Senate debates

Wednesday, 24 February 2010

Corporations Amendment (Financial Market Supervision) Bill 2010; Corporations (Fees) Amendment Bill 2010; Higher Education Support Amendment (University College London) Bill 2010; National Consumer Credit Protection Amendment Bill 2010

Second Reading

5:31 pm

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Minister for Climate Change and Water) Share this | Hansard source

I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted

The speeches read as follows—

Corporations Amendment (Financial Market Supervision) Bill 2010

Today I introduce a bill which will amend the Corporations Act 2001 to reform the way financial markets in Australia are supervised. In doing so, the Bill will enhance the integrity of Australia’s financial markets and contribute to the goal of making Australia a financial hub.

The Bill removes the inherent conflict of interest present in the current law, whereby financial markets supervise themselves, and transfers the supervisory responsibility to the Australian Securities and Investments Commission (ASIC).

The Bill contains three primary measures.

Firstly, it amends the obligations on licensed financial markets operating in Australia. At present market licensees, and prospective market licensees, are required to have arrangements and resources devoted to supervising trading on their market.

The Bill amends this obligation. Markets will no longer be required to supervise trading on their own market, but must still have arrangements and resources to operate their market. This includes arrangements for enforcing compliance with a market’s operating rules. Individual markets will retain responsibility for supervising listed entities.

Secondly, the Bill confers on ASIC the explicit function of supervision of domestically licensed financial markets.

It is important that the supervision of Australia’s financial markets be transparent and independent. It is important that any actual or perceived conflicts of interest be avoided.

Consequently, it is more appropriate for an agency of the Government to perform this important function. The decision to transfer responsibility for supervision of Australia’s financial markets to ASIC is a significant one which will stand the operation of Australian financial markets in good stead.

By removing the inherent conflict of interest in having markets supervise themselves, this Bill is in line with Australia’s G20 commitment to protect the integrity of financial markets by avoiding conflicts of interest.

This reform is in line with the move towards centralised or independent regulation in other leading jurisdictions.

Thirdly, the Bill establishes a new rule making regime, whereby ASIC will have the ability to set ‘market integrity rules’.

Markets currently play a significant role in determining acceptable conduct by participants in Australia’s financial markets, as markets are responsible for setting and enforcing their own operating rules.

The Bill amends the role of operating rules, and establishes ASIC-set ‘market integrity rules’. These rules will be made by ASIC for the protection of the integrity of the market. These market integrity rules will be the primary determiners of behaviour on Australia’s financial markets. Markets will still be able to make operating rules. However if an operating rule conflicts with a market integrity rule, the market integrity rule prevails.

This is a further step in the Government’s drive to improve regulation of the financial industry.

Commensurate with ASIC’s new responsibilities, the Bill provides ASIC with additional enforcement powers and remedies.

The Bill provides that a breach of an ASIC-set market integrity rule is a breach of a civil penalty provision, which can be taken to Court and enforced. The maximum penalty that can be imposed is $1 million. This was reduced from the amount in the exposure draft of the Bill to reflect concerns that the higher amount might be inappropriate.

However, the Bill also establishes a framework for alternatives to civil penalty proceedings. The Bill sets the groundwork to allow the Regulations to establish alternatives to civil proceedings, such as an infringement notice and enforceable undertaking regime.

This will allow persons who are alleged to have contravened a market integrity rule to avoid Court by opting for an alternative penalty. The monetary amount which can be included in an alternative penalty is limited to three-fifths of what a Court could order.

Such remedies are vital to the ongoing success of the market integrity rule framework as they provide ASIC with a fast and effective remedy, akin to the remedies available to markets under the current operating rule framework.

The Bill also makes consequential amendments to other parts of the Act, specifically to the qualified privilege and court order provisions to reflect the new functions of ASIC and the change in obligations on market operators.

The transfer of supervisory responsibility is an important step in enhancing the regulation of Australia’s financial services industry.

These reforms will stand Australia in good stead, going into the future, by ensuring that Australia’s markets remain fair, orderly and transparent into the future.

Corporations (Fees) Amendment Bill 2010

The Corporations (Fees) Amendment Bill 2010 supports the Corporations Amendment (Financial Market Supervision) Bill 2010.

The Bill amends the Corporations (Fees) Act 2001 to allow a fee to be charged to market operators in respect of market supervision functions which the main Bill vests in the corporate regulator ASIC.

