Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

My question is to Senator Coonan, the Minister representing the Assistant Treasurer. I refer to the Westpoint financial scandal, in which thousands of elderly Australians have lost up to $400 million of their superannuation retirement savings. Is the minister aware of the revelations on last night’s ABC Four Corners program that a Mr Richard Beck earned $9.2 million in commissions for enticing elderly Australians into Westpoint investment entities? Further, is the minister aware that the receiver, Mr Mark Korda, has identified that financial planners associated with Westpoint made more than $50 million in commissions? When is the government going to toughen regulation of commission based selling to protect Australian superannuation from Westpoint type rip-offs?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

I thank Senator Sherry for the question. The information I have in relation to the ABC’s Four Corners Westpoint special, to which Senator Sherry refers, is that Mr Beck was a director of a number of key Westpoint entities. Based on publicly available information, there are ample grounds for suspecting that there have been a series of breaches of the Corporations Act 2001. Conviction of certain breaches of the act has certain consequences that include the automatic disqualification of a person from managing corporations, and there is a strong possibility that Westpoint was insolvent at an earlier stage than originally suspected. The Corporations Act provides for heavy civil and criminal penalties for directors engaging in insolvent trading.

Senator Sherry specifically raised issues to do with compensation, commissions and losses in relation to superannuation. The program reported that some financial planners who promoted the Westpoint investments do not have professional indemnity insurance in place. This indeed may create difficulties for investors who receive defective advice from these planners in obtaining compensation. Appropriate compensation arrangements will become mandatory for all financial service licensees on 1 July 2006 after the transitional phase ends.

In relation to self-managed superannuation funds, many of the Westpoint investors decided to invest their retirement savings outside the prudentially regulated superannuation sector. They sought to gain full independent control over their investments by establishing self-managed superannuation funds. Taking this step necessarily implied assuming greater responsibility for their investment decisions. The government has put in place arrangements that are due to come into effect on 1 July this year in relation to dealing with appropriate compensation arrangements, which will become mandatory for all financial service licensees.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. My question actually went to the issue of outrageous commissions that were being charged in respect of these products and, in some cases, other superannuation products, which the minister did not address. Is the minister also aware that another principal of Westpoint, a Mr Norman Carey, has established a new financial investment company called Ferntree, with ex-Westpoint employees and owned by Mr Carey’s relatives? What action, if any, has ASIC taken to shut down this new entity and to prevent more Australians being defrauded of their superannuation savings?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

In relation to ASIC actions against Westpoint, they have been quite significant. As Senator Sherry would no doubt be aware, ASIC started investigating the Westpoint mezzanine financing back in 2002. There were a number of actions taken, which included keeping investors informed about court proceedings against Westpoint. An announcement on the case was placed on ASIC’s website in order to keep people informed. In June 2004, ASIC wrote to each investor in the two mezzanine financing schemes which formed the substance of the court action, informing them about ASIC’s concerns.

It is important to understand that ASIC does not prudentially regulate companies such as Westpoint. Westpoint directors were providing statements that Westpoint was solvent as late as 2005. Westpoint auditors were at the same time providing unqualified financial statements for the Westpoint entities and, with respect to the current matters, they are— (Time expired)