Senate debates

Wednesday, 9 February 2022


Economics References Committee; Report

7:14 pm

Photo of Louise PrattLouise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | Hansard source

I also want to speak to this report. I was the instigator of this inquiry before the Senate. It is true there were devastating impacts on the victims of this financial collapse, and there was the absolute failure of ASIC and the government to take timely action to address these issues. Back in 2015, ASIC first had complaints about the Sterling Income Trust. Purportedly, it inquired into them. Then, in 2017, the state government had concerns about the scheme and referred the issue to ASIC in order to see it address those concerns.

The issue here is that we have an investment product that is both a retail investment, where people invest in a managed investment scheme, and at the same time a leasing arrangement. It was too good to be true, but no-one told these vulnerable consumers that that was the case. They were told by the proponents of this scheme that they would be able to pay their money upfront and get a lease arrangement that would last 40 years, and at the end of those 40 years—or upon their death—they would get all of their money back. They were told that this was ironclad and that their money was held in trust. We've already seen through determinations before AFCA that this company engaged in false and misleading conduct and that that has resulted in calls on the insurers of these companies to have those initial claims paid out. The issue now is that we know this company engaged in false and misleading conduct but we haven't seen adequate action taken by ASIC in that regard. It was very slow to act. We've been told that it might be looking at referrals to the Director of Public Prosecutions and the like, but, frankly, this is all too little, too late.

The product disclosure statements of these products were also false and misleading, and the 'buyer beware' approach of ASIC, where companies can say and do what they like and the regulator takes absolutely no accountability for what is said in a product disclosure statement, is part of what has seen these people lose their money. One of the product disclosure statements was withdrawn in around 2019 because ASIC asked for it to be withdrawn, because it was false and misleading. What did the company then go and do? It just put out more product disclosure statements with different variations which conned more people out of their money and into making this investment. It seems to me like all of the product disclosure statements attached to this company would, if ASIC had looked closely enough, have been found to be false and misleading.

When ASIC visited the residents who were renting homes through this scheme, it did not disclose to them that there were problems with the scheme, and the people who were in those homes were none the wiser. They didn't know that their money was on the verge of being lost and that, frankly, the company had already spent most of it, even though they had been told that it was held in trust. They had no expectation to complain at the time, because they did not have the insight and oversight as to how those investments were performing, but ASIC refused to look and to intervene before the company collapsed.

The state department responsible for consumer protection, DMIRS, referred the issue to the Commonwealth back in 2017. There were legal tenancies in place, but they acknowledged that the nature of an investment that overlooks a tenancy and the way it intersects is clearly an issue that federal and state governments need to look at together, which is exactly what our committee has recommended. It has recommended that this issue be reviewed. I endorse the recommendations. I am wholly horrified by what has happened to these victims of this financial collapse, and I wish I had longer to debate the issue tonight.


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