Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

Thank you for your guidance, Mr Acting Deputy President. I move the amendment:

(1)   Schedule 1, items 14 and 15, page 4 (lines 14 to 21), omit the items, substitute:

14 Section 960

Insert:

life risk insurance superannuation product has the meaning given by subsection 963B(2).

15 Section 960

Insert:

MySuper product has the meaning given by subsection 963B(3).

(2)   Schedule 1, page 4 (after line 21), after item 15, insert:

15A Section 960

Insert:

personal intra fund superannuation advice has the meaning given by section 964N.

(3)   Schedule 1, item 21, page 5 (lines 18 and 19), omit "a meaning affected by section 964A", substitute "the meaning given by subsection 964A(2)".

(4)   Schedule 1, item 23, page 7 (line 6), after "identified", insert "through instructions, so far as is reasonably possible in the circumstances".

(5)   Schedule 1, item 23, page 7 (line 30), omit "circumstances;", substitute "circumstances.".

(6)   Schedule 1, item 23, page 7 (lines 31 to 33), omit paragraph 961B(2)(g).

(7)   Schedule 1, item 23, page 9 (lines 15 to 22), section 961E TO BE OPPOSED.

(8)   Schedule 1, item 24, page 16 (after line 10), before paragraph 963B(1)(a), insert:

  (aa)   the benefit is given to the licensee or representative solely in relation to the provision of general advice;

(9)   Schedule 1, item 24, page 16 (lines 13 to 18), omit paragraph 963B(1)(b), substitute:

  (b)   the benefit is given to the licensee or representative solely in relation to a life risk insurance product, other than a life risk insurance superannuation product (see subsection (2));

  (ba)   each of the following is satisfied:

  (i)   the benefit is given to the licensee or representative solely in relation to a life risk insurance superannuation product;

  (ii)   the product is not issued to an RSE licensee of a registrable superannuation entity, or a custodian in relation to a registrable superannuation entity, in relation to a MySuper product (see subsection (3));

  (iii)   the benefit is given by, or on behalf of, a person to whom the licensee or representative provided advice in relation to the life risk insurance superannuation product;

(10)   Schedule 1, item 24, page 16 (lines 23 to 26), omit subparagraph 963B(1)(c)(ii), substitute:

  (ii)   the benefit is not for financial product advice in relation to the product, or products of that class, given to the person as a retail client by that licensee or representative;

(11)   Schedule 1, item 24, page 16 (after line 32), after paragraph 963B(1)(d), insert:

  (da)   the benefit is given to the licensee or representative by an authorised representative of the licensee (the purchaser) in relation to the sale of a financial services business by the licensee to the purchaser;

(12)   Schedule 1, item 24, page 16 (line 35) to page 17 (line 18), omit subsections 963B(2) and (3), substitute:

  (2)   A life risk insurance product is a life risk insurance superannuation product if the product is issued to an RSE licensee of a registrable superannuation entity, or a custodian in relation to a registrable superannuation entity, for the benefit of a class of members of the entity or for one or more members of the entity.

  (3)   MySuper product has the same meaning as in the Superannuation Industry (Supervision) Act 1993, as in force on and after the commencement of item 6 of Schedule 1 to the Superannuation Legislation Amendment (MySuper Core Provisions) Act 2012.

(13)   Schedule 1, item 24, page 17 (lines 34 and 35), omit "the provision of financial product advice to persons as retail clients", substitute "carrying on a financial services business".

(14)   Schedule 1, item 24, page 17 (line 37), at the end of subparagraph 963C(c)(iii), add ", which must not require the benefit, or the education or training, to be provided in Australia".

(15)   Schedule 1, item 24, page 18 (lines 4 to 6), omit all the words from and including "in relation to" to the end of subparagraph 963C(d)(ii).

(16)   Schedule 1, item 24, page 18 (after line 14), after paragraph 963C(e), insert:

  (ea)   the benefit provider is the employer of the licensee or representative;

(17)   Schedule 1, item 24, page 21 (line 21), omit "a financial services licensee or an RSE licensee", substitute "the responsible entity of a registered scheme, an RSE licensee or the issuer of a managed investment product".

(18)   Schedule 1, item 24, page 22 (lines 11 to 29), omit subsections 964A(2) and (3), substitute:

  (2)   A volume based shelf space fee is a monetary product access payment which is not administrative in nature paid by a funds manager to the platform operator.

  (3)   To the extent that the benefit is not a volume based shelf space fee, a platform operator may accept an investment management fee scale discount on an amount payable or a rebate of an amount paid to the funds manager.

