Senate debates

Wednesday, 19 November 2014

Regulations and Determinations

Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014; Disallowance

3:53 pm

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

I, and also on behalf of Senators Xenophon, Muir, Lambie, Whish-Wilson and Madigan, move:

That the Corporations Amendment (Streamlining Future of Financial Advice) Regulations 2014 be disallowed.

I note that this is not a decision or a disallowance that has been taken lightly. The reasons to disallow these regulations are manifest. There are three particular reasons that I want to draw the Senate's attention to. Firstly, the parliamentary process has not been properly treated here. Secondly, there has been a policy overreach. Finally, there are clear problems within the industry that need to be addressed. I do this noting that there are thousands of victims of financial crime out there who deserve to have proper, strong protections in place. What these regulations have done is weaken a set of laws that were designed to make sure we had the maximum level of protection.

Firstly, I want to note that there has been a whole team of senators that has come together to make today a reality. I acknowledge the incredible work of Senator Xenophon, Senator Muir, Senator Lambie, Senator Whish-Wilson and—

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

I would like to see what Senator Lambie's and Senator Muir's contributions were!

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

Starting the debate, I do want to acknowledge there are different people with different views, and people in this chamber are entitled to disagree and to have different views on substantive pieces of legislation. But I want to put forward the case as to why I believe this is a disallowance that is necessary and these are regulations that need to be removed.

This first big issue I have has been the entire process that has been undertaken. The minister would be well aware that the regulations we are discussing pre-empt legislation which is currently before the parliament. Almost every substantive measure in the government's FoFA wind-back bill was put into regulations on 30 June and took effect less than 24 hours later on 1 July. Let's be clear about this: on 30 June, the day before they needed to come into effect, these were rammed through—a series of regulations that were rammed through. The changes to regulations made to the operation of part 7 of the Corporations Act were not routine and were not uncontentious. Rather, they were sweeping in their effect, and they fundamentally changed the operation of the law.

I have no issue with a minister being prepared to bring legislation into this place to change the law. As a minister of an elected government, the minister has a right to do that. But proper changes and proper process required a proper parliamentary debate where senators would have had the opportunity to move their amendments, to participate and to put forward different views. The minister's strategy was to make his changes to financial advice laws with a stroke of a pen and to then ask the parliament to fall into line, lest the industry be disrupted. It was an audacious strategy but was without principle and without respect for due process.

The Senate's own Standing Committee on Regulations and Ordinances has forensically examined the process here and found the minister himself has gone too far. The Senate's own regulations and ordinances committee found that he minister had offended scrutiny principles by making regulations which are so far removed from the law they should be done through a substantive legislative process. The committee also found that the minister even exceeded the regulation-making powers in the Corporations Act by, in effect, 'suspending the operation of duly made law'. Finally, the Senate's own regulations and ordinances committee found that allowing the regulations to stand was creating a precedent where the government of the day might seek to implement its policy agenda without the full scrutiny of parliament. Indeed, the seriousness of these matters is reflected in the fact that this disallowance we are debating today was originally actually initiated by the chair of the Senate committee himself, Senator Williams.

My second big issue in why I believe this needs to be disallowed is there has been a massive policy overreach here. Turning to the substantive details of the regulation, there can be no doubt that they constitute significant policy change, deliberately and dramatically changing the operation of the law in respect of financial advice. The regulations make substantive changes to the character and operation of the best interest duty—a duty which is at the heart of ensuring consumers' interests are always put first. The regulations gut the duty by removing the only element, the only requirement, for an adviser to exercise judgement, care and objectivity—the so-called s961B(2)(g)clause. Further, the regulations allow an adviser to agree to limit the scope of advice without even having to take into consideration the client's own best interests.

The second substantive change is that the regulations permit the payment of conflicted remuneration—or kickbacks—from products provided by financial advisers. Let's be clear what it does: the law itself says that you cannot have conflicted remuneration. Then it says that secret sales advice and kickbacks will not be treated or dealt with as conflicted remuneration.

Perhaps worst of all is the return of commissions on income stream products, despite the minister claiming repeatedly that he will not bring back commissions. I urge those senators here to track down the fantastic interview by Alan Jones of Senator Cormann on this matter—actually, I previously tried to table it in the chamber and was not given leave—where he outlined and went through the detail and the falsehoods that have been presented when it comes to these laws. I want to draw the Senate's attention to this issue of bringing back commissions. Let us be clear: while the language in the law itself says that these kinds of commissions cannot come back into being, it creates loopholes and exemptions in a manner that a system identical to a commissions structure could develop. Nothing is clearer than that. I reject the notion that a secret sales bonus and a sales commission are somehow two mind-blowingly different things. They are not. They are the same thing, structured and argued in a different way.

There is a reason why not a single consumer, advocate or representative of those out there who have suffered from financial crime supports the regulations that have been imposed on this place—not CHOICE, not National Seniors Australia, not the Council on the Ageing and not the many victims groups whose voices for too long have been silenced in this debate. Every single one of them opposes this. I note Senator Lambie is in the chamber, and I also acknowledge the work that the veterans groups have been doing in this area, noting that veterans are some of the people most susceptible, unfortunately, to being taken advantage of. Why? When they return from duty and are sitting on a small pile of money they were perhaps fortunate enough to be able to save while they were overseas representing us and in combat, they become a prime target for the sharks, the criminals and the con men who try to take advantage of such people.

Let us be clear: our point is not that the entire sector is bad; that is not the case. Most of the financial advice industry is made up of incredibly fantastic people who are trying to do the right thing. The problem is that a handful of crooks, criminals and con men have given the industry as a whole a bad name. We have a responsibility in this chamber to ensure that the highest standard is set not only to protect consumers but also to help protect those in the industry who are trying to do the right thing.

Let us be clear about who supports the government's position on this: four big banks and AMP. That is where their support in this debate rests, not with the consumers groups or the advocacy groups. In fact, repeatedly we have seen different groups within the financial planning industry themselves coming out about this. The Financial Services Council is run by John Brogden, a former state Liberal leader. He is not some kind of socialist who has been running a Labor Party line, as Senator Cormann will argue. This is a former Liberal Party leader who has put his hand up and said: 'We have massive problems in this industry. The industry is incapable of self-regulation and we need to make sure a higher standard is set.' When the industry itself is saying there are problems, it is time to sit up and listen.

There are a series of major problems in this industry. This is an industry which, unfortunately, has been tainted by the behaviour of a handful of people. I want to tell the chamber about the Holt-Norman victims, the victims we heard from during the Timbercorp collapse and what has been going on down there in Melbourne. Last week, we had a series of Senate hearings, including in Melbourne, where we heard some harrowing stories and tales about people who have been conned, cheated and ripped off. Those victims actually came here today to speak to senators to tell their stories about how bad financial advice, poor practice within the sector and industry, and pre-FoFA conditions allowed for behaviours and activities that, frankly, we as a society have gotten together and deemed as so reprehensible that they should never be allowed to happen again. What happened to most of those victims would not be allowed under the current laws as they stand. What could happen is that those same con men and cheaters could restructure how they give those victims bad advice. That could happen. That is the issue here. That is the concern that people like me have.

We are in a privileged place here in the Australian Senate. We all have a voice; we are all able to be heard. The reality is that there are a lot of people out there who do not have the privilege that we have and do not have the opportunity that we have. They, unfortunately, do not have the same access to the sorts of resources that a lot of us have about financial advice. Our responsibility is to establish the highest standards, rules and protections to make sure that people are not being hurt and abused.

