House debates

Monday, 20 August 2018

Private Members' Business

Australian Securities and Investment Commission

5:16 pm

Photo of Stuart RobertStuart Robert (Fadden, Liberal Party) Share this | | Hansard source

I move:

That this House notes:

(1) notes the appointment of the new Deputy Chair of ASIC, Mr Daniel Crennan QC;

(2) further notes that the Government invested in ASIC to give it the tools it needs to be a tough cop on the beat including:

(a) the introduction of an industry funding model to secure ASIC's funding base;

(b) a new product intervention power to enable ASIC to intervene in the sale of harmful products to retail customers;

(c) legislating to:

(i) remove ASIC employees from the Public Service Act 1999 to enhance ASIC's ability to attract and retain the best staff, and

(ii) include competition considerations within ASIC's mandate;

(3) notes Mr Crennan's appointment builds on the reforms to strengthen criminal and civil penalties for corporate misconduct; and

(4) further notes that this appointment boosts the powers of ASIC to protect Australian consumers from corporate and financial misconduct.

ASIC has a new deputy chair, Mr Daniel Crennan QC, appointed by government. He's a highly regarded Queen's Counsel. He has extensive experience in handling relevant cases that relate to ASIC's responsibility, and he will be working with ASIC to further the government's agenda in that part of the regulatory environment.

This motion today before the Chamber is to further note that there is an industry funding model to secure ASIC's funding base; that there are new product intervention powers; that we are legislating to remove ASIC's employees from the Public Service Act to enhance its capacity to attract the best staff; and that we are legislating to include competition considerations within ASIC's mandate. This motion further moves to note that the reforms strengthen criminal and civil penalties for corporate misconduct and notes the boosting of powers for ASIC to protect Australian consumers from corporate and financial misconduct. These are outstanding initiatives and further strengthen the regulator.

Industry funding for ASIC ensures that the costs of regulation are borne by those that have created the need for it. It incentivises compliance. The introduction of the ASIC funding model or industry funding model was a key recommendation of the Financial System Inquiry, and it's a critical component of the government's reforms to strengthen ASIC and better protect Australians.

The government is also moving forward with progressing important reforms to ensure that financial products are targeted and sold to the right customers. The days of product sellers deciding what products they want and squeezing all customers into the same size are coming to an end. We've just concluded a second round of consultation on draft legislation for design and distribution obligations, and product intervention power. These will ensure that financial products are targeted and sold to the right consumers and, where they're inappropriately targeted or sold, ASIC will be empowered to intervene in the distribution of the product to prevent harm to consumers. I've recently met with the Australian Banking Association to discuss the issues of design and distribution obligations and the product intervention power, and I note some of their legitimate concerns regarding inclusions and exclusions, especially to deal with bank accounts.

There's also legislation to remove ASIC from the Public Service Act to enhance it and give it the opportunity to hire the very best staff. We do this right now in some areas of defence and in areas of science. ASIC needs to be able to hire the very best it can get if we wish our regulator to be able to prosecute to the very best levels, as we want it to do. The bottom line is that it's competing in a market for skills, knowledge and experience, and we need to let the regulator compete in the market. I'm particularly pleased about the fact that Mr Crennan's appointment builds on the reform to strengthen civil and criminal penalties. We're strengthening the penalties to protect Australian consumers from not only corporate and financial misconduct but misadventure. These new penalties will ensure that those who do the wrong thing will be punished. It is that simple.

These are some of the most significant reforms to maximise civil penalties that we've seen in 20 years. They are designed to be strong and they are designed as a deterrent, to send a message, to bring them into line with leading international jurisdictions and to ensure that penalties are not only credible but a strong deterrent. In terms of harmonising: penalties for individuals will be 10 years imprisonment or the larger of $945,000 or three times the benefits and for corporations the larger of $9.45 million or three times the benefits or 10 per cent of annual turnover. This is tough. We will expand the range of contraventions subject to civil penalties and also increase the maximum penalty amounts that can be imposed by the courts. We've responded to ASIC's need for funding with an additional $70.1 million over the next two years.