(19)   Schedule 1, item 24, page 25 (after line 7), at the end of Division 5, add:

Subdivision C—Fees for personal intra fund superannuation advice

964J Application to a financial services licensee acting as an authorised representative

     If a financial services licensee is acting as an authorised representative of another financial services licensee in relation to the provision of personal intra fund superannuation advice, this Subdivision applies to the first licensee in relation to the advice in that licensee's capacity as an authorised representative (rather than in the capacity of licensee).

964K Financial services licensees must not accept fees for personal intra fund superannuation advice other than from member to whom advice provided

  (1)   A financial services licensee that is a trustee of a regulated superannuation fund must not accept a fee in relation to the provision of personal intra fund superannuation advice to a member of the fund, other than from that member.

Note:   This subsection is a civil penalty provision (see section 1317E).

  (2)   A financial services licensee contravenes this subsection if:

  (a)   the licensee is a trustee of a regulated superannuation fund; and

  (b)   a representative, other than an authorised representative, of the licensee accepts a fee in relation to the provision of personal intra fund superannuation advice to a member of the fund, other than from that member; and

  (c)   the licensee is the, or a, responsible licensee in relation to the contravention.

Note:   This subsection is a civil penalty provision (see section 1317E).

  (3)   The regulations may provide that subsections (1) and (2) do not apply in prescribed circumstances.

964L Licensee must ensure compliance

     A financial services licensee that is a trustee of a regulated superannuation fund must take reasonable steps to ensure that representatives of the licensee do not accept a fee in relation to the provision of personal intra fund superannuation advice to a member of the fund, other than from that member.

Note:   This subsection is a civil penalty provision (see section 1317E).

964M Authorised representatives must not accept fees for personal intra fund superannuation advice other than from member to whom advice provided

  (1)   An authorised representative, of a financial services licensee that is a trustee of a regulated superannuation fund, must not accept a fee in relation to the provision of personal intra fund superannuation advice to a member of the fund, other than from that member.

Note:   This subsection is a civil penalty provision (see section 1317E).

  (2)   The regulations may provide that subsection (1) does not apply in prescribed circumstances.

964N What is personal intra fund superannuation advice?

  (1)   Advice is personal intra fund superannuation advice if:

  (a)   the advice is personal advice; and

  (b)   the advice is provided by a trustee of a regulated superannuation fund, or an authorised representative of the trustee, to a member of the fund as a retail client; and

  (c)   the trustee holds an Australian financial services licence that covers the provision of personal advice in relation to superannuation products; and

  (d)   the advice relates to the member's interest in the fund and does not also relate to:

  (i)   any other financial product (except eligible insurance (see subsection (2)) in relation to the member's interest in the fund); or

  (ii)   anything mentioned in subsection 765A(1) that would be a financial product but for that subsection (except eligible insurance in relation to the member's interest in the fund); or

  (iii)   any other matter specified in the regulations for the purposes of this subparagraph; and

  (e)   the fund is not a self managed superannuation fund (within the meaning of section 17A of the Superannuation Industry (Supervision) Act 1993).

  (2)   For the purposes of subparagraphs (1)(d)(i) and (ii), eligible insurance is insurance of a kind that the trustee maintains in relation to the members of the fund for the purpose of financing benefits to the members that are within the scope of the Superannuation Industry (Supervision) Act 1993.

964P Meaning of trustee and member of a regulated superannuation fund

     The following expressions have the same meaning when used in this Subdivision as they have in the Superannuation Industry (Supervision) Act 1993:

  (a)   member;

  (b)   regulated superannuation fund;

  (c)   trustee.

(20)   Schedule 1, item 28, page 26 (lines 7 and 8), omit paragraph (jaah).

(21)   Schedule 1, item 28, page 26 (after line 26), after paragraph (jaap), insert:

  (jaapa)   subsections 964K(1) and (2) (financial services licensee responsible for breach of fees accepted for personal intra fund superannuation advice);

  (jaapb)   section 964L (financial services licensee to ensure compliance with duty about accepting fees for personal intra fund superannuation advice);

  (jaapc)   subsection 964M(1) (authorised representative must not accept fee for personal intra fund superannuation advice other than from relevant member);

(22)   Schedule 1, item 30, page 27 (lines 12 and 13), omit subparagraph (1E)(b)(v).

(23)   Schedule 1, item 30, page 27 (after line 30), after subparagraph (1E)(b)(xiii), insert:

  (xiiia)   subsections 964K(1) and (2) (financial services licensee responsible for breach of fees accepted for personal intra fund superannuation advice);

  (xiiib)   section 964L (financial services licensee to ensure compliance with duty about accepting fees for personal intra fund superannuation advice);

  (xiiic)   subsection 964M(1) (authorised representative must not accept fee for personal intra fund superannuation advice other than from relevant member);

(24)   Schedule 1, item 30, page 27 (line 34), omit "or (v)".

(25)   Schedule 1, item 30, page 28 (line 3), omit "or (v)".