Today Senator Cormann has repeatedly made reference to the fact that there are elements within the regulations, which we propose to disallow today, that those on my side of politics and other sides of politics have said in the past are reasonable compromises. That remains the case. We urge the minister: if these regulations are disallowed, come to the table, sit down and initiate a consultation process over the substantive legislative framework. Allow the senators in this place to have a debate, express their different views and discuss the different amendments that I know many senators in this place wish to put forward.

I also want to reject a falsehood that has been presented, and that is that somehow the financial advice industry is going to fall apart if these changes are made through a disallowance today. Nothing could be further from the truth. The words of the former minister responsible for this, Senator Sinodinos, were crystal clear: there is a facilitative process available to ASIC—

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

So I assume you support that?

Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

Order on my right!

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

I will get to the substantive.

Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

Ignore the interjections.

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

A facilitative process is available to ASIC for the process of implementation to allow these matters. I would urge the minister and the government to make sure of this in their discussions with ASIC. There are those on this side of the chamber who are very reasonable about this matter and acknowledge and recognise the fact that the allowing of this disallowance will mean a facilitative approach will need to be initiated and entered into with ASIC. I think that is a reasonable thing to do.

It is reasonable to say that, when there have been changes, there needs to be a facilitative approach. I note that people like myself have spoken to ASIC about this specifically. I also note that ASIC have actually done this in the past. They did this during previous Labor and Liberal governments, where they said to industry, 'Let's be clear about this: there are going to be some changes and there are going to be new laws. We are going to work with you and with business for implementation.' So I reject the notion that somehow the industry is going to fall apart overnight.

I do believe that we have to be setting a higher standard. We have to be setting a higher bar. I and others in this place believe that the FoFA regulations that were brought in by Senator Cormann in the dead of the night, moments before they were to come into effect, not through legislation but through regulation, have created a situation where the only opportunity available to us is to reject them all. I urge the minister to bring forward legislation, allow us to be part of the debate and engage with the crossbenchers and the Labor Party and say—

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

We tried that. We did that.

Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

There are parts of the legislation that people here are prepared to support—and you touched on them earlier—and there are parts that we are not. But that is how this place should be run. These are bad regulations. These are bad laws. They exceed their power. They go too far. They fundamentally change the nature of financial advice laws in this country, and they need to be rejected.

I reject the notion from the minister that this is somehow about industry super and that that is the only thing that this is about. It is not about that at all. There are thousands of victims of financial crime out there. We are going through a Senate process at the moment, and I want to put on the record that, while there will be disagreement—and there is a disagreement in this place at this point in time—as to the nature of dealing with the issue, there has been an incredible amount of cross-party support in trying to get to the bottom of a lot of these matters. I acknowledge that the former chair of the Senate Economics Legislation Committee and the deputy chair of the references committee are here with us. Senator Heffernan, Senator Williams and others have all agreed about how horrible some of these crimes have been, though there is a difference of opinion as to what is the best way of dealing with that. So I want to get on the record—

Senator Bushby interjecting

There is a legitimate policy disagreement about the best way of tackling and approaching this. I know there were a few comments earlier from Senator Back—though I do not think he meant them as seriously as he said them—but no-one here is trying to claim that they are the only ones who care about this issue. There is a legitimate disagreement, and we are entitled in this place to have legitimate disagreements on what the best policy response is. My belief, and the belief of many other senators, is that the best policy response is to make sure we have a very, very high standard. Unfortunately, there are elements of these regulations that I and others believe water down these regulations—that weaken them—and allow a handful of crooks, criminals and con men to take us back to the bad old days of financial planning where a handful of financial planners were able to give the entire industry a bad name.

This is bad law. There has been a bad process and it is bad policy. Frankly, the government should be forced to go back to the drawing board, bring their legislation before the chamber and allow a debate where the many different views of different senators in this place can be put forward—and I know there is a series of different amendments that senators will be moving as part of that legislative process. Allow us to have this debate properly. Bringing in in the dead of the night these regulations that have fundamentally changed how financial advice laws in this country operate was not the right the thing to do. It was not the right process, Minister. I think it is important that we use the opportunity that we have now, if these are disallowed, to go back to the drawing board and bring forward legislation and allow an open, honest and serious debate.

Yes, Minister, people like myself and others on this side of the chamber very reasonably respect the fact that there will have to be a facilitative approach to allow for the implementation of the law that we will be returning to. I think that is a reasonable and sensible thing to do, and it is how things have operated in the past. If the minister and ASIC were prepared to bring forward a reasonable facilitative approach and process, I think you would find that there would be a lot of support—though I do not want to speak on behalf of other senators—for that form of implementation process. These are bad laws. This has been a bad process. I urge the Senate and all senators to support this disallowance motion.

4:13 pm

Photo of Michael RonaldsonMichael Ronaldson (Victoria, Liberal Party, Minister for Veterans’ Affairs) Share this | | Hansard source

For those who are listening in this chamber and listening elsewhere, we have just had 20 minutes of complete and utter weasel words—softly spoken but complete and utter weasel words. Senator Dastyari and others have had probably 12 months to come up with some solution to this issue—but, no, they have not. This is a disallowance without a fix. This is a disallowance that is completely duplicitous. We know exactly what this is all about. This is about you supporting your mates in the union movement and using what has happened with people in the past to pursue your cheap, philosophical view of life and your support for the Australian Labor Party. I am old enough to remember a song by AC/DC, Dirty Deeds Done Dirt Cheap. This is a dirty trick, a dirty deed, but it has not been done dirt cheap. This is a dirty trick paid for by the CFMEU and other union leaders, and Senator Dastyari sits there, wrings his hands and his voice softens and he says, 'No fix for this disallowance.'

Not only that but we saw today the most disgraceful intervention in the due process of this Senate that I have seen in the 10 years that I have been here. Senate question time is the opportunity for this government to be questioned and for it to respond accordingly. Halfway through Senate question time today, question time was completely finished. It disenfranchised Senator Day and disenfranchised those that should have had the opportunity to have their voice heard. But it goes further than that. The wringing hands—and I am concerned about this—from Senator Dastyari mark his utter duplicity, and the duplicity of the Australian Labor Party. Guess who has had their voice taken away today with this stunt?

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Big banks.

Photo of Michael RonaldsonMichael Ronaldson (Victoria, Liberal Party, Minister for Veterans’ Affairs) Share this | | Hansard source

Well, you would know a lot about them, old boy. I reckon you have probably had your fair share of them as well. What has happened today is that those people who should have had the opportunity to have some input into this have lost that right to do so. Everyone in this chamber knows full well that, if there were matters that were to be put to the government, we had until next Thursday for that to be done. This matter did not need to be disposed of today. There can be only one reason for that. It is crocodile tears for those who have been affected, it is crocodile tears for those who should be protected, and it is only about the cheap motives of the Australian Labor Party.

There are some crossbenchers in this place who have not been here for long, and I am prepared to excuse them for what happened today during question time. But I am not prepared to excuse the Australian Greens and the Australian Labor Party and some crossbenchers who have been here for some time who have cried crocodile tears for due process. They are opposed to gags, which are spoken about by the Australian Greens particularly and they have done that since I have been in this place. Well, today, they simply lost any credibility. I can assure the Australian Greens and the Australian Labor Party that every time you put this up we are going to cite your deplorable behaviour today, because you stand utterly condemned for your behaviour today.