This is in line with the findings of the Wallis Inquiry which, when it reported in 1997, made a recommendation that regulatory agencies should collect enough revenue from the financial entities which they regulate to fund themselves. The principle is that for reasons of equity and efficiency, the costs of financial regulation should be borne by those who benefit from it.

The fee collected by ASIC will be levied on a cost recovery basis.  It is intended that the imposition of fees by ASIC on market operators will not have a significant impact on investors.

The Regulations will specify how the fee will be calculated and when it will be imposed.

Full details of the measures in this Bill are contained in the explanatory memorandum.

Higher Education Support Amendment (University College London) Bill 2010

The Higher Education Support Amendment (University College London) Bill 2010 makes a minor amendment to the Higher Education Support Act 2003 to add University College London as a Table C provider.

The Higher Education Support Act 2003 includes provision for a foreign University, operating in Australia to be listed as a Table C provider.  This listing means that eligible domestic students studying with the University can access FEE-HELP.

FEE-HELP assists eligible domestic students studying for all higher education courses ranging from Diploma to PhD by providing a loan for all or part of their tuition costs.

University College London is a non-profit organisation established under United Kingdom law, and has been approved to operate as a higher education provider in Australia by the South Australian government under the National Protocols for Higher Education Approval Processes.

It commenced offering courses in Masters of Science in Energy and Resources in Semester 1, 2010 and is anticipating an enrolment of 10 students this year.

National Consumer Credit Protection Amendment Bill 2010

Today, I introduce a bill that will amend the Commonwealth’s consumer credit legislation to ensure an effective referral of power from the States to the Commonwealth in relation to consumer credit.

As you would be aware, last year the Government enacted legislation to implement Phase 1 of the National Consumer Credit Reform Package, delivering on the Government’s commitment to modernise Australia’s consumer credit laws.

This Credit Reform Package will, for the first time in Australia, provide a single, standard, national regime for the regulation of consumer credit replacing the state-based regime, which operates inconsistently across the eight jurisdictions.

This landmark reform has only been possible through the strong commitment by the Commonwealth, State and Territory Governments working in a spirit of cooperation to realise the COAG reform vision for a single, uniform national credit law.

This is evidenced by the signing of the intergovernmental agreement on the National Credit Law by the Commonwealth, State and Territory Governments in December last year; and a commitment by all governments to commence the National Credit Law at the same time later this year.

As the Commonwealth’s legislative powers are not sufficient to enact a nationally comprehensive regulatory framework for consumer credit, it is therefore necessary for the States to refer their powers to the Commonwealth under section 51 of the Constitution, by passing the relevant referral legislation in their respective Parliaments.

Tasmania has passed the States’ Credit (Commonwealth Powers) Bill 2009 (the Referral Bill).

Following the enactment of the Referral Bills, the States will be able to repeal their state laws in time for the commencement of the National Credit legislation on 1 July 2010.

In December last year, the Commonwealth and State Governments agreed to modify the Referral Bills by inserting ‘carve out’ provisions, which provide that certain subject matters (such as State taxation) are excluded from the Referral Bill.

This Bill amends the National Consumer Credit Protection Act 2009 (the Credit Act) to recognise certain exclusions to the scope of the amendment power in the Referral Bill and to enable an effective reference of State power to be made either with or without any exclusions to that power.

This ensures that the State reference legislation with no limitations and State reference legislation with the added protection of the exclusions to the reference of their powers, are equally effective.

The amendments in this Bill will also allow the States to refer their regulatory powers in relation to consumer credit by ‘adopting’ the Commonwealth’s legislation. This will ensure the constitutional soundness of the referral of consumer credit powers.

Following the Commonwealth’s enactment of this Bill, the States wishing to refer powers using the adoption approach will be able to do so with their Referral Bills.

Importantly, the scope and effectiveness of the national credit protection regime will not be affected by any such variation to the referral or whether States refer power or adopt the National Credit legislation.

Full details of the measures in the bills are contained in the explanatory memorandums.

Ordered that further consideration of the second reading of these bills be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.

Ordered that the Higher Education Support Amendment (University College London) Bill 2010 and the National Consumer Credit Protection Amendment Bill 2010 be listed on the Notice Paper as separate orders of the day.


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