(26)   Schedule 1, item 33, page 29 (lines 15 to 18), omit all the words from and including "if:" to the end of subsection 1528(1), substitute "if the benefit is given under an arrangement entered into before the day on which that item commences".

(27)   Schedule 1, item 33, page 29 (line 33) to page 30 (line 1), omit "a financial services licensee, or an RSE licensee", substitute "the responsible entity of a registered scheme, an RSE licensee or the issuer of a managed investment product".

(28)   Schedule 1, item 33, page 30 (lines 4 and 5), omit "a financial services licensee, or an RSE licensee", substitute "the responsible entity of a registered scheme, an RSE licensee or the issuer of a managed investment product".

(29)   Schedule 1, item 33, page 30 (after line 28), at the end of Part 10.18, add:

1532 Application of ban on other remuneration—fees for personal intra fund superannuation advice

  (1)   Subdivision C of Division 5 of Part 7.7A, as inserted by item 24 of Schedule 1 to the amending Act, applies in relation to the provision of personal intra fund superannuation advice on or after the day on which that item commences (whether or not the advice was sought before that day).

  (2)   Despite subsection (1), that Subdivision does not apply in relation to the provision of personal intra fund superannuation advice to the extent that the operation of that Subdivision would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph of the Constitution).

For example, there is no precedent in the world for introducing the sort of additional red tape that would result from the introduction of the government's opt-in proposal. Minister Shorten clearly is intent, at the behest of the Industry Super Network, on making Australia the world champions in red tape. I know we are very keen to be the world champions in many things, but the world champions in red tape is not a goal that we should aspire to as a nation. Every time you increase the levels of red tape, every time you increase complexity and impose unnecessary additional compliance burdens, you actually reduce our productivity and impose significant additional costs on the economy, which of course hold us back from reaching the full potential we should always be striving for.

The coalition have very constructively engaged in this debate. We have made a series of very sensible and constructive recommendations on how this flawed legislation currently before the Senate can be improved. In fact, the coalition have presented a 16-point plan as part of our dissenting report attached to the report of the parliamentary joint committee inquiry into this particular legislation, which sets out in some detail how we think this legislation can be improved. We urge this Labor government and we urge the Greens, even at this late stage, to carefully reflect on the recommendations we have made.

This is a process that has been going for some time. Ever since Minister Shorten took responsibility for this portfolio there has been a lot of chopping and changing. He has backed down on a number of his very ill-considered early forays in this space. In April 2011 he announced that the government would ban all commissions and like payments on all individual and group risk, which was always a dumb idea; it was always going to be bad policy, it was clearly ill-thought out and it was something he was pushed into by a vested interest agenda in part of one segment of the financial services market that he is particularly close to. Of course he had no choice other than to completely back down from what was always a bad idea and that was always driven by a deeply conflicted approach to policy development in this area. We think he should have done likewise in relation to some of the other contentious bids.

Where did all this start? All this started with the so-called Ripoll inquiry. Perhaps I can take a step back here. Financial advisers provide a very important service to the community. They help people with their financial health and wellbeing. They help people manage financial risks and maximise financial opportunities. They deal with other people's money, which is why it is important to have an appropriately robust regulatory framework in place. However, whenever we consider making changes to that regulatory framework we do, as I said earlier, have to work on getting the balance right. After the global financial crisis, clearly it was appropriate for us to consider whether the regulatory framework was still appropriate in the wake of collapses like Storm Financial, Westpoint, Trio and others. But let me just make the point that, overall, the financial services industry in Australia performed very, very well in the context of the global financial crisis. The incidents were isolated incidents, and the proposal to force clients to resign contracts with their advisers on a regular basis would have done nothing to prevent the collapse of Storm, Trio or Westpoint, for example.

Of course, the reason I can say that is that when the Ripoll inquiry—the Parliamentary Joint Committee on Corporations and Financial Services—ran a thorough inquiry in relation to all this in 2009, they received well in excess of 400 submissions. Out of all those submission, how many do you think recommended that we have enshrined in legislation a requirement that people should be forced to resign contracts with their financial advisers on a regular basis—the so-called opt-in proposal? Out of more than 400 submissions, one of those submissions recommended that we have a requirement enshrined in legislation that clients should be forced to resign contracts with their advisor on a regular basis, taking away the freedom of individuals to make their own choices and their own decisions on how long they want to engage into a contractual relationship with a particular service provider for. One single submission recommended that particular change. Two guesses as to who that one submission came from. It was the Industry Super Network, a gentleman called David Whitely. He came to see me, week in week out, and said, 'Can't I negotiate a deal with you?' He came to see me in my office as if he were talking on behalf of the government, trying to negotiate a deal.