The bottom line is that this package of measures is designed to resource ASIC to the level it needs to be resourced, to accelerate and expand its enforcement activities and to introduce strong new supervisory approaches. It will enable ASIC to be a more agile regulator, which is what we want. It will be a tough cop on the beat, but a cop that can move quickly as the beat changes. I commend the motion to the House.

Photo of Luke HowarthLuke Howarth (Petrie, Liberal Party) Share this | | Hansard source

Would someone like to second the motion?

Photo of Steve IronsSteve Irons (Swan, Liberal Party) Share this | | Hansard source

I second the motion and reserve my right to speak.

5:21 pm

Photo of Ross HartRoss Hart (Bass, Australian Labor Party) Share this | | Hansard source

I would like to welcome the new Deputy Chair of ASIC, Daniel Crennan QC, to the role. No-one having observed the activities of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry could possibly suggest that he does not have a lot of work ahead of him. This is particularly true, noting the support of the Minister for Revenue and Financial Services, Kelly O'Dwyer, who's claimed that this government has provided the resources and powers necessary for ASIC to be 'the tough cop on the beat', whilst her actions and the actions of the government speak otherwise.

The truth of the matter is playing out every day, with horror story after horror story coming out of the banking royal commission. It is beyond a reasonable observer's contemplation, having the benefit of hindsight, that this government, supposedly having the interest of consumers at heart, actually opposed the royal commission, derided Labor constantly for suggesting that the royal commission was necessary in the first place and claimed instead to have appointed ASIC with the necessary powers and resources to protect consumers. ASIC, along with many of our other public institutions and, in particular, the regulators, has been run down by this Liberal government, a government which has seemingly made it a point of pride to claim that the royal commission might harm the integrity of our financial institutions. This is a government that, whilst pretending to act in the interests of Australians, I say has operated a protection racket for the big banks. Rather than protecting ordinary Australians, this government is more interested in protecting the banks from ordinary Australians. Following the news of ordinary Australians being ripped off and having their lives destroyed by the big banks, who treat people, even dead people, as instruments of profit, what the government is now offering is too little too late.

They say actions speak louder than words, and the actions of this government are on record when it comes to tackling corporate misconduct. The government has time and time again put the interests of the big banks ahead of Australian consumers. It tried to pull apart the future of financial advice reforms in a bid to wind back protections for consumers. We all remember the Liberals, led by the Prime Minister, denying for nearly two years the need for a royal commission into the banks. What has the government actually done to provide the regulators with the resources they need? I, along with many Australians, remember the disastrous 2014 budget that saw so many broken promises and funding cuts. ASIC was not immune to those cuts—it lost $120 million. We then heard at Senate estimates how the budget cuts of 2014 would affect ASIC. It's then chairman, Greg Medcraft, said:

In particular, our proactive surveillance will substantially reduce across the sectors we regulate, and, in some cases, it will stop.

He also said:

Some examples of the changes in our consumer cluster are the deposit takers, credit and insurance team. There will be reduced proactive surveillance. As a result, they will focus on activity by entities that have the greatest market impact at the expense of smaller entities that have a smaller customer basis.

It wasn't until Labor began calling for a royal commission into the banks in 2016 that the government relented and restored funding to ASIC.

Unfortunately, the damage has been done and Australian consumers have been impacted and had their lives destroyed. For some in our community, this damage can never be undone. In the government's quest for savings and pursuit of their ideological campaign for tax cuts, damage once done is not easily repaired. Their cuts were cuts to the capability of the regulator and amount to a free pass to the financial sector for misconduct—misconduct which has been played out day after day in the royal commission. Indeed, just when you think the particular conduct appears particularly egregious, it seems to get worse. They made ASIC's task even worse this year: only a few months ago the Prime Minister cut ASIC's funding and its staff numbers in the 2018 budget. Now the Prime Minister and the Liberals are fighting their ideological war against Medicare, public schools and the interests of ordinary Australians to give the big banks a $17 billion tax handout. What sort of doublespeak constitutes this as levelling the playing field for consumers?