It is quite obvious to me that most of the Australian Labor Party have a pathological hatred of the small business sector, and they always have, because the small business sector does not support the Labor Party's philosophical view, which is about big unions and big business. The small business man or woman just gets thrown out. I say to the crossbenchers who have voted the way they have today: you have let down a group of people who were looking to you to provide them with a voice. You have taken away from them, with your behaviour today, the opportunity to have their voice heard. They do not expect the Australian Greens to hear their voice, because they never have. The Australian Greens hate small business. The Australian Labor Party hate small business. That we all know; that is a given. What I had hoped was not a given was that some of the crossbenchers here today who were clearly put into this place on the back of small business men and women would let them down, but they have, in a manner those men and women will never forgive.

What about the employees of a multitude of small financial planning businesses across Australia? Where has their voice been heard today? I say to the crossbenchers: how are you going to look them in the eye tomorrow and say, 'I had the opportunity to discuss this matter up until Thursday of next week and I decided I was not prepared to do so; I was going to back the Australian Labor Party because of their complete and utter ownership by the trade union movement, complete and utter ownership by the industry unions'? We on this side all know what the ramifications of that will be.

If the outcome of the Victorian state election Saturday week is that the CFMEU runs the state of Victoria, then the ramifications of that will be felt for a generation. Of course, it will be lauded by the Australian Labor Party. At nine o'clock on Sunday morning, if the results are known—and I do not think it will go this way, but if it does—guess who will be knocking on the door of Daniel Andrews's office? The CFMEU. What will they be saying to Daniel Andrews? 'Time to cough up, brother. Time to pay back.' The dirty deed has been done but it has not been dirt cheap. There have been tens of thousands of dollars of union money going into the Australian Labor Party, and guess who is the one that is the collector? Who is the big collector of the big bucks? Who is the collector of big favours from a change of government, if there is one? The CFMEU are the big collectors. They are the big-buck deliverers and they will get every single thing that they asked for. I say to the people of Victoria: if you want the CFMEU knocking on Daniel Andrews' door on Sunday morning, you should be acutely aware of what the ramifications of that will be. I do not think the Victorian people are going to let someone like the CFMEU, through their wholly-owned subsidiary, Daniel Andrews, run the state of Victoria.

I come back to this disallowance motion. I say to the crossbenchers: what are you going to say tomorrow when those small firms dotted around the country—decent men and women running decent businesses and employing decent Australians—ring up and say, 'Why wasn't my voice heard yesterday; why did you gag debate; why did you not let the Australian Senate have until next Thursday to see if we could get some resolution?' Oh no, it had to be knocked off today—we had to disenfranchise those people. I will tell you where a lot of them are from. They are from regional and rural Australia; they are dotted in small towns around this country and providing advice to a multitude of people. Those people they are providing advice to might be the farmers or they might be the tradespeople—they might be the plumbers, they might be the electricians or they might be the butchers or the employees on farms. But, oh no, apparently their voice was not worth hearing. Apparently their voice runs second to that of the trade union movement. I say to the crossbenchers that they have been duped by the Australian Labor Party. Do not think for one minute that the handwringing and the duplicitous language used by people like Senator Dastyari in any way mean that what happened today should be countenanced by anyone.

I say to those small business people and their employees who are listening to this or who will read this debate: there is only one group in this parliament who was prepared to support you, who was prepared to have your voice heard, who was prepared to sit down with the Australian Labor Party and others and see if we could have a resolution to this by next Thursday. But this disallowance motion did not include one word about fixing things. It did not include one word about trying to resolve this issue. It is just a dirty political trick to support the trade union movement, who we know completely owns the Australian Labor Party. I am bitterly disappointed on behalf of tens of thousands of Australians that some on the crossbench have allowed the voice of those people who supported them to be completely subsumed by the Australian Labor Party and big unions. What a seriously sad day it is for this chamber when we see question time cut off at the knees; when we see an Independent senator denied his right to ask a question; when we see debate gagged when this government said we had until next Thursday to reach some resolution of this matter so let us have the debate over that period and see if we can get somewhere. That was a perfectly reasonable offer. There is no mention from Senator Dastyari about that; no mention about the fact that on the table was the ability for this Senate to have a long and sensible debate about a resolution. There was no word of that—just the handwringing and the duplicitous language.

This is an opportunity lost for this chamber. This chamber had the opportunity today to send out a very clear message that we believe in people having the right to have their voices expressed through this chamber. We abrogated our responsibility to those people today in the most shameful of ways. Tomorrow morning, when the papers come out and people realise what has happened, it will be too late—but I hope there will be cause for reflection by many in this chamber.

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

They’ll be cheering!

Photo of Michael RonaldsonMichael Ronaldson (Victoria, Liberal Party, Minister for Veterans’ Affairs) Share this | | Hansard source

Only someone completely and utterly owned by the trade union movement, such as Senator Cameron, could say they will all be cheering. What a remarkable comment from someone who simply does not understand and who has never understood small business, does not want to understand small business and does not want to see the due processes of this place followed. A really silly interjection like that adds nothing to the debate.

When an opposition are given at least six months, and probably 12 months, to have some constructive input into a policy and they refuse, then they have abrogated their right to be included in the debate. But they should not, through their duplicitous language and handwringing, have abrogated the right of those on the crossbench to discuss this matter further. This is a really sad day for this place. I intend reminding each and every one of you who have destroyed some of our fundamental rights, such as the right to ask questions during question time, about this for as long as I am in this place. The Australian Greens and the Labor Party cannot ever come into this place bleating about due process again, because today they denied themselves the right to a place at the discussion table in relation to due process. They destroyed that right and today they have collectively destroyed the good governance of the Senate of Australia.

4:29 pm

Photo of Jacqui LambieJacqui Lambie (Tasmania, Palmer United Party) Share this | | Hansard source

In rising to support the motion before the Senate to disallow the Corporations Amendment (Streamlining of Future of Financial Advice) Regulation 2014, I would firstly like to apologize to my Tasmanians, especially those who have reached the stage in life when, having worked hard and saved every cent, they have created a nest egg that they would like to invest for their future and their family's future. I have let you down and I am sorry. In the past, my vote in the Senate helped create the situation where today the laws of our country do not provide proper protection for investment funds.

After much consultation with Tasmanians, people bodies like the National Seniors, and consumer advocates like Choice, I have changed my view and now acknowledge that the laws of Australia as they stand do not guarantee that the best interests of investors are put before the profits of the big end of town. A Choice briefing on the Liberal government's FoFA laws says:

The Bill and associated Regulation will result in a significant reduction of protections for consumers seeking financial advice. Conflicted or poor advice, much of this linked to ongoing financial advice scandals, have caused consumers significant detriment with many losing life-savings and homes.

Today Choice released a statement which said:

We applaud the stand of Senators who have decided to put the interests of consumers ahead of the interests of big business

The current regulations leave mum-and-dad investors open to being ripped off by unscrupulous financial advisers who, we all know, receive kickbacks and secret commissions to sell unsound and risky financial products or schemes. This is not a hypothetical or made-up allegation. Unfortunately, successive Australian governments have failed to protect our investors. Ordinary Australians, like members of our ADF, nurses, police officers, public servants and small business owners, will benefit from a successful disallowance motion today.

