports this bill. Labor support our corporate regulator, ASIC, and we wish them well. Labor will always support measures that assist ASIC to operate effectively and efficiently.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (ASIC Governance) Bill 2018. I start by acknowledging the commitment of the previous speaker, the member for Moreton, and I note that today we will also hear from the member for Herbert—both Queensland representatives who are firmly on the side of the consumer and customer, unlike this government, which is on the side of big banks. I think it is telling that, when you look at the speakers list today, you see that not one member of the government is getting up to defend this legislation. Perhaps they're not interested. Perhaps they're not interested in hearing the true facts regarding the impacts and how we can improve the situation and protect consumers.

The Treasury Laws Amendment (ASIC Governance) Bill 2018, as we know, concerns the governance of ASIC and the direction of the Governor-General to appoint a second deputy chairperson of ASIC. As we heard from the member for Moreton and our spokesman, Labor do support the bill. We commend the government for legislating to assist ASIC to better operate as an effective and efficient regulator. But—and it's quite a big 'but'—it has only come after years of cuts to and attacks on ASIC by this very same government. It took the teeth out of this regulator, which resulted in thousands and thousands of Australians being taken advantage of. We are only seeing this now because of the advocacy and strong representation by the Leader of the Opposition, by the shadow Treasurer and by the shadow finance minister, who called for a royal commission into banks and financial services, to protect consumers and to protect customers.

It's important as part of today's debate on the Treasury Laws Amendment (ASIC Governance) Bill to add a little more context as to where we've come from and why we're here today. I want to place on record the facts. In reading through the legislation today and reading through the statements by the minister—after taking $120 million in budget cuts from ASIC over four years, and let's acknowledge that this began in 2014—the government want somehow to be congratulated for their belated attempts to fix the mess they started four years ago. Four years ago we saw the introduction of the cuts to ASIC; we're now fast forwarding to 2018, where we've got a bill to somehow improve and strengthen the powers of ASIC.

In response to these savage cuts, the Australian Securities and Investments Commission said in its annual report released back in October 2014 that the impact of the $120 million in budget cuts would mean its ability to fulfil its role would be 'substantially reduced'. The report included estimates of reduced surveillance staff levels in 2015 for every focus area bar one. We know that these changes conveniently came at a time when the government attempted to change rules that would have allowed financial planners with six years experience to give tax advice. We know how that movie ends; it's not a happy ending.

The writing has been on the wall for some time as to what the cuts and changes would mean for ASIC, and what that means for Australians. At the beginning of 2016, Choice said:

Cuts to ASIC funding … have significantly reduced its oversight capabilities and opened the door to more unscrupulous activity in the financial services sector.

The Choice analysis found that, because of the cuts and subsequent reduced resources of ASIC, 751 fewer surveillance activities took place in just the two years since the cuts took effect in the 2014 budget. It also found a 57 per cent decrease in the number of actions against potentially misleading or deceptive promotional material. We are dealing with a new measure today, which, as I acknowledged, as part of this legislation, is a step in the right direction. But, in light of recent events, this quote from Choice's analysis perhaps sums up the government's approach to ASIC:

We rely on ASIC to monitor the likes of CBA, NAB, ANZ and Macquarie Bank and ensure consumers' interests are protected. ASIC is doing a lot with very little. However, with $120 million being ripped from the regulator over four years it's undergunned against some of the world's most powerful financial institutions.

So it makes sense that, if you as a government decide to reduce funding, reduce resources, reduce the powers and surveillance of an oversight body, there are consequences. And there have been consequences.

The government has since moved to restore only some of this funding to ASIC, after we began calling for the royal commission, of course. Even then, it was so they, I guess, could look like they were doing something and keep running a protection racket for the banks. However, the impact of those cuts on ASIC's capabilities cannot be undone so easily. These were cuts to the capability of the corporate regulator and a free pass to financial sector misconduct. The cuts are consistent, in my opinion, with the attitude that saw the government spend 601 days bitterly resisting the urgent need for a royal commission into the banking and financial services sector, as we've heard from previous speakers in today's debate. Now, let's be clear on this. Members of the government—from both the frontbench and the backbench—week after week, month after month, would talk on Sky News, talk in front of cameras and talk in front of the media, saying, 'We don't need a royal commission.' They were proud of it. They were patting themselves on the back. They were clinking champagne glasses, meeting with the top end of town and saying, 'Don't worry: we're going to hold the tide, we're going to fight them every step of the way. We're not on the consumer's side; we're on your side.' That's what the government was saying, right from the backbench up. They were going into the boardrooms of some of the most powerful institutions in the country, saying, 'It's okay. The Labor Party, the broader community, consumer action groups, the victims—no-one is going to listen to them. You've got the big talking stick and we're going to cuddle up to you and sidle up to you. We've got your back.'

What happened? Community protests happened. The stories were told of people being ripped off right across the country. We saw members of the government go a bit wobbly. Who can remember that great lion in the north, George Christensen, the member for Dawson—a little pussycat when he comes here. 'I'm going to cross the floor. I'm going to bring the government down.' Remember all of that? The member for Herbert was in there fighting for consumers and for the customers of Herbert. The member for Dawson, allegedly, in the Daily Mercury up there, was beating his big chest, saying 'I'm going to sort the banks out'. He comes down here, a little pussycat—or rather a little mouse running down here—he gets slapped over the wrist by the Treasurer, by the PM's office and by the Deputy Prime Minister—whoever it was back then—who said, 'You know what—you're not going to cross the floor.' Then he lied to the media or misled the media.

Luke Howarth (Petrie, Liberal Party) Share this | Link to this | Hansard source

Order! You have to be careful with reflecting on members. Make sure you use their correct titles. The last word you used should be withdrawn.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I withdraw.

