Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

On behalf of Senator Mason, I present the report of the Parliamentary Joint Committee on Corporations and Financial Services, Statutory oversight of the Australian Securities and Investments Commission, together with the Hansard record of proceedings.

Ordered that the report be printed.

by leave—I move:

That the Senate take note of the report.

I seek leave to have the tabling statement incorporated in Hansard.

Leave granted.

The statement read as follows—

I am pleased to speak to the Joint Corporations and Financial Services Committee’s report on the statutory oversight of ASIC. I would like to thank the secretariat for their assistance in preparing this report and ASIC officials for their continuing cooperation with the committee. I would particularly like to thank former Deputy Chairman Jeremy Cooper for all his assistance to the committee over the years and wish him the best in his new role as head of the government’s recently announced review of Australia’s superannuation system.

The oversight report covers a number of issues including the lift on the short selling ban; ASIC’s efforts to improve market integrity; and recent corporate collapses including Storm Financial, Timbercorp and Great Southern. The committee also continued to seek information about mortgage fund redemptions, credit rating agency regulation and professional indemnity insurance arrangements for the financial services industry. The ban on covered short selling of financial stocks was lifted on 25 May, exceeding the length of similar measures in overseas jurisdictions. ASIC defended its cautious approach and suggested that a ban could be re-introduced if extreme market conditions justify it. The committee welcomes the lifting of the ban. We will monitor the effectiveness of the new reporting arrangements for covered short sales in bringing transparency to this area.

ASIC has also sought to address the market integrity issues that made short selling such a problem during the period of market volatility. Although the steps ASIC has taken to stamp out false and misleading market rumours have not generally led to successful prosecutions, they claim that their efforts had a deterrent effect. The committee expects that the resources allocated to this task through Project Mint will result in more tangible results in the near future. We also look forward to seeing more effective market surveillance now ASIC has taken responsibility for this from the ASX.

The collapses of Storm Financial and agribusiness MIS companies Timbercorp and Great Southern have led to the committee conducting two separate committee inquiries into the regulatory issues around these events. In terms of the collapses themselves, the committee strongly supports ASIC taking whatever steps it can that lead to prosecution of regulatory breaches, wherever they may have occurred.

Freezes on redemptions from mortgage funds and cash management trusts continue. A number of hardship payments have been made so far, and ASIC has announced that it will extend the scope for hardship payments to assist those who remain affected by the freezes. But the task of unfreezing these funds is a difficult one—they need new funds to allow redemptions, yet such an inflow of funds is unlikely while they remain frozen. The committee welcomes the expansion of hardship payments and will continue to monitor this sector.

The new arrangements for the regulation of credit rating agencies have been delayed until the first of January 2010. These changes will require credit rating agencies to hold an Australian financial services licence and report on their ratings processes and on how they manage conflicts of interest. ASIC told the committee that the delay is due to international developments. The committee reiterates ASIC’s warning that the ratings provided by these agencies should not be blindly relied on.

Finally, the phasing in of professional indemnity insurance requirements for financial services providers is causing concern in the industry. Cover is getting more difficult to obtain, which might cause problems for smaller operators when the implementation period for compulsory cover concludes at the end of this year. The committee will continue to seek further updates on this problem as the requirement for a higher standard of cover begins. The committee would also like to see ASIC better explain the limited capacity for PI insurance to compensate investor losses.

Question agreed to.