Today I am proud to say that I am going to vote with like-minded senators—the coalition of common sense—to fix an injustice that I helped create just a few months ago. Today, now fully aware of the facts, I will vote according to my conscience and in the best interests of my Tasmanians. I will not this time be dictated to or bullied into voting to protect the big end of town. Today abusive threats to kick me out of the Palmer United Party will not interfere with my free and fair performance as a member of this parliament.

When average Australians seek financial advice from the big financial institutions, it becomes a David and Goliath battle—and in this battle David is no longer armed with even a slingshot. All I am doing today is arming the average Australian investor with rights under the law to give them a fair chance in that unfair battle with Australia's financial Goliaths.

At the heart of this FoFA battle is a case of human rights—the right of the weak to be treated fairly by the powerful. The history of humankind has been characterised by battles between the weak and the powerful—and more often than not we get the predictable outcome of the powerful winning. AC Grayling, the noted British academic, sums up the human situation in his book Towards the Light, in which he writes:

... for the strong do what they can and the weak must suffer what they must.

That is not the Australian way, that is not the Tasmanian way and that is not my way. Our nation, our culture, has evolved to take care of the weak, the sick and the elderly.

Australian back the underdog in a fight. We fight—and I fight—for what is right and just, not for what is powerful. While it is not a sin to be powerful, it is a sin to be powerful and to abuse that power. It is a sin to pander and suck up to power. It is a sin to turn a blind eye to power's abuse. It is a sin to be an accomplice to power's abuse. That is what is at stake in this matter, this motion to disallow the government's FoFA regulations. The big end of town, the billionaires, the rich and powerful, have been allowed by successive governments to abuse their powers.

There are many victims of bad financial advice. There are many victims of dodgy investment schemes peddled and facilitated by Australia's rich and powerful financial institutions. The voices of those victims will be heard in this chamber and those voices will be given equal weight, and will be considered to have equal merit, as those of the rich and powerful.

I want to briefly address the sly, personal attack that the Leader of the Palmer United Party has waged against me in public in recent times. I understand that he is under pressure because of bad political decisions and legal action that has been taken against him. However, that does not give him the right to spread hurtful rumours about me in an effort to intimidate—or to interfere with the free and fair performance of a member of this Senate who represents Tasmania. Putting aside the personal hurt these actions cause, these continual outbursts have become a distraction that takes the focus away from the real issues, the issues Tasmanians care about.

Tasmanians care about a fair pay deal for the men and women of the Australian Defence Force and about better national security. They care about protection for investors from dodgy financial advisers, who—if the Liberal government have their way and get to keep these lax FoFA regulations—will still be able to receive secret kickbacks from the big end of town. Tasmanians care about protection for the 10,000 direct and indirect Tasmanian jobs at risk from the unfair mainland RET scheme—which is nothing more than a hidden tax and which, for no good reason, increases the cost of living for our pensioners, families and businesses. I will always vote as my conscience dictates and in the best interests of all Tasmanians. I will not be told how to vote by anyone. My only boss is the people of Tasmania. It is their approval I seek; it is their opinion that counts for me.

I will vote for the disallowance of the FoFA regulations. This action will protect the weak—ordinary Australian investors—against the powerful—Australia's big banks and large investment companies, who have a proven record of recklessness and irresponsible behaviour. I will not allow the Liberal Party and their supporters to wind back consumer protection when it has been shown that the financial advice industry currently acts in a scandalous manner.

4:37 pm

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

I stand to support the disallowance motion by Senator Dastyari, and I do that because this is an issue of some significant national importance. This is an issue that I have been involved in for some time as a senator during my period of serving on the Economics Legislation Committee and the Economics References Committee. What I have seen reported to that committee in its various inquiries and through the estimates process leaves me very concerned that ordinary Australians are not getting a fair go. I am extremely concerned that the coalition is putting the big banks, big money and big donations before the interests of the Australian community. That is the reality of what we are facing here.

We have heard the coalition argue about red tape. I have said it before: one person's red tape is another person's protection. And the protection that we are putting in place—that the Labor Party put in place previously—is protection to ensure that the rip-off merchants do not get into the bank balances of ordinary Australians and do not end up destroying the lives of ordinary Australians who have worked hard their whole lives to put together, in many cases, a very modest bank balance to invest for their future. Yet we have this cavalier approach from the coalition that simply argues that this is about the CFMEU. Give us a break! This is about the people who have lost their homes. This is about the people who have suffered nervous breakdowns. This is about the people who have lost their health. This is about the people whose families have been ripped apart because there were not adequate protections in place prior to the FoFA regulations and legislation.

That is the issue that we should be talking about. I have heard some pretty poor contributions in my time in this place, but Senator Ronaldson's contribution almost takes the cake. Senator Ronaldson was roaring away, bellowing away, but I never heard him mention any of the issues that we are debating here. He mentioned none of the issues about proper regulation, proper legislation and proper controls to protect the Australian public against the rip-off merchants out there in the financial sector making themselves rich, driving around in their Mercs, driving around in their Bentleys, out there on Sydney Harbour in their big boats—those are the protections that are in place here. That is what is going on here. And it is clear that the arguments that are being put up, that this is going to affect all these small businesses, are so much nonsense. The reality is that 80 per cent plus of financial planners are linked to the four big banks and to the AMP. That is the reality. This is not about small business; this is about big business. This is about big banks who have allowed, under their name, some of the most egregious rip-offs of ordinary Australians ever in this country. It is about ensuring that the big banks take some responsibility to bring about a proper course of conduct in the financial planning industry. It is about trying to make sure there are no more Storm Financials. It is about trying to make sure that there are no more Trios, no more Timbercorps, no more Commbank finance problems and no more Macquarie Private Wealth rip-offs. These are the issues, and all the bellowing and all the ideology and all the nonsense you hear from Senator Ronaldson will not make any difference to that.

It is clear that this Senate has considered the issues and that the crossbenchers have considered the pleas from individual Australians to be protected against the rip-off merchants. They have listened to Choice. They have listened to the other pensioners associations, to the Council on the Ageing and to National Seniors. They have listened to their concerns about what is happening to the consumers in this industry. And they are arguing that you cannot let the market rip when it comes to the finance sector—there have to be checks and balances. There have to be controls. There has to be a government that looks after the interests of everyone in this country who is investing through the big banks and their financial advisers.

The problem we have—and we have seen it in New South Wales—is that big business and the big banks have huge influence on the coalition—a massive influence. You have just seen what happened in Newcastle, where the rich businesspeople drive up in their Bentley, the coalition politician jumps into the passenger seat and the rich driver of the Bentley hands over the brown paper bag full of money to get influence with the politician. That is what is happening with this mob now. That is exactly what is happening over here. It is the big banks, it is AMP and it is the big business controlling the coalition, because there is no-one else in this Senate supporting the position that has been adopted by the coalition.

When the crossbenchers have had a chance to go back to Tasmania, Victoria and New South Wales and listen to what people are saying about the problems associated with the rip-off merchants in the finance sector, they have come back and changed their view. They are entitled to listen to the community. They are entitled to listen to age pensioners who are being ripped off. They are entitled to take a position that says, 'We must fix this terrible position that the coalition have brought about where the checks and balances and controls that are in place are no longer there.' This goes back some time. This goes back a long way.