An honourable member interjecting—

I know the member for Mackellar is very—we know who you are. So do the banks. We know that when it came to action, consumers and customers could not be relied upon. On that particular note, I want to put something on record regarding this piece of legislation today and the further influence and strengthening of powers that it will give to ASIC in terms of its governance structure. When the rubber hit the road a matter of weeks ago, and we saw the first tranche of victims coming forward to the royal commission and telling their very powerful stories about how the banks had treated some customers, the Minister for Revenue and Financial Services appeared on ABC's Insiders. In describing the minister's refusal to come clean, media reports at the time described it as a disastrous interview. We've all seen it on our social media feeds, with the minister refusing to give a straight answer to a very simple question: was the government wrong to stall on calling a royal commission into the banks, given the appalling evidence that we had heard just that week from consumers and customers? We note that in the media reports in the article on five occasions the minister failed to answer questions about her past opposition to this inquiry. That totalled 10 unanswered questions on the government's delay on implementing a royal commission, even though in July last year the minister responsible was quoted as saying there would be 'no benefit to customers'. This is the person in charge of financial services in this country, who proudly said a year ago that we didn't need a royal commission because it would be of no benefit to consumers. Talking about withdrawal and apologies, I think it's about time that the minister came into this place and apologised to the consumers and customers for not listening and not caring about them.

We know there can be no doubt whatsoever that this government was wrong to delay the royal commission into the banks as long as it did, and in doing so—let's be clear—allowing Australians to be ripped off. It may not be enough to fix the problems of the past, but it's a start. Having a second deputy chairperson will support ASIC in engaging with its stakeholders to better communicate its role, its priorities, and how its resources are allocated. It will provide greater flexibility for the commission to determine how it undertakes its oversight and other governance functions. But given the shocking evidence presented to the royal commission so far, it's clear we need strong and effective regulators.

In recent times, ASIC's role has been expanding. ASIC has new direction powers to strengthen its oversight of the new one-stop shop dispute resolution body, the Australian Financial Complaints Authority. I want to note that the government has also proposed that ASIC be responsible for the management of expected additional disclosures following reforms to whistleblower laws. And ASIC may soon also have new responsibilities for administering the new Asia Region Funds Passport regime.

As Australia's corporate markets, financial services and consumer credit regulator, we need ASIC to operate as effectively and as efficiently as possible. That's why, today, Labor will be supporting this bill. This is more than can be said for the member for Warringah, who, instead, has called for everyone employed at ASIC to get the sack. That's right: the member for Warringah, after hearing about the startling revelations and misconduct of the banks, took aim not at those who'd committed the horrid acts but instead at the regulator, who the member for Warringah, when he was Prime Minister, gutted to the tune of $120 million. Speaking on the matter, the member for Warringah said:

… all the existing regulators should be sacked and people who are much more vigilant and much less complacent go in their place.

This level of hypocrisy within the Abbott-Turnbull government is astounding but not surprising. This is the same member, who, as I said, slashed $120 million from ASIC's funding over four years when he was Prime Minister, when he was the then leader of the government, in 2014.

Those opposite have a long record of turning a blind eye to what is going on with financial misconduct in the financial sector. We should never ever forget the coalition's opposition to the previous Labor government's Future of Financial Advice, or FoFA, laws and their attempts when in government to reverse them. The FoFA reforms gave ASIC important new powers to rein in poor financial advice. In opposition, the coalition voted against FoFA in the House and voted against FoFA in the Senate. When they got into government, the coalition tried to gut FoFA by legislation and then regulation. I'm proud to be part of a party that fought tooth and nail to stop this, and it was lucky that Labor prevailed in the Senate in stopping this from happening.

We know that when it comes to the protection of consumers, the rights of consumers, there is one side of politics that will always call out misconduct, that will always call out people being ripped off, and that is the Australian Labor Party. We are the party that has fought tooth and nail to deliver a royal commission, standing shoulder to shoulder with consumers and customers in this country. It took this government months, if not years, to deliver a royal commission. Now we need justice for everyone in Australia.

Cathy O'Toole (Herbert, Australian Labor Party) Share this | Link to this | Hansard source

I stand here very happy to support this bill with my Labor colleagues, and I note the excellent contribution by the member for Oxley, Milton Dick. 'Greedy', 'dishonest', 'mistrust', 'dodgy', 'criminals'—sadly, all too often, these are the words we hear used to describe Australia's financial and big business sector. As the member for Herbert, a community that has deeply suffered because of corporate greed that includes the likes of Clive Palmer and Storm Financial, I ask: is it any wonder that the financial sector's reputation is damaged in my community and around the nation?

Time and time again, newspapers and social media feature articles about the corporate greed that is rife in this country. The royal commission into banking—a commission that, by the way, the Turnbull government didn't think we needed to have—has highlighted the lengths and depths that the finance industry is prepared to go to to make money: practices that promote the notion that the end justifies the means regardless of who gets hurt along the way. As we all know, thousands of people have been badly hurt and damaged. The royal commission has revealed just how fast and loose the Australian banks have played with Australian families' and workers' livelihoods. We have witnessed bank bosses who were aware of widespread fraud but did absolutely nothing. We have witnessed banks and financial services charge for non-existent services and then lie repeatedly to the Australian Securities and Investments Commission about their practices. This behaviour is deplorable, it is disgusting, and it is led by pure corporate greed at the expense of innocent people.

But none of what the royal commission has unearthed is news to Australian families and workers, especially those who have been impacted. We have known for years about the deceit and destruction that the victims have experienced, because they have been telling us. Sadly, this government just would not listen. The reports, the surveys and the pleas from the victims begging the LNP government to do something have been there for the last six years.

This government has chosen to do nothing but ignore Labor's calls and fight against every opportunity to do something to end this disgraceful situation. The evidence has been there all along. In 2014 PricewaterhouseCoopers released a report titled Corruption: from the boardroom to the backroom. Surely, the title of the PwC report is a dead giveaway as to what the it would include. Obviously, it wasn't as clear to those in government, the elected representatives who sit opposite to me, because they chose to do nothing. Allow me to enlighten those members.