The announcement of additional funding for ASIC is, of course, welcomed by Labor. We also support the introduction of an industry-funding model and the plans to remove ASIC employees from the Public Service Act. These are a good start, but much more needs to be done. This government's furious back-pedalling in just about every policy area does nothing to distract the Prime Minister and the Liberals from the side of the big banks.

5:27 pm

Photo of Steve IronsSteve Irons (Swan, Liberal Party) Share this | | Hansard source

I thank the member for Fadden for bringing this important motion to the House. I'm the chair of the Parliamentary Joint Committee on Corporations and Financial Services, which has oversight of ASIC. I see the member for Burt in here, who is a member of that committee as well. On Friday we held a hearing with ASIC. One of the things I knew that Labor would come in here and talk about is the cuts. They are not cuts. I heard the member for McMillan in here today talking about honesty and truth and some stuff. Just to explain: one of the questions we asked ASIC on Friday—which the member opposite might be interested in, as he was the one who raised the cuts—was about the $26.1 million. He didn't actually mention the figure, but he talked about the budget. The $26.1 million is actually about the finishing of programs, which the ASIC staff confirmed. The head of ASIC confirmed that they were finishing off programs; they weren't cuts to their core budgets. And this happened back in 2012 when, under Labor, they finished the GFC funding program and cut $20 million. If you want to talk about cuts, Labor cut $20 million. Don't listen to what Labor say; watch what they do.

I will get back to the thrust of the member for Fadden's motion. It's timely that the member for Fadden put this motion forward, as I would like to update the House. As I said, we had the committee hearing on Friday. It was a great opportunity to meet Mr Daniel Crennan QC, who has a strong focus on enforcement action. I must also add that, after Friday's hearing, I'm confident the Mr Crennan's appointment as deputy chair of the corporate regulator will only strengthen ASIC's position as the corporate watchdog. I look forward to working with Mr Crennan in his role as deputy chair, as I'm sure the member for Burt will.

The coalition government is committed to ensuring ASIC has the powers and resources it needs. That's why the coalition government is injecting $70.1 million into ASIC to combat misconduct in the financial services industry and across all corporations for the protection of all Australian consumers. This is new funding which will bolster ASIC's enforcement capabilities and enable it to undertake regulatory activities and investigations so as to better deliver on its mandate of combating misconduct in corporations and in the financial services industry. The additional funding follows a decision by ASIC's new chairman, James Shipton, to refocus ASIC's strategic direction on proactive enforcement and increase onsite supervision. This is the key. We need to maintain confidence in our corporate regulator. We need to know that they have the resources they require to ensure corporate misconduct is investigated and penalties are enforced.

At the hearing on Friday, I spoke briefly about the need for mum-and-dad investors to have that confidence, and I referred to the case of LWP Technologies. I know ASIC are currently investigating the company and its directors. In the interim, there are investors who have been left financially devastated by people doing the wrong thing. There need to be consequences. Every Australian needs to have the confidence in ASIC to deliver on this.

I'd like to speak further on the $70.1 million the coalition government is investing in ASIC. The package of measures includes: $26.2 million to accelerate and increase the intensity of ASIC's enforcement activities and enhance its capacity to pursue actions against well-funded litigants for serious misconduct, through the Enforcement Special Account; $9.4 million to boost supervision of the superannuation sector by strengthening audit and enforcement action to improve transparency and outcomes for superannuation members, which, as you know, Deputy Speaker Gee, is sorely needed; $8 million to implement a new supervisory approach in respect of Australia's five largest financial institutions, the big four banks and AMP, by, for the first time, embedding dedicated staff within these institutions to monitor governance and compliance actions; $6.8 million to establish a dedicated task force which will conduct a proactive, targeted and thematic review into corporate governance to identify and pursue failings in large listed companies, including deploying staff to conduct new onsite surveillance and investigations; $6.6 million to implement the government's reforms to whistleblower protection laws, so that ASIC can better receive, assess, triage and address whistleblower disclosures about misconduct; and $6 million to promote Australia as a world leader in the development and adoption of regulatory technology solutions for the financial services industry.