I heard, again, Senator Dastyari being attacked. It just seems to me that Senator Dastyari is doing a good job, because every day you get personal attacks on Senator Dastyari—attacks on how he looks, attacks on what he is doing. That is not how we should be dealing with the issues in here. I think the way the Leader of the Government in the Senate engaged in those personal attacks on Senator Dastyari yesterday demonstrated that Senator Dastyari has really exposed the coalition. He has exposed the coalition on the basis of their support for the banks over the community. That is what he has done. That is why you hear the roaring and bellowing of senators like Senator Ronaldson, with absolutely no intellectual underpinning to the argument—just these arguments about the CFMEU, arguments about industry funds and arguments about unions. I have been involved in this debate now for some years and these have never been the issues that have been raised anywhere in any of the inquiries into this problem. The issues that have been raised have been the lack of controls on the big banks, the lack of controls on financial planners and the lack of controls that saw Trio rip off people all over this country.

Labor took that into account and Labor set about trying to deal with it. When Labor put up the Corporations Amendment (Future of Financial Advice) Bill 2012, there were two FoFA measures. One was a requirement for providers of financial advice to obtain client agreement to ongoing advice fees every two years and enhanced annual disclosure fees and services associated with the ongoing fees. We said: 'If you are going to take money off people, you have to disclose what you are doing. You have to advise them every two years why you are being paid.' What is the problem with that? We said that we should enhance the ability of ASIC to supervise the financial services industry through changes to its licensing and banning powers.

One of the most excruciating times I have ever had in this place was watching Senator Williams, a coalition senator, who was a bit of a pit bull—if I can use that word nicely—against the excesses of the financial sector in this country. He took up a position to expose the problems that people were having with these companies and these big banks and these financial advisers. During an estimates where I was a member of the committee with Senator Williams, I thought ASIC treated Senator Williams with contempt, and I did not think that was the right and proper thing for ASIC to do. I went down to the estimates hearing and I went after ASIC and I put 16 questions on notice to ASIC. Then I had a discussion with Senator Williams and I recommended to Senator Williams that he should go and seek the support of the Treasurer at the time to get an inquiry going into these financial planners and into ASIC. Senator Williams did that.

It is unfortunate that Senator Williams has gone from being a pit bull to a bit of a poodle on this issue, because he has been shirt fronted—to use that word—by the Liberal leadership on this issue because it is exposing the banks, it is exposing the financial planners and it is exposing AMP. So Senator Williams will probably come in here, if he is involved in the debate, and tell you it is not really about all the issues he was concerned about in the past; it is now about vertical integration; and if you fix vertical integration everything is going to be okay. That is not the case. Unless you have proper regulation, unless ASIC are out there dealing with these issues and looking after ordinary Australians, unless ASIC have a proper approach and the powers to deal with these people, it will not go away. Senator Williams has been very good on this issue and you could certainly look at—

Photo of Barry O'SullivanBarry O'Sullivan (Queensland, National Party) Share this | | Hansard source

Till now.

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

Senator O'Sullivan says Senator Williams has been good up until now. They have got Senator Williams under control. The Liberals have got Senator Williams under control, as they always do with the National Party—the doormats of the coalition, who get stood upon, who the Liberals wipe their feet on day in, day out in this place.

We heard this argument about all the small businesses in the bush. Let me tell you about some of the people who have been ripped off in the bush, ripped off in rural and regional Australia, by people acting for and on behalf of the big banks. They are the people who have lost their house. They are the people who are in hospital because they are crook and sick because their house is being ripped from them. They are the people who have lost every cent they have put together over the years. And the National Party, through Senator Williams, were on the case, but, as the National Party do all the time, they are all talk when they are back in their electorates and when they come back here they do nothing. They are all talk and no action—that is the National Party. They are the absolute doormats of the coalition.

We need to be in a position where we can get back to some proper checks and balances and we can get over this nonsense that we will hear from Senator Cormann about timing, the nonsense we will hear from Senator Cormann about red tape and the nonsense we will hear about unions. This is about ordinary Australians being protected by their government. The people who know what is happening out there—the pensioner groups, the seniors groups—are saying, 'We need protection from these rip-off merchants,' and that is what we have done. We put that in place and when the coalition came in and their political backers and financiers, the banks, sat them down and said, 'This is not on; you must change it,' then Senator Williams was pushed to the side, the Nationals were pushed to the side and the Liberals put their financial backers before the pensioners and the retirees of this country. That is the bottom line. That is what has happened here.

Senator Bushby was on the inquiry. He went there some of the time and heard some of the evidence, but when you have one of the biggest reports ever from a committee of inquiry, which lays out all the problems in the finance sector which have to be dealt with, Senator Bushby does six pages of waffle, six pages of nonsense, six pages of capitulation to the banks and the AMP. So, if you see Senator Bushby on his feet, you know that he had an opportunity to do something about this and failed miserably. He failed absolutely miserably to do anything about it. This is about ensuring that we have proper checks and balances; it is not about red tape and it is certainly not about the CFMEU.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Yes, it is.

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

You guys across there—mostly guys; there are no women there again. These blokes over there, who are capitulating to the big banks and to the AMP, just do not get it. They will be okay. They are living off a big, fat salary. They are doing all right. They have never had to worry about putting food on the table. They have never had to worry about how they pay the mortgage. These are people of absolute privilege over here, and what they are doing is looking after the people of privilege in this country. They are looking after the banks, they are looking after AMP and they are allowing a rip-off of pensioners in this country.

We decided to do something about it, and the Senate is now determined to overcome and to overturn your cushy little deal with the banks, because the Senate is going to put the interests of retirees and investors in this country before the interests of the big banks. And do not fall for the argument that it is all about us attacking small business and not understanding small business. This is not about small business. As I said before, over 80 per cent of the financial planners are associated in one way or another with the four big banks and the AMP.

So this is not about small business; it is about ensuring that, if people invest their hard-earned savings after years of work and toil, it is protected to the best we can provide, that the government protects it and that we make sure the rip-off merchants are not in there carving up these poor people and leaving them destitute, with mental health problems, sick, with no home and having their family broken up. This is not good and this is why the coalition are more and more on the nose in this country—because they put their ideology and they put their financial backers before what is good policy in this country. It is reprehensible.

4:57 pm

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

After hearing from Senator Cameron and Senator Lambie, the last two speakers, I think I have now heard it all. I have heard Senator Cameron talking about corruption, dodgy deals and sweetheart deals. The factional backer of New South Wales's Ian Macdonald is here lecturing about cushy deals. We know about cushy deals and Senator Cameron, because he backed Ian Macdonald, one of the most corrupt politicians in the history of New South Wales.

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

Madam Acting Deputy President, I rise on a point of order. Senator Seselja should read the decision and the outcome of ICAC. And I have to say to you: if you have any backbone, get out and say that outside! See whether you have any backbone and whether you will say those things outside, you coward!

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Senator Cameron, resume your seat.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

We know how sensitive Senator Cameron is on this, but he should withdraw that and he should not be making spurious points of order.

An opposition senator interjecting

Which am I to withdraw—that he is a factional backer?

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Senator Seselja, take your seat please.

Photo of Doug CameronDoug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | | Hansard source

I will not withdraw. I repeat: if you want to make these accusations, step outside and do it! Make the accusations in the public and we will see whether you have any backbone. I am not touchy; I am just not going to get this from you, you coward!

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Senator Cameron, we can take the temperature down, and you can continue with your remarks, Senator Seselja.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Madam Acting Deputy President, I am seeking your ruling as to whether that is parliamentary language and whether you will allow that to stand or whether you will ask the senator to withdraw.