The report found that 50 per cent of Australian organisations experienced white-collar crime in the last two years, from the date of the report's release. Of that, 47 per cent suffered more than 10 fraud incidents over that time frame. Of the 57 per cent who were victims of white-collar crime, one third of organisations lost more than $1 million. If you think it would be worse elsewhere, you are very wrong. More Australian organisations have reported significantly more white-collar crime than our global neighbours. Just 32 per cent of countries in the Asia-Pacific region describe themselves as victims of white-collar crime, compared to Australia's 57 per cent. It is no wonder, when you look at the toothless tiger laws for white-collar criminals.

People who commit white-collar crime in Australia are getting off lightly compared to those found guilty of similar offences in other countries. Let's compare and contrast. People who provide financial services without a licence in Australia can only be fined up to $34,000. In contrast, people guilty of the same offences in the US face a maximum fine of $5.6 million. In the UK, the fine is unlimited. The maximum civil penalty in Australia for giving inappropriate advice is $200,000 while in the UK the fine is unlimited and in Hong Kong it is the greater of $1.4 million or three times the benefit gained by the wrongdoer.

Studies show that individuals who break corporate rules in the US may have prison sentences of up to 20 years. In Australia, and most other jurisdictions studied, the maximum prison term is 10 years for criminal penalties such as fraud and insider trading. The maximum prison term for providing financial services without a licence in Australia is just two years. On top of imposing fines and prison terms, regulators elsewhere can remove financial benefits that wrongdoers have obtained through illegal profit or avoided losses. ASIC does not have that power, although it can ask other agencies to bring an action to confiscate the proceeds of crime. The relatively low fixed fines that ASIC can impose and the fact that it cannot remove the proceeds of crime itself means that wrongdoers may still profit from their conduct and not be deterred by the penalties. ASIC is not to blame for this, as they have been screaming at the top of their lungs for harsher penalties for many years.

Over the last two years, former commissioner Greg Medcraft has made numerous calls and very strong statements about the problems occurring with white-collar crime in Australia. He has stated:

The penalties, particularly civil penalties, in Australia for white-collar offences are basically not strong enough, not tough enough. All you're doing is giving them a slap on the wrist [and] that is not deterring people.

He said you have to 'lift the fear and suppress the greed'. There you have it: comments clear as daylight from the person who knows, lives and breathes these corruptions all day, every day.

In fact, Mr Medcraft has gone a step further. Last year he called Australia a paradise for white-collar crime. On top of the fraud, deceit, tax evasions, money laundering and lies there is a new business model being used by these greedy corporations. That business model is wage and superannuation theft. This is the latest threat for working Australians. Instead of a perpetrator climbing in your window at night to rob you, businesses are instead robbing workers' back pockets. Almost every single day I am meeting a local Townsville resident who is owed either wages or superannuation. At a mobile office a couple of months ago, the entire staff of a retail centre stated that they were affected; they were owed both wages and superannuation. There are people in the Herbert community who work in the hot sun all day, six days a week, as tradesmen, who are owed over $100,000 in unpaid wages accumulated over a number of years. Herbert has the highest unpaid or underpaid superannuation in the entire state of Queensland, with more than 22,000 people owed money that totals over $53 million.

Some of the people affected are textile workers in Townsville who have not yet been paid their superannuation payment for more than four years. Some of these workers are almost 60 years of age; they are close to retirement, and they want and desperately need their superannuation as they are not wealthy people. Two weeks ago, I stood with the textile union and workers to call out the dodgy practices and unpaid superannuation impacting on local workers. These are people who haven't been politically active previously but are standing up and fighting a system that has allowed this sort of behaviour to occur. They are standing up and fighting back against the Turnbull government, which just does not seem to care about them. I believe Gordon Gekko, an infamous movie icon who represents the epitome of corporate greed, said it best in the movie Wall Street: Money Never Sleeps, where he said, 'Greed is good. Now it seems it's legal.' Given what has been revealed in the royal commission hearings, this quote does appear to be 100 per cent correct. If there are not effective laws to punish white collar criminals then they will continue to get away with robbing Australian families and workers. If there aren't the resources in the Australian Securities and Investments Commission then there is no-one to police these crimes. And if there aren't the resources in the Australian Taxation Office then there is no-one to make these organisations pay outstanding superannuation. But instead of the Turnbull government investing in resources for ASIC or resources for the ATO, they are making massive cuts. The Turnbull government has cut 110 jobs from the ATO's Townsville office. That's not only local jobs; that's resources for investigating dodgy white-collar criminal activity.

Once again, the former commissioner for ASIC, Greg Medcraft, has called for more resources and support from the Turnbull government, when he said: 'If we want to react faster then having more resources to be able to do it is important.' None of this is news for the Turnbull government. Whilst the Turnbull government is making cuts and underfunding the organisations that are there to police and protect families and workers from these dodgy companies and practices, this government is rewarding corporate greed by offering an $80 billion tax cut to big business and the banks. How out of touch can you be? On top of the cuts and ignorance, the Turnbull government is demonising the one entity that has always supported workers and has always looked after Aussie workers and their families and, of course, I am referring to the mighty union movement.

Yesterday, I was proud to march alongside my union comrades to celebrate Labour Day, a day when we remember the battles fought and won by Australian workers and unions. There have been many battles fought by my comrade predecessors, but none have been as tough as the challenges that workers and unions face today—the challenges thrown up by this out-of-touch, top-hat Turnbull government, a government that has no concern for Australian workers and their families, and a government that will not recognise that families are struggling every day to make ends meet.

I will fight against the Turnbull government's cuts, especially those to the ATO in Townsville. I will stand up for workers who haven't been paid their wages and superannuation, and I will continue to fight—

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

A point of order.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

Order!

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

My point of order is that the member is not discussing the subject of the bill we are considering.

Cathy O'Toole (Herbert, Australian Labor Party) Share this | Link to this | Hansard source

I'm not actually.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

It's the second reading. I will listen very carefully. Thank you, Member for Mackellar.