ASIC are an important part of our financial sector in Australia. They need to be a strong cop on the beat, as the member for Fadden said. I wish them all the best in pursuing their duties and their obligations to the Australian community.

5:32 pm

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

Adele Ferguson, in today's Financial Review,perfectly sums up this government's approach to financial services and regulation. She says:

… the Prime Minister down to the Treasurer and Financial Services Minister, used every trick in the book to avoid a royal commission.

It should never be forgotten that for 600 days all of the Liberals and many of the National Party dodged and weaved Labor's call for a royal commission. Let's not forget how the new Minister for Home Affairs and Liberal Party leadership hopeful called Labor's demands for a royal commission into the banks a 'financial stunt'. On 263 occasions in total, government ministers of all stripes have argued to the hilt against a banking royal commission. We now know why, given the evidence that's been uncovered by the banking royal commission. Many of the coalition's mates in this particular industry are now facing unwanted scrutiny.

In 2016, the Treasurer was adamant that, despite slashing ASIC's budget and cutting 14 per cent of its staff, the understrength regulator was the answer. He said:

ASIC has the powers of a Royal Commission and in fact it has greater powers than a Royal Commission.

The coalition were out of touch when that was happening and they're really out of touch now with what the community is feeling regarding financial services, because they are the government that want to give the banks a $17 billion tax cut. In the environment where Australian workers, families and small businesses are struggling to make ends meet, the government want to give the biggest banks in the country—who have been doing such a wonderful job and such a fine job by the Australian people!—a tax cut. Consumers were getting ripped off and our regulators were being short-changed and didn't have the resources to deal with it.

The Abbott-Turnbull government have never given any encouragement to the regulator. They tried their best to gut ASIC, having undermined its ability to uncover and prosecute unconscionable financial conduct. Of course, this kicked off in 2014, when the Abbott government's first budget slashed ASIC's funding by $120 million. The result was not surprising: a devastating loss of staff and expertise, with a significant effect on the ability of the corporate and financial services regulator to address financial misconduct. It was a further kick in the guts for victims of financial rip-offs. And despite the length of the cuts to ASIC and their massive impact on its ability to police the financial sector, the government took zero action. They only partially unwound ASIC's cuts when Labor began to shine a light on the industry and commenced its calls for a royal commission.

We know what this government's approach to financial services regulation is. Labor first proposed the future of financial advice reforms, which set out the best interests duty and the obligation on financial advisers to actually act in the best interests of their clients. Believe it or not, prior to the FoFA reforms being introduced into the parliament by a Labor government, there was no obligation on financial advisers to actually act in their client's best interest. Can you believe it? There was no legal obligation at all. And guess what? In many circumstances, they didn't and that's what's being uncovered by the royal commission at the moment. It was Labor that inserted that best interests duty into the corporations law and it was this government, the Abbott-Turnbull government and their predecessors, that opposed it.

When they got to government, they actually tried to water down the provisions that we put in the act. They were actually successful; they got it through the House of Representatives and the Senate. It was only after Labor moved a rescission motion that we were able to stop that. So if the Turnbull government had their way, the activities that are being uncovered in the banking royal commission at the moment would not be illegal. They would simply be a bad look and that is unconscionable given the suffering, the pain, the hurt and loss that the banks and financial institutions like AMP have caused for so many Australians.

This government would seek to water down those provisions and would seek to cut the budget of the regulator whose responsibility it is to keep a check on this industry to ensure that banks and financial institutions are acting in the best interests of their clients and acting in the interests of the Australian public. So this motion is a ruse because, when it comes to properly financing and resourcing our regulator, we all know it's only Labor that's really interested in this; all the Libs do is slash and cut.

5:37 pm

Photo of Matt KeoghMatt Keogh (Burt, Australian Labor Party) Share this | | Hansard source

I did think there was quite a degree of irony in the fact that it was the member for Fadden who moved this motion to strengthen ASIC's investigative powers. I'll put that to one side because the member for Fadden is so committed to what he has moved in today's motion that, as soon as he moved it, he left the chamber. But that is no matter.