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Having taken some advice from the Clerk, I think, in the interest of the ongoing robust debate that is part of the chamber, you may take personal offence at the terms that were used—and I am sure that the senator on this side also was very impacted by the comment that you made—but the language that the senator used was not unparliamentary and you should continue your remarks.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Thank you for your ruling, Acting Deputy President. That is fine. That is interesting. It is interesting how sensitive Senator Cameron is—that he does spew out these terms.

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

It would assist the chamber if the senator could move on to some of the substantive matters that deserve debate.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

I am moving on to the substantive. I have not even been able to get started.

Photo of Mitch FifieldMitch Fifield (Victoria, Liberal Party, Assistant Minister for Social Services) Share this | | Hansard source

He is allowed to respond to the interjection.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

And I will respond. He was a factional backer of Ian Macdonald. That is on the record. He looked after people like Ian Macdonald. He can try and walk away from that—

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Can't you say anything? Are you so embarrassed about your position—

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

and he is very sensitive—and Senator Wong is very sensitive about it as well. We see the sensitivity. We cannot get two words out without being shouted down—

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Go on! Defend Mathias!

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Here it is—without being shouted down because of the sensitivity there. One mention!

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I rise on a point of order, Acting Deputy President, in relation to relevance. Perhaps if Senator Seselja actually gets back to what we are debating here and moves on, then we might all benefit from some of his wisdom on the subject at hand.

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Thank you for your point of order on relevance. I repeat: it will assist the chamber if Senator Seselja can go to the substantive remarks on the debate that is before the chair.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

I have barely gotten to my feet, and we were subjected to Senator Cameron talking about doormats and all sorts of things, which we have put up with.

An honourable senator interjecting

I will, and I am. In fact, this is highly relevant to the issue. May I resume?

Photo of Deborah O'NeillDeborah O'Neill (NSW, Australian Labor Party) Share this | | Hansard source

Continue your remarks.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Thank you. I will continue. They are sensitive on the CFMEU links. That is why Senator Cameron spent so much time defending them. That is why he spent so much of his speech defending them, because the CFMEU links are critical to this, because the industry super funds here get a special deal. That is what we are talking about. We are talking about a sweetheart deal for the industry super funds, who leak information to the likes of the CFMEU, who hand over information to the likes of the CFMEU, as we have heard at the royal commission.

I will go to the facts of the type of sweetheart deal we are talking about. Senator Cameron said in his speech: 'What's wrong with having to opt in every two years? What's wrong with that? What's wrong with actually asking people to opt in every two years?' I will tell you. The industry super funds who provide this type of advice are not required to ensure people opt in every two years. In fact, people may not know that they are paying these kinds of fees to the industry super funds. So you can have nondisclosure, if you are an industry super fund, and you can have a situation with those industry super funds where there is no opt-in. So what we are talking about is an absolute sweetheart deal for their mates. That is why we see the sensitivity. That is why we see Senator Cameron shouting across the chamber. That is why we see Senator Wong shouting across the chamber. We have been watching this royal commission and seeing how close some of these industry super funds are to these unions.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

Ha, ha! Look at you!

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Senator Wong laughs. We saw a Cbus super fund coordinator sacked after lying to the royal commission about leaking confidential information to the CFMEU.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

You cannot defend the policy, can you?

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

I am defending the policy, because we are talking about the sweetheart deal.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

You cannot defend the policy.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

Here it is. They cannot listen. They are very, very sensitive. Senator Wong will continue to yell across the chamber.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I rise on a point of order, Mr Acting Deputy President. This is a very interesting speech being presented by Senator Seselja and I ask you for those on your left, especially Senator Wong, to remain quiet while he is presenting his speech to this parliament.

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

There is no point of order, but, senators, I would ask that we let the senators get their contributions out. But I remind senators to be relevant to the debate.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

I will. I will come back to that, but I did talk at the beginning of my speech about how I had heard it all. We talked about Ian Macdonald. Previously we heard from Senator Lambie, who is now, she says, on this issue leading a coalition of common sense. A coalition of common sense led by Senator Lambie! I would say to senators who are contemplating voting with Senator Lambie that a coalition of common sense led by Senator Lambie you have to be somewhat sceptical about.

I will mention in passing that I have a lot of time for Senator Madigan and Senator Xenophon but I think that their decision today, as crossbenchers, to vote to deny another crossbencher a question in question time was pretty disappointing, to say the least. It was pretty disappointing, because I am very sympathetic when I hear from the likes of Senator Madigan about how little time crossbenchers and Independents, in particular, get either for questions or for the debate of their legislation. For them to vote to deny one of their fellow crossbenchers today was very disappointing. If you look at it in the context of some of the discussions we have about giving them more time, it was particularly disappointing.

But let us go to what we are dealing with here in terms of certainty. What we have had is the Senate twice voting to approve these FoFA regulations, twice voting down the disallowance motions that have been moved by the Labor Party and by Senator Dastyari. The uncertainty that is caused by this sudden about-face and by this reneging on a deal by Senator Muir and by Senator Lambie is a particular concern to the coalition and I am sure will be a particular concern to many in the community, who will see that, even when a regulation is backed, it may not be backed in two months, or three months or six months. The very same regulation, with the very same composition of the Senate, on any given day—based on what we are hearing today from Senator Lambie and from Senator Muir—could be overturned. That creates a high degree of uncertainty.

Let's be clear about what this is. It is reneging on a deal. Senator Lambie and Senator Muir did a deal. Senator Muir, in fact, actually got some concessions for the deal that he made. On behalf of the Motoring Enthusiast Party he asked for some concessions, and these were agreed to by the government. The government was asked to give concessions in order to gain the support of Senator Lambie, Senator Muir and others to get the regulations through. The government honoured its part of the deal, and Senator Muir and Senator Lambie cannot be trusted to honour their part of the deal. They walk away. What is their word worth? What is a handshake worth from Senator Muir and Senator Lambie? I will be interested to hear from Senator Muir later on in the debate, because Senator Muir in particular asked for certain things to be done in return for his vote on this issue. They were done and, notwithstanding that, he is now flipping around. So I would be keen, I am sure other senators would be keen and I am sure that many in the community would be keen to know what exactly made him change his view.

It is interesting to look at one of the main claims made by the Labor Party and others in relation to this legislation—Senator Lambie talked about it, but Senator Cameron did not touch on any of the detail of what we are talking about here today—because, when it actually gets subjected to scrutiny, it is found to be false. I would not necessarily call the ABC's Fact Check an organisation that leans to the right. I would not say that Fact Check from the ABC is more likely to back the position of the coalition. I think that would be a stretch. The Fact Check from the ABC looked at some of the very claims we are debating today. The claim was—it was Chris Bowen saying it—that the government's changes to financial advice laws will bring back the type of commissions that encourage financial advisers to recommend risky investments. And the verdict of the Fact Check? Scaremongering was the verdict. The ABC Fact Check looked at these claims that we have been hearing from the Labor Party today and that we have been hearing from Senator Lambie—presumably backed by the likes of Senator Xenophon and others. The verdict on the claim that the government's proposed changes to financial advice laws will bring back the types of commissions that encourage financial advisers to recommend risky investments was that they will apply only to some forms of general advice. They do not bring back old-style commissions. The overall verdict is that this is scaremongering.