Cathy O'Toole (Herbert, Australian Labor Party) Share this | Link to this | Hansard source

I will continue to fight for Australian workers and their families because I have had enough of the growth of corporate greed in this country. There is much more work that needs to be done, and it starts with the discretion to appoint a second deputy chair of ASIC. It starts with putting an end, once and for all, to the savage cuts to public sector jobs and worker penalty rates. Now it is time to get rid of corporate greed once and for all, because the citizens of this great nation deserve nothing less.

Tim Watts (Gellibrand, Australian Labor Party) Share this | Link to this | Hansard source

The Treasury Laws Amendment (ASIC Governance) Bill 2018 makes a series of changes to the governance of ASIC. For example, it allows for the appointment of an additional deputy chairman of ASIC. And it's not beyond time that we see change at ASIC. It's not beyond time that we see change in the enforcement of Australia's corporate laws. We know that ASIC sits at the heart of preventing the kinds of scandals that we've seen at the royal commission that is being held in Melbourne as we speak. We know that it's important because the Treasurer told us. He told us for 600 days that there was no need for a royal commission into the banking and financial sector in Australia because we had ASIC, a corporate watchdog that was 'a tough cop on the beat'.

What is the result of it? We've seen this government get every call wrong when it comes to banking and financial services regulation, and they have made the wrong calls because they have got the wrong priorities. The government, led by Prime Minister Turnbull, are in it for the big end of town. They are in it for the banks, not for rural Australians. They make the wrong calls because they have got the wrong priorities. That's why they fought this royal commission for 600 days. It's why, even in the face of ongoing shocking revelations and disclosures from members of the public to representatives in this parliament, when the government were dragged kicking and screaming to initiate this royal commission, they made it very clear that they didn't want it to happen. We heard it called unnecessary, a populist whinge and reckless. And on the day they caved in and initiated the royal commission, it was called regrettable.

Since then we've seen the most shocking revelations of rorts and rip-offs in the banking and financial sector in Australia, new revelations that we did not know about before this royal commission was initiated. We have heard revelations about banks charging fees to customers who they knew were dead. We have heard about banks charging customers fees for services they didn't provide, services that they knew they weren't providing. We've heard endless stories of dodgy financial planners giving self-interested advice and ripping off their clients. We have heard stories about financial planners impersonating their clients on the phone to superannuation funds. We have heard them giving advice to switch to a super fund associated with them. That would have incurred exit fees. In one example that was heard at the royal commission, that would have cost one man a quarter of his superannuation in exit fees. Another person was given advice by her financial advisor to bundle her superannuation into a self-managed super fund in a way that would have cost her $500,000. It would have helped the celebrity financial planner who gave her the advice to do that. Half a million dollars! We've heard about it being common practice at NAB to falsely witness documents inside the company, documents dealing with the life savings of Australians. We've heard about one in 20 pieces of financial advice coming out of ANZ being 'inappropriate' because the advice was either in the self-interest of the financial planner or they didn't appropriately investigate other options for advice.

Why do I flag these issues? I flag these issues because, in every one of these cases I have talked about, the misconduct occurred during the 600 days that the Turnbull government was delaying the royal commission. It wasn't historical conduct; it was happening while the Turnbull government said everything was fine. It was happening while we had that 'tough cop on the beat' protecting Australians—ASIC, the subject of the bill before the House today. Despite this, the government continues to refuse to apologise for this delay. We've heard Prime Minister Turnbull say it was a political mistake.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

Order. The member for Mackellar on a point of order.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

We are discussing a bill regarding ASIC's governance, not the banking royal commission.

Lucy Wicks (Robertson, Liberal Party) Share this | Link to this | Hansard source

The member for Gellibrand is in order. The question before the chair is that the amendment be agreed to. For the benefit of the member for Mackellar, I'm happy to provide a copy of the amendment. The member for Gellibrand.

Tim Watts (Gellibrand, Australian Labor Party) Share this | Link to this | Hansard source

I encourage the member for Mackellar to learn some parliamentary procedure, and to read the second reading amendment, to get across what is in this debate. Even the Treasurer said we didn't need the royal commission because of ASIC, the subject of the bill before the House today. Prime Minister Turnbull still won't apologise for delaying this royal commission. He said it was a political mistake. So he gets that it has hurt him. The politics look bad for the Prime Minister. As a politician, yes, I can sympathise with some political pain, but what about the scandals that hurt Australian consumers? They are the ones who have suffered. When is the Prime Minister going to apologise to them? When is the Prime Minister going to apologise to the one Australian who lost a quarter of his superannuation, based on dodgy financial advice from AMP, during the 600 days that the Prime Minister delayed this royal commission? Where is his apology? I'm sure he doesn't care about the political damage that the Prime Minister has incurred. That's not his priority. They make the wrong calls because they have the wrong priorities and the wrong values.

The governance problems we have seen with ASIC—some of which this bill is trying to address—are a function of the Turnbull government's approach to ASIC. What has ASIC done? When ASIC appeared in front of the royal commission, we found that it had 'never' pursued civil penalties against a financial adviser for dodgy advice. It has pursued only one criminal prosecution of a financial advice licensee this decade. This isn't a coincidence. This is the result of the policy framework put in place by the Turnbull government for ASIC.

After the Abbott-Turnbull government were elected, in the 2014 budget—that was a cracker; do you remember that one? It went well!—they gouged $120 million from ASIC's budget. In their statement of expectations to the regulator, they told them to 'minimise compliance costs for business', and they did this despite ASIC warning the government repeatedly that their proactive surveillance would be substantially reduced due to these cuts. That's the governance framework for ASIC. If you take money away from them, if you reduce their headcount, you reduce the ability for that tough cop on the street to be effective.