The first point of this motion does note the appointment of a new deputy chair of ASIC, Mr Daniel Crennan QC. I do welcome his appointment because I think it is entirely appropriate for a body that should be one of the most significant law enforcement bodies in this country that at least its deputy chair is able to bring a focus into that part of the work of our corporate regulator. I welcome that appointment.

The motion goes on to further note the government has invested in ASIC. Let's take a look back at that investment. 'Invested in ASIC' is a curious choice of words for a government that cut the budget for ASIC when it came into power and had to reverse that decision. It took a long time for ASIC to be able to restore its staffing numbers after those disastrous cuts. But when we got to this budget, again we saw there was a reduction in funding for ASIC. Now the government has said it's okay because programs have wound down—they're coming to end of life. Let's look at the core funding that's available to ASIC. That has reduced significantly over time, partly because this government continues with its task of applying efficiency dividends which, ironically, are making ASIC less efficient and less able to do its work. It is completely wrong in this motion to say that this government is investing in ASIC and being a tough cop on the beat.

Let's get into the detail. It talks about the introduction of an industry-funding model. Labor welcomes that. That is appropriate. Look at the big task, the new task that the government has given to ASIC. ASIC came to government and said, 'We want to place investigators and officers into the banks.' Because, after all of the disasters we have seen come out of the royal commission, we know that it's really important that we're able to see what the banks are actually doing to try and make cultural change, to hold them to account. But who is paying for that? Not industry, not the banks. ASIC had to get the government to use taxpayers' money to fund that purpose because, at the moment, the industry funding model that the government has put in place doesn't actually cover that yet.

Then we get to the new product intervention powers. How long has it taken to get to this point? How long has it taken to get to the point where these new powers, which ASIC has been crying out for for years, and of which review after review has said, 'ASIC should have these strong powers,' are introduced? It's taken years, as it has with penalties. The government says it wants to make sure that the book is thrown at the banks. Actually, the government should have gotten on with the job of delivering some of this legislative change years ago instead of holding up FoFA reforms and trying to stop the things that are unlawful from becoming unlawful. If it had gotten on with the job of making these stronger penalties come into force and of giving ASIC these powers then some of the things that have come before the royal commission wouldn't have happened in the first place.

Then we get into legislating the removal of ASIC employees from the Public Service Act. That is something we support. The government's stated purpose for that is that they want to allow ASIC to be able to pay more to its employees, to attract people that it needs and to keep the employees that it needs, instead of them being taken away by industry. That's a great idea, but how are they going to fund it if they keep cutting back ASIC's budget and keep enforcing efficiency dividends that are making it less efficient at its job? This government says one thing but does another. It is effectively all bark and no bite when it comes to our corporate regulator. In fact, it's effectively left our corporate regulator not a corporate watchdog but a corporate poodle, because it keeps neutering it every time it steps forward. The government says something harsh but fails to deliver when it comes to ASIC.

They talk about strengthening the criminal and civil penalties that are available. They continue to defer and delay. They have not delivered on this. Only on Friday, in the committee that the member for Swan was just referring to, we asked ASIC about its commitment to being a strong law-enforcement body, it reeled back from saying it has a strong nexus to serious and organised crime. But when we look at what serious and organised crime actually is, we see it is quite clear that there are many offences under the Corporations Act that completely fit that nexus. Money laundering in particular is something we often see associated with corporate crime—but, no, apparently there's no nexus. Thankfully, ASIC has said that it will go back and look at this more seriously.

To conclude, we've got a problem here because the government is all bark and no bite. It is quite clear that only Labor can be trusted to make sure we have a strong corporate regulator and to make sure the recommendations of the banking royal commission are properly implemented to protect the consumers of Australia, who need strong corporate watchdog protection in this country. (Time expired)

Photo of Andrew GeeAndrew Gee (Calare, National Party) Share this | | Hansard source

There being no further speakers, the debate is adjourned and the resumption of debate will be made an order of the day for the next sitting.