Let's be clear about what we are talking about. We are talking about scaremongering. Under the government's legislation, significant safeguards are in place—safeguards which have been outlined many times by Minister Cormann and others. We are hearing that the reason for the shift today by Senator Lambie—and by Senator Muir, presumably, although we do not know exactly why he is shifting—is these claims that even the ABC's Fact Check has found to be scaremongering. The safeguards are there. Let's go through some of those safeguards. The requirement for a financial adviser to act in the best interests of his or her client is enshrined in section 961B(1) of the Corporations Act. That remains in place and unchanged. There is no amendment. The current section 961B(2) outlines the steps an adviser may go through to show that he or she has satisfied the duty to act in the best interests of his or her client. The first six steps effectively remain unchanged. Let's go through those. They have to identify the subject matter of the advice sought, whether explicitly or implicitly. They have to identify the objectives, the financial situation and the needs of the client that would reasonably be considered as relevant to the advice sought on that subject matter.

They have to identify the objectives, the financial situation and the needs of the client that are disclosed to the adviser by the client; where it was reasonably apparent that information relating to the client’s relevant circumstances was incomplete or inaccurate, they have to make reasonable inquiries to obtain complete and accurate information. They need to assess whether he or she has the expertise required to provide the client advice on the subject matter sought and, if not, they must decline to provide the advice. If, in considering the subject matter of the advice sought, it would be reasonable to consider recommending a financial product, they need to conduct a reasonable investigation into the financial products that might achieve the objectives and meet the needs of the client that would reasonably be considered as relevant to advice on that subject matter. They need to assess the information gathered in the investigation and base all judgements in advising the client on the client’s relevant circumstances.

This is a comprehensive set of steps. If anyone claims—as Chris Bowen has, as Sam Dastyari has and as others on the crossbench have—that the government's changes will bring back the type of commissions that encourage financial advisers to recommend risky investments, the ABC's fact checker and many others say that is absolutely not true. It is scaremongering. There is a long list of safeguards there for people who are seeking financial advice. This is not about safeguards. This is about a special deal for one sector. It is about a special deal for industry super funds. Senator Wong can sigh all she likes, but those are the facts, because industry super funds get a different deal. Senator Cameron said in his contribution, 'What is wrong with having to opt in every couple of years?' What is wrong with it for industry super funds?

That is fundamental to this debate.

Senator Cormann interjecting

That is right. Clients of industry super funds do not get those protections that Senator Cameron is arguing for. What apparently would be too much red tape for industry super funds is okay for small businesses. That is fundamental to this argument. It is fundamental to why they have made this judgement. They are not seeking to do what is in the best interests of clients. We have seen and heard just how comprehensive the set of safeguards is. What they are seeking to do is leave that competitive advantage for their mates.

We know why. I do need to respond to some of what was said earlier in the debate by Senator Cameron—and others—when he claimed it is about donations. If it is about donations, I think we should be looking to the other side: the CFMEU that funds the Labor Party and that funds the Greens—it is not just the Labor Party that receives significant funds from—

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Are you sure about that? What's your evidence on that?

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

What's my evidence! Senator Whish-Wilson said, 'What's your evidence that the CFMEU funds the Greens?' It is on the public record. I will share a little bit of it. I know that just here, at the Senate election in the ACT, the national CFMEU spent $50,000 backing the Greens. That is $50,000 just here in the ACT. You are asking for the evidence of where the CFMEU backs the Greens. I have given you one example.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

That's funding us, is it?

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

There are countless examples around the country.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

That's not what you said.

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

Senator Whish-Wilson! Senator Seselja, ignore the interjections.

Photo of Zed SeseljaZed Seselja (ACT, Liberal Party) Share this | | Hansard source

I certainly will do my best to ignore the interjections. Senator Whish-Wilson would like to claim some sort of distinction that the Greens are not funded by the CFMEU, even though they receive money from the CFMEU—even though they receive significant funds from the CFMEU. I do not know what he determines is 'funding'. I do not know what he understands by funding.

I would have thought that a $50,000 donation just here in the ACT, presumably much more—I think Adam Bandt receives a significant amount of funding from the CFMEU, but I stand to be corrected; I do not have those documents in front of me. If I am wrong on that, I will withdraw. Certainly we know one example here, and right around the country the CFMEU funds the Greens—as well as the Labor Party, of course, and people like Daniel Andrews.

On the relevance of that and in responding to Senator Cameron's earlier claims that on our side it is somehow about donations, let us be clear. When we talk about donations, let us talk about the special deal that Labor wants to do, and has done, for the industry super funds that are close to the big unions—like the CFMEU—and those very unions that fund Labor Party and Greens election campaigns. If you are looking for a conflict of interest as to what might be at the heart of this, perhaps look over to the Labor Party and the Greens and their sources of funding on this issue.

It is clear on any measure, as we look at the facts, that what has been claimed at the heart of this by Senator Dastyari and others, on what this FoFA legislation actually does, is false. It is wrong. It is scaremongering. In the words of ABC Fact Check, it is scaremongering and it is dishonest to make those claims. People like Senator Dastyari, Chris Bowen and others in the Labor Party—and on the crossbench—should know better. They must know. They must have looked at this and decided they could somehow scare people into agreeing with them on this issue.

I go back to the issue of the flip-flopping from some on the crossbench and the unfortunate nature in the way they have done that. They made a deal to vote on it twice—twice this was considered—and the likes of Senator Lambie and Senator Muir voted with the government. They looked at this issue and voted with the government. Industry proceeds on that basis—believing that the parliament has made a judgement. Nothing changes other than, apparently, a fight within the Palmer United Party. That seems to be all that has changed since the last time we considered this legislation. That is not a good basis for a change in public policy—because Jacqui Lambie does not like Clive Palmer anymore. That is not a good reason.

The 'coalition of common sense' that Jacqui Lambie now claims to be leading is going to lead us to outcomes where important legislation like this gets chopped and changed. What is to stop it being different in two or three months time, if Senator Lambie and Clive Palmer kiss and make up? What is to stop it changing again? This is the farce it will become if we go down this path. This disallowance motion should not be supported.

5:20 pm

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

I rise to make a contribution to this debate. There are many important issues in this debate, but there is one very important issue. We had a grandfathering clause in the change brought forward by Senator Cormann, who is sitting here in the chamber. What that grandfathering clause meant was that, when you had a financial advice business prior to 1 July 2013, you may well have been receiving commissions. There was nothing wrong with that. It was totally within the law.

When the FoFA started on 1 July 2013, that removed those commissions from these businesses, especially small businesses, that had a cash flow and had done everything right by the book. I will give you an analogy. It is a bit like exporting live cattle out of Darwin and having the government ban live export. You have lost your cash flow, you have lost the value of your property, you cannot sell what you grow on it and it destroys you financially. This is no different.

What Senator Dastyari and others have done here with this disallowance—if successful—will wipe out that grandfathering income for those small businesses. Mr Acting Deputy President Sterle, it would be like you buying a truck and signing a five-year contract, a good contract with a cash flow. Three years into it they just tear it up, and you walk away. You have lease payments on your rig and repairs to do—and your truck has lost its value and you have lost your contract. This is what is going to happen if this disallowance gets through.

I know people like Senator Cameron do not care about small business or their value—do not give a hoot about that.

I want say to people like Senator Xenophon—and Senator Xenophon, I hope you are listening in your office—Senator Lambie; Senator Madigan, and I am glad he is here, he comes from small business, a hardworking blacksmith; and Senator Ricky Muir, a timber cutter from small business: if you do not amend and reinstate part 28, 29, 31, 32, 33, 34 and 35 of those regulations to protect small businesses, you are going to destroy the value of those small businesses that have built that value through hard work and playing by the rules.