The Turnbull government only started to restore some funding to ASIC after Labor began calling for the royal commission. It was only designed to make it look like they were trying to do something, to stave off the royal commission. Even restoring the funding to ASIC was a way of trying to protect the banks. But the damage was already done. The impact of these cuts on ASIC's capabilities can't be reversed overnight. Inside ASIC, you build up that competence, that capability, that institutional knowledge of enforcement, over time. They ripped it out. Now we've got to put it back. These cuts were to the capability of the corporate regulator and gave a free pass to the financial misconduct we've seen in the royal commission.

Another area where it's really clear that this enforcement framework has just been completely misunderstood by the Turnbull government came with respect to the Labor Party's Future of Financial Advice reforms. This was the other plank to the way that the Abbott-Turnbull government dealt with ASIC when it was elected. It cut its funding, told it to minimise compliance costs for government and tried to rip the guts out of the most substantial consumer protections for Australian recipients of financial advice. Labor's Future of Financial Advice reforms were critical, because we know, from the evidence at the royal commission, that they were changing behaviour at the banks. The Future of Financial Advice reforms only came into force in the first year of the Abbott government. They were introduced by the previous Labor government but they only came into force under the Abbott government. We know, from the evidence of the banking executives at the royal commission, that they were changing behaviour. When you change the law to require financial advisers to act in the interests of their clients, not themselves, guess what: their behaviour changes. At ANZ they changed their remuneration practices. They changed the way they give bonuses, not only to financial advisers but to the executives supervising them, saying: 'The law requires us to put the customer first, so maybe let's start doing that, as a corporate citizen. Maybe let's start paying people on the basis of this advice.'

The FOFA reforms also gave ASIC important new powers to rein in poor financial advice. They banned conflicted remuneration. They instituted a duty for advisers to act in the best interests of clients and created an obligation for advisers to renew ongoing fee arrangements with clients. This is ground zero of the financial advice scandals that we've seen in the royal commission, and the Abbott government wanted to remove them. They wanted to get rid of the protections that were there—such as they were; we've seen how inadequate they were from the evidence in the royal commission. They have made every wrong call, because they have the wrong priorities. The only reason that we've retained the obligation for financial advisers to act in the interests of their clients is that the Labor Party wouldn't cop these changes. We went into bat for the Australian public when the Abbott-Turnbull government was going into bat for the big end of town.

At this point in time, after 600 days of delaying the banking royal commission, after an extended period before that of gutting the corporate oversight regime, the corporate law enforcement regime governing corporate Australia, it's clear that we now have a crisis of trust in the Australian public for corporate Australia. We need to restore confidence in the banking sector. Our financial system depends on trust and confidence. That's what banking is about. Sunlight is the best disinfectant, and the royal commission into the banks needs to be able to run its course. It needs to air all this dirty laundry; we need to get it out there. And those who have presided over misconduct need to take full responsibility. When the commissioner of ASIC, Greg Medcraft, warned that there were subcultures operating within the banks that were not meeting community expectations, you knew that the system had a problem. Mr Medcraft warned against people characterising misconduct in the banks as 'a few bad apples' and at the start of 2017 he said:

Stop saying it's a few bad apples. At some point you've got to look at the damn tree and say, what's wrong with us as an organisation? That's what I am saying to these guys.

As Australia's corporate markets, financial services and consumer regulator, we need ASIC to operate as effectively and efficiently as possible, but we also need corporate Australia to take some responsibility for the scandals that we've seen. I'd like to see some shame. It's not asking too much, with the revelations and scandals that we've seen in the royal commission. It's not asking too much for the Australian public to see accountability, to see some responsibility taken. If I were a board member of these companies, I'd be ashamed. I'd take responsibility; I'd resign. I wouldn't fluff over it with euphemism. I'd take responsibility.

I want to call some attention to AMP's media release on 30 April, 2018 advising of AMP chairman, Catherine Brenner, 'stepping down' from her role as chairman for her company misleading ASIC on 20 occasions and her involvement in an 'independent report' into this behaviour. I want to compare that with the statement of Steve Smith, the Australian test cricket captain, following his one-year ban for Australian cricket's ball-tampering scandal, just to illustrate the corporate rot that has beset corporate Australia and how to respond to it. The lack of shame on AMP's part is astounding. Steve Smith started his statement after the ball-tampering scandal with the words, 'I'm sorry'. In AMP's statement, the board did not take direct responsibility for misleading ASIC; in fact, it cleared itself—it said the board had not engaged in inappropriate conduct and that the chairman was just stepping down. I don't know why. They blamed the legal counsel for it. AMP talk about being disappointed in the conduct of others and euphemistically talked about the chairman stepping down. They say that the general counsel and company secretary will 'leave' the company. No-one's getting sacked here. No-one's being held accountable. Excuses are being made. Steve Smith showed empathy for those affected by his actions, declaring, 'I now understand the consequences. I'll do everything I can to make up for my mistake and the damage it has caused.' AMP states, 'The board is satisfied they did not act inappropriately.' Where's the accountability? Where's the shame?

We need to change the culture of corporate Australia. Some of that comes from the governance reforms we see here with ASIC. But it also takes an intrinsic change in the way corporate Australia does business. The game of mates has got to stop. The covering up for misconduct has got to stop. The excusing of oversight of governance arrangements within companies—where a company can lie to the regulator on 20 occasions, where they can knowingly charge fees for services that aren't being provided, where they can doctor a supposedly independent report to remove references to executives—will not restore confidence in the Australian corporate sector. We need a tough cop on the beat. We need ASIC to start doing its job as an external oversight, but what about governance inside the companies that it's overlooking? That's the change that we need to see in corporate Australia.

Clare O'Neil (Hotham, Australian Labor Party, Shadow Minister for Justice) Share this | Link to this | Hansard source

I want to start by congratulating the member for Gellibrand on the comments he has just made. This member of parliament has taken time out of his incredibly busy schedule to actually sit through some of the hearings in the royal commission. I must say, I wish more of those on the other side of chamber were taking an interest in the goings-on of this royal commission.