There is only one reason Minister Shorten has put this particular aspect into this legislation, and that is that the Industry Super Network and David Whitely insisted on it. It is not about good policy. I am very happy for Bernie Ripoll; he has since been promoted to Parliamentary Secretary to the Treasurer, and good luck to him. He was a very good chair of that inquiry, and the Parliamentary Joint Committee on Corporations and Financial Services, under his leadership, did a very good job. It delivered a unanimous bipartisan report with a series of 11 or 12 recommendations that were very sensible recommendations, widely supported across the industry and with bipartisan support across the parliament. And what did Mr Shorten do? Instead of implementing those recommendations he jumped on the one recommendation that was put forward by the Industry Super Network—one out of more than 400 submissions—and said, 'No, I'm going to attach that to it.' That means it was 2½ years after the Ripoll inquiry reported before we actually got the opportunity to deal with this legislation to improve the financial services regulatory framework. This minister has allowed the reform agenda to be completely hijacked by one particular vested-interest perspective in the financial services market, which clearly is pursuing a particular commercial interest. If this was about good policy, we could have implemented the 11 recommendations made by the Ripoll inquiry back in November-December 2009. That was years ago. We could have had the better and improved financial services regulatory framework in place years ago. But because this government and this minister were so intent on pursuing a conflicted, vested-interest agenda here we are years later.

This is legislation that is supposed to come into effect on 1 July 2012. That is 11 days away. So here we have a piece of legislation which is very complex and which has significant system change requirements at the end of it and we are debating it in the Senate today. I can well understand why this completely dysfunctional, incompetent and divided government want to guillotine debate on this bill tomorrow. If they do not guillotine debate on this tomorrow, we might well still be debating it after it is supposed to have come into effect. Then magnanimously at some point the minister said: 'We are going to have a soft start. We are going to leave it optional as to whether people comply with it from 1 July 2012. The hard start is going to be as of 1 July 2013.' When this legislation went through the House of Representatives the government was not even ready to move amendments to that effect, even though the government had made those commitments way earlier. The way the government and Minister Shorten have handled this debate has been incompetent, chaotic and disrespectful to an important industry across Australia. It has had serious implications already on the structure of the industry and not for the better for consumers. It has already resulted, as I said earlier, in reduced choice, reduced competition and increased costs for consumers for little or no additional consumer protection benefit.

There are a series of very specific issues that we are concerned about in relation to these bills—for example, the chopping and changing. The minister had given commitments for sometime, all throughout the consultation period, that the changes in terms of the additional annual fee disclosure requirements and the opt-in requirements would be prospective only—that they would not apply to existing clients; they would only apply to new clients. When the draft of the legislation was released in the second half of last year, out of nowhere, all of a sudden, they were to apply to everyone. I do not expect people in Treasury to necessarily know how a business is run. I do not expect people in the Labor government to know how business is run. But they should make it their business to find out what the cost implications and system implications of some of the changes they are pursuing are ultimately for consumers before they impose all this additional red tape and complexity.

We have long supported the introduction of a best interest duty. We have long supported that. If we had had a sensible discussion on how that should be enshrined into the Corporations Act we could have passed it long ago. The best interest duty really should be an important and central part of the FoFA changes. However, the way it is currently drafted in this legislation is not clear enough. It still leaves the opportunity for confusion, and we should avoid confusion and minimise the risk of future disputes by tightening up the definition of the best interest duty. The current version of the proposed best interest duty included in the current FoFA bill is certainly an improvement on the version included in the exposure draft; however, the coalition remain concerned that the catch-all provision contained in proposed section 961B(2)(g) would create uncertainty for both clients and their advisers. We recommend that this clause be removed from the best interest duty.

We also think it is important to provide certainty around the provision of scaled advice. One way of ensuring that clients are able to access affordable and appropriate financial advice would be to allow advisers and their clients to limit the scope of the advice to a series of discrete areas identified by the clients rather than to mandate a full financial plan in every case. We also think that the government still has a bit of work to do on fixing the status of risk insurance inside superannuation.

In short, if the coalition is elected to government at the next election, we will fix Labor's FoFA mess because this legislation, which has already been passed by the House of Representatives, never went through a proper regulatory impact assessment, because Labor's FoFA bills will increase red tape and costs for both business and consumers by reducing choice, competition and diversity across the financial services industry, because it is unnecessarily complex and in large part still unclear and because, according to Minister Shorten himself, it will cause job losses in the financial services industry. We, the coalition, if we are successful at the next election, will pursue the complete removal of opt in, pursue the simplification and streamlining of the additional annual fee disclosure requirements, improve the best interest duty, provide certainty around the provision and availability of scaled advice and refine the ban of commissions on risk insurance inside superannuation further to go beyond the backdown that the minister has pursued since his April 2011 announcement. The government's handling of this legislation has been completely inept and the Senate should not be supporting these currently deeply flawed bills. (Time expired)