A huge amount is going on in Australian politics at the moment. We have High Court decisions and a budget, but the thing that people stop me in the street to talk about is the royal commission. I don't think there is a full appreciation across this parliament of the depth of anger and dismay that exists amongst Australians, as the culture of unbelievable greed and corporate misconduct is being revealed in this royal commission. The member for Gellibrand, who is going to these hearings, understands what is going on and the way it's affecting our constituents. I congratulate him on his passionate speech and the interest he's taking in this issue.

Perhaps unsurprisingly, I will be returning to the subject of the royal commission, but I want to make a few comments briefly about the substance of the bill before us today, the Treasury Laws Amendment (ASIC Governance) Bill 2018. As you've heard from previous speakers on the Labor side of parliament, we are very happy to support this bill. The bill amends the ASIC Act to provide the Governor-General with the opportunity to appoint a second deputy chairperson of ASIC. We note the government has announced its intention to appoint Mr David Brennan QC to this role. Labor supports the addition of a second deputy chairperson to ASIC. We believe this is important to assist ASIC's operation as an efficient and effective regulator. It will also provide a bit more flexibility to the organisation in how it divides work between its different chairpersons and deputy chairpersons.

I think it is an opportune time for us to be looking at governance reforms to ASIC, because the evidence that has been presented to the royal commission, if nothing else, shows us that there is a crucial and dire need in this country for strong and effective regulation of our corporate sector. ASIC plays a crucial role there. ASIC has a new directions power to strengthen its oversight of the new one-stop shop dispute resolution body, the Australian Financial Complaints Authority. We also note that the government has proposed that ASIC be responsible for the management of expected additional disclosures, following reforms to whistleblowing laws, and for administering the new Asia Region Funds Passport regime.

As I said, it is crucial that, at a time like this, we look at those opportunities to improve how ASIC is working. I don't think I'm alone in this chamber in believing there will be more substantial reforms down the road to how ASIC is functioning. If anything, it's a little bit disappointing that only a pretty minimalist approach is being taken with the reform before us. It is a good, straightforward reform coming through the parliament, but through the royal commission we are seeing an organisation buckling under the incredible extent of this culture of greed and corporate wrongdoing in financial services. The very sad reality for us as parliamentarians is that ASIC has not been approaching these difficulties from a position of strength. The truth is that, since the Abbott government was elected, very significant cuts have been made to ASIC. The government moved to restore some funding to ASIC, but that was only after this push to support a royal commission into financial misconduct came from within the community and the Labor Party. Those on the other side of the House spent 601 days running a protection racket for the banks against the royal commission. They had to be seen to do something about the problem that was so evident to just about every other Australian, and I think giving some additional funding to ASIC was somewhat of a sop to make it look like there was some attitude of practical activism to try to deal with this problem.

Coming back to the banking royal commission, I will speak about the amendment put by the member for Kingsford Smith. When I returned to Canberra this week, it was abundantly clear to me, having talked to my constituents out in the community, that the level of unspeakable anger about what is happening in our banking sector is not understood across the chamber. Labor members of parliament today are lining up to speak about the bill before us because, I know, they want to address the intense feelings their constituents have about the royal commission. One of the things that are very distinctive about the royal commission into financial misconduct is that in a sense all Australians are victims of it. We have victims at the lower end: people like me and many of my colleagues here who have been paying fees for things that shouldn't have had fees attached to them, and all the other bits and pieces that have gone on for ordinary Australians, right up to people who have had catastrophic financial impacts—people who have lost their homes. In the royal commission we heard about one extraordinary situation where a very well-educated woman was given advice that she should roll over her super into a self-managed super fund. That single move would have cost her half a million dollars. As I walk the streets in my community I've got people coming up to me trying to tell me their stories. I'm very proud to say that Labor is 100 per cent behind this royal commission. We need to give this royal commission the time and resources it needs to get to the bottom of these incredibly deep-seated difficulties and deep-seated problems of culture within financial services.

I want to share some of the examples that I have read about and heard about through the royal commission that I see as most egregious and most emblematic of some of the deep-seated problems within this sector. I am quoting from an article by Dan Ziffer which was reported in ABC news. It's a report on some of the first public hearings of the banking royal commission. These are some of the things that came out just in those first few days: cash envelopes filled with bribes, problem gamblers getting credit extensions, and a bank manager transferring $35,000 directly to foreign scammers.

I want to spend a bit of time talking about the National Australia Bank, because—my goodness!—they are one of the organisations that has come into focus, shall we say, in the royal commission. During the hearings on some of the issues facing the National Australia Bank we heard about staff being involved in an alleged bribery ring covering multiple branches; forged documents; fake pay slips and Medicare cards; and bribes being paid in cash to secure loans as staff responded to an incentive program to sign up new customers. I am quoting from an article from Gareth Hutchens in The Guardian. I want to pause on this incentive program that was created by the National Australia Bank to sign up new customers. It was called the introducer program at the National Australia Bank. The bank decided that it would pay ordinary people—not financial experts, but people such as gym instructors—commissions for referring strangers to the National Australia Bank to ask for home loans. What could possibly go wrong?

I want to really make this clear. What we're talking about here is a bank that paid ordinary people with no financial expertise money to encourage other Australians to invest hundreds of thousands of dollars with a bank to make probably the biggest financial decision they'll ever make in their life. They did this through this dodgy incentive scheme that was paid to people such as gym instructors. More than $24 billion in home loans was lent by the National Australia Bank under this scheme between 2013 and 2016. I want to remind the parliament that at the end of 2017 the National Australia Bank posted a $6.4 billion profit, and in that same statement they announced that they were cutting 6,000 jobs. I want to pause there, because it's $6 billion and 6,000 jobs being cut. This goes right to the core of the issue that's in discussion in parliament this week about the effect of the $80 billion in corporate tax cuts that the government has decided to place at the heart of its economic agenda. The argument being made is that if we give companies more profit they will employ more people. I know that argument is not washing with the Australian community, because it does not conform with the lived experience they have of being in the Australian economy. How can the government ever expect Australians to buy this economic craziness when we have a company like the National Australia Bank announcing on the same day a $6.4 billion profit and 6,000 job cuts? It's just ridiculous.

I want to quote from an article called 'Banking royal commission is on track to expose a culture of greed'. This is from the Canberra Times. This recounts a situation in the royal commission where the Australian Securities and Investments Commission disciplined Aussie brokers over something called liar loans. I want to speak about liar loans because for me this is one of the clearest examples that the argument that it's just a few rotten apples, just a few people and a few financial services advisers doing the wrong thing, is completely wrong.

These liar loans are where financial advisers deliberately falsify the income of ordinary Australians to entitle them to get home loans they would not be able to properly repay—because their income has been deliberately inflated by a financial adviser who is supposed to be acting in their best interests. The commission will be taking a particular interest in liar loans over the coming weeks because it's feared these make up a third of all Australian home borrowings. So if any member of parliament talks to you about bad apples and this being some small part of the industry, remember that figure. It's possible that a third of all Australian home loans have been authorised on the basis of income that's been deliberately and dishonestly inflated by financial advisers. It's absolutely shocking.

We can't forget the Commonwealth Bank in all this because, my goodness, they have some issues to deal with. I want to mention the way that the Commonwealth Bank has approached the royal commission generally. As members of parliament will know, the royal commission has asked banks to account for their conduct by asking them to confess, essentially, to some of the things they've done wrong. The royal commission has not been given the time and resources it needs to go into these organisations on its own and search for misconduct.

What the Commonwealth Bank did, firstly, was write a submission to the royal commission which was flimsy. It was too brief, absolutely. The counsel assisting the submission talked about it being a 'high level and general approach' which 'did not disclose the totality of its conduct'. Come on, Commonwealth Bank. We are having a royal commission into your conduct. This culture of obfuscation, of turning your nose up at this parliament and the laws of this nation, has to end. The Commonwealth Bank had another opportunity to come back and give the information that's been requested by the commission. In its second submission it didn't do that. Instead, it provided an abundance of spreadsheets presenting information that was 'not in a form which made it possible to understand the type and scale of the bank's misconduct events'. This has to end. The Commonwealth Bank needs to accept that there is now some scrutiny around its activities—as there should have been 601 days ago—and it needs to understand that this royal commission will be looking into its activities and holding it to account. I have so many more articles here that I could talk about and—I can't believe it—we haven't even talked about AMP. AMP is the institution where we've seen the initial consequences of this unbelievable misconduct start to hit the fence.

I want to quickly talk about the fees-for-no-service scandal. What we understand now from the royal commission is that AMP was charging clients fees for services they did not receive. That on its own is shocking, but let's hear a little bit more. We know that in 45 per cent of those cases financial advisers were doing the wrong thing within AMP. In 20 per cent of cases the fees were not stopped for clients of advisers who'd been sacked. We'll understand more about the reason for that. In the rest of the cases, the reason they were being charged fees for services they were not receiving is that it was a business decision, to continue charging fees for no service while clients were transferred between advisers. Let's understand this. Leaders at AMP sat down and made a business decision to continue to charge their clients for services they were not receiving. This happened in a corporation in our country. It's a corporation that was meant to have been overseen by ASIC, the organisation that is the subject of the bill before us this afternoon.

We don't have nearly enough time to go through and deal with all the issues with ASIC. I'd simply make the point that despite all of the misconduct—the broken laws that we know are referred to, the counterterrorism laws which have been broken obscenely by the Commonwealth Bank—not one senior banker in this country has properly faced court in response. That's ASIC's job. So next time I talk about ASIC in this parliament I hope it's about a bill that does something a little more than make a minor change to the governance arrangements.

Ed Husic (Chifley, Australian Labor Party, Shadow Minister for the Digital Economy) Share this | Link to 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.

Chris Hayes (Fowler, Australian Labor Party) Share this | Link to this | Hansard source

I too would like to make a contribution on the Treasury Laws Amendment (ASIC Governance) Bill 2018. We on this side will always support the interests of everyday Australians. We have fought against corporate misconduct and the watering down of consumer protections. That is why Labor will support this bill. We will support all appropriate measures to assist ASIC to become more effective and efficient in its regulation of the financial sector.

This bill amends the ASIC Act to give the Governor-General the discretion to appoint a second ASIC deputy chairperson. Amending the ASIC Act will provide for two deputy chairs and that, in turn, will provide greater flexibility for the commission to determine how it undertakes its oversight and other governance functions. A second deputy chairperson will be able to assist ASIC in engaging with stakeholders to better communicate its role and priorities and how its resources are going to be allocated. Essentially, that's why Labor will support this bill.

In the wake of the royal commission into the misconduct of the banking, superannuation and financial services industry, there are certainly some big lessons to be learnt from that, including the need for strengthening the regulatory aspects of the financial sector to protect Australians. This calls for greater flexibility and increased capability to crackdown on misconduct and for adequate resourcing of the financial sector regulators. If we haven't learnt anything from the royal commission, I think we should at least acknowledge that there is that need to provide greater support for the regulator in that respect. Therefore, giving ASIC greater powers to protect consumers and rein in corporate wrongdoing means that the government can no longer be the unwitting, or sometimes witting—I'm not sure—accomplice to financial misconduct. I'll come to this a little later on but, with the benefit of hindsight and the damning revelations of the bad behaviour from banks and various financial advisers, the government has finally proposed tougher accountability regimes and making ASIC the one-stop shop when it comes to consumer complaints.

I did say that the government may be seen as an unwitting accomplice to financial misconduct. To put this in perspective, don't forget that it was the coalition government that defended the banks for far too long. The coalition have prioritised the banking sector and financial institutions over consumers—over the people. After the shocking evidence that has come out in the royal commission, it is clear that we do need better outcomes for consumers. For far too long the government has attempted to protect their friends in the big end of town and the banking sector by resisting any investigation into corporate misconduct. But don't forget that, in 2016, the Prime Minister, in resisting Labor's call for a royal commission into banking, said:

Bill Shorten's call for a royal commission into the banking industry is just another distraction, just a thought bubble … to respond to the news of the week.

I'm not sure how he would swallow that comment today.

An honourable member: That transcript's not on his web page!

It'll be on my website! As to the financial services minister, Kelly O'Dwyer's, view of the royal commission into banking, she was very succinct about it. She said, 'It will just be a talkfest.' We had ministers saying, 'It's only designed to make lawyers rich,' and the Treasurer, Scott Morrison, saying that Labor's push for a royal commission into banking was a 'populist whinge' that would not uncover anything of which the government was not already aware. So would you call the government an unwitting accomplice to poor behaviour in the banking sector, or were they really an accomplice to the bad behaviour in the banking sector? Again, I quote from the Treasurer, who said:

I think there is the great risk that if the opposition continues to engage in this recklessness that the only product of that approach could be to undermine confidence in the banking and finance system.

Let's briefly look at the evidence that's been elucidated so far in the royal commission. I know the royal commission has some time to run, and possibly will be seeking an extension of time, because it seems the commission has taken seriously the complaints lodged before it. In relation to Commonwealth Bank, the evidence so far has been that it continued to charge a customer for services that were never provided, even though the customer had been dead for 10 years and the financial adviser knew it. It charged ongoing service fees to customers despite the fact the adviser never provided any advice to any customer at all and admitted to charging customers for advice that was never provided. It's not a ringing endorsement of 'Which bank?' Don't forget: this is the system that was being protected by the Prime Minister, the Treasurer and the Minister for Financial Services.

AMP you can see in the newspapers. I'm not sure if they have anyone left on their board now. They had a few departures. An AMP financial service adviser gave advice to a couple to switch to an AMP fund, even though it would immediately cost the husband $16,000 of his retirement savings and mean higher ongoing fees and charges for his wife. The counsel assisting the royal commission said that AMP misled the corporate regulator, ASIC, at least 20 times about fees being charged for services that weren't provided. An AMP executive admitted to the royal commission that he'd lost count of the number of times the company had misled the corporate regulator about fees charged for nonservice. Finally, the barrister assisting the royal commission said that AMP should be charged with criminal offences for misleading the corporate regulator in relation to fees for nonservice.

As for ANZ, their financial adviser that was before the royal commission is now being dealt with by the police for taking over $200,000 of customer money without authority. The same ANZ financial adviser told five of his clients that they should invest their retirement savings in an investment property of which he was the sole director. On each occasion those clients lost in excess of $100,000. You might say that's just a one-off bad apple, but the ANZ as a bank turned a blind eye to these concerns about the same financial adviser. By the bank's own admission to the royal commission, the commercial interest of the bank took precedence.

In respect of Westpac, a nurse told the royal commission that she'll now have to work until she's 80, because a Westpac financial adviser told her and her husband, a truck driver, to sell their house and switch to a self-managed super fund which was totally unsuited to their needs. It soaked up tens of thousands of dollars in commissions and unnecessary premiums in respect of insurances taken out, but they lost out all round because of the inappropriate product peddled to them. With respect to National Australia Bank, apparently it was commonplace for their employees to falsely sign a document as a witness—so much so that a NAB executive complained about having their bonuses cut when it was revealed hundreds of NAB employees were involved in falsely signing documents. They actually knew about these things, and none of these self-compliance aspects were reported to APRA.

Don't forget: this all started when Commonwealth Bank was caught breaking money-laundering and terrorism-financing laws on 54,000 occasions. It has now resulted in a damning report by APRA. But, at a time when this government talks a lot about national security and border protection, we have seen one of our big four banks, one of the pillars of our financial system, on 54,000 occasions breaching money-laundering and terrorism-financing laws. There is no wonder that the public have lost confidence in our banking and financial institutions. They have lost confidence in a government that chose to defend the banks over the interests of the Australian people. This government were taken kicking and screaming to a royal commission. We can't colour that any other way. They opposed this outright, until the will of the Australian people was just so profound that they came, as I say, kicking and screaming to this position—where they predominantly wanted to protect their mates at the big end of town.

Now the Prime Minister has admitted that the Australian people were not put first. The government, quite frankly, have a great track record of not putting Australians first when it comes to these major decisions. One of the first actions taken by the coalition government when they came to power was to gut Labor's Future of Financial Advice reforms—powers which we had given to ASIC to crack down on poor financial advice, to ensure that financial advisers put the interests of consumers first and foremost in the provision of advice. The government dragged their feet in the calling of the royal commission, for fear of exposing wrongdoing within the banking sector, and it's taken a significant number of scandals to emerge for the government to realign their priorities and at least admit that they got things wrong in failing to endorse Labor's call for a royal commission.

Juxtapose that with the readiness of this government to have a royal commission into the working class of our land, a royal commission into the trade unions. The government, at every question time, at every opportunity, would recount the evidence taken by a royal commission which they spent $47 million on. And do you know how many prosecutions that wound up with? One. Against the wishes of even the royal commissioner, we had the then Attorney-General, before he darted off to Britain, extending the life of the royal commission, saying, 'You need more evidence.' The royal commissioner didn't ask for that, but the government wanted to give them more evidence, because this was a political stunt that they wanted to pull against Labor and those in the labour movement. They could not wait to have this thing extended. They wanted more and more evidence, and we got daily reports in the parliament about the issue of so-called corruption within the trade union movement. We have heard hardly a peep from the government so far about the misdeeds in the financial sector, particularly by the banks.

So the government has backflipped. It has backflipped and seen the flaws in its primary position of protecting the financial sector from further scrutiny. We do support this bill, because we think the provision of an additional deputy chair will assist ASIC in its operating efficiency and assist it to be more effective as a regulator in the financial sector.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Kingsford Smith has moved as an amendment that all words after 'That' be omitted, with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

Sitting suspended from 12:40 to 16:00