I believe that, when the former Labor government brought these FoFA rules in, they realised afterwards that they had it wrong; that they went too far. I believe there was a bipartisan verbal agreement to fix this—the grandfathering clauses—to protect the value and cash flow of those small businesses. However, we know the previous government lost government.

So now we have got Senator Dastyari backed up by those senators I mentioned—Senator Xenophon is from small business as a legal professional; as I said, Senator Madigan, a hardworking blacksmith—you would not get much tougher jobs than that; Senator Muir from the timber industry and a tough industry, especially with the Greens trying to strangle it at every post; and Senator Lambie. If you support this disallowance that has been put up in this way, you will destroy the value of those small businesses. You will destroy their cash flow, and they did it all legally.

I would hope that you will come forward, Senator Madigan, with amendments and you will talk to Senator Xenophon and the others. I would hope that those amendments would be supported by Senator Wong and those on the other side. I know many of them do not care about small business, but this is vital. If we make decisions in this place that destroy the cash flow and value of small business, then we should hang our heads in shame—that is the first point I want to make.

When it came to the regulation changes by our government, the scaremongering that went on to say the best interest test will be removed was simply wrong. Section 961B and 961J clearly stated that. We altered and tinkered with the catch-all clause 961B(2)(g) to prevent people from being sued everywhere.

The opt-in—of course the original inquiry chaired by Bernie Ripoll MP—was the suggestion of industry super funds. I see today out there in the corridors Robbie Campo and David Whitely from industry super funds with grins on their faces like a cat out of a dairy; they are very pleased that they have rounded up the troops to support their cause.

I want to read from Judith Sloan's story here: 'Links with industry superfunds are worth probing.'

Senator Wong interjecting

Senator Wong perhaps does not want me to read this.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

No, it's just Judith Sloan—we all know.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

But let me quote—Senator Wong obviously does not send Judith Sloan Christmas cards.

Photo of Penny WongPenny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | | Hansard source

No, you're right.

Photo of John WilliamsJohn Williams (NSW, National Party) Share this | | Hansard source

No wonder Australia Post is in trouble. Judith Sloan said:

A few weeks ago, former NSW Labor politician and unionist Michael Costa made some very interesting remarks.

'The royal commission (into trade union governance and corruption) has exposed some massive problems … I think the most important is the governance of industry (superannuation) funds,' he said.

'There’s billions of dollars in these funds and they are badly managed in terms of corporate governance. The rorts that are going on there are horrific and they need to be dealt with.'

They were the words of former New South Wales Labor minister and politician Michael Costa.

Judith Sloan goes on to say:

For an outsider, it is difficult to come to grips with the workings of industry super funds. Their annual reports are generally a combination of pictures of happy workers, random charts and effusive copy about the benefits of compulsory superannuation and industry funds. The consolidated financial statements tell you little and, with few exceptions, it has not been possible to establish the remuneration of the executives or trustees.

She goes on to say:

The first serious inkling I had about the dubious practices of industry super funds came in 2010, when failed Labor candidate for the seat of Melbourne Cath Bowtell was conveniently given the job of chief executive of the Australian Government Employees Superannuation Trust.

At the time, opposition finance spokesman Andrew Robb queried the appointment.

We will go on to see what Senator Wong said:

The finance minister, Penny Wong, hit back, claiming that Bowtell (who had once worked for the ACTU) had been a superannuation trustee for more than 10 years—

a trustee—so what?

and a member of the AGEST board for five years.

So what?

But the truth is that being a trustee and being a chief executive of a superannuation fund are very different tasks.

As I said, if this disallowance goes through, we will have the opt-in back in place for more costs, and those planners and advisers will charge more and the consumer will pay for it.

After the recent ASIC inquiry, we have only one in five Australians on average seeking financial advice. Sure there is a lot to do for the industry to improve it. However, when it comes to these sorts of things and industry super funds, it is just amazing.

I questioned ASIC at Senate estimates about The New Daily. I was interested to read a story recently—The New Daily is an online newspaper. It said:

General news website The New Daily has raised a further $3 million in capital from Australia's industry super funds, less than six months after launching.

They kicked off with $3 million; now they have kicked the can for another $3 million and there could be another $3 million on the way—they set up a newspaper to send information to their members. They have got our email addresses. Why can't they put a monthly report together? They do not spend $6 million and then look for another $3 million.

A source at Cbus also confirmed the super fund was re-examining its investment in The New Daily after less than 12 months.

it is already re-examining it.

The New Daily has been marketed to the more than five million Australians who are members of not-for-profit, or industry, funds. But Nielsen figures show the site had a unique audience of 124,000 in June, and 106,000 in May, putting it just outside the top 100 news sites.

The $6 million kicked in the can was your money, Mr Acting Deputy President Sterle and mine. I do not want my Australian super funds going into some crazy newspaper, but some bright spark thought this would be a great idea.

It went on:

Its directors are industry funds stalwart Garry Weaven, AustralianSuper director Alison Terry, Media Super chairman Gerard Noonan and former Fairfax executive Glenn Thompson. Mr Weaven told last year: "I'm the first one to understand that it is somewhat speculative. The market is moving all the time. But, on the numbers we've done, it can be justified as a commercial investment."

A commercial investment—$3 million from the Australian Super funds, then kick the can for another three million. This is just in 12 months! 'Oh, it is a great commercial investment.' What is it all about? I would like to know. As I said to ASIC, it should be canned.

I will follow this closely. I want to say this, Mr Acting Deputy President and I am going to be very frank, as you are whenever you speak: the previous Labor government's FoFA did not address the big problem, and our changes have still not addressed the big problem. The big problem in financial advice is what is called vertical integration. Imagine if I was a salesman for a Ford dealer, and you came in with your wife and six children and said, 'I need to buy a vehicle'—and I had the obligation to sell you the vehicle that is in your best interests. I might not have that product, but I would try to sell you something for Ford, because I work for Ford. Mr Acting Deputy President, I would not say to you: 'Go down to Toyota. They have got a Tarago; it seats eight, it is a good safe vehicle, it is economical. That would be the best vehicle for you.' I am working for Ford: they pay my way; I am going to try to sell you a Ford.

That is what happens in the financial planning industry. The big six—the big four banks, Macquarie Private Wealth and AMP—basically run the industry: their planners work for them. And it is likewise in the financial industry when you wish to invest your money or your self-managed super fund or whatever. They are going to tell you to invest in one of their products—but it may not be the best product in your case or in your circumstances. This is the problem that I am highlighting in this chamber now with vertical integration, and no FoFA regulations have ever addressed it. It should be torn down and rebuilt. I do not know for sure, but I believe that if you are a financial planner in the UK, you cannot be linked to any company. You are actually fully independent. It is a bit like politics—if you are an Independent, vote where you like; if you are in a party such as yours, you vote where you are told. So here is the problem we are facing—and FoFA has never addressed this.

I just want to say this—and I have highlighted this—to Senator Xenophon and Senator Lambie, and Senator Muir and Senator Madigan: if you do not bring these amendments in to save the value of those small businesses, we will highlight it to those businesses—we will go right around Australia saying: 'The value of your business has just gone down by 90 per cent. Your cash flow has gone. You built a business that you were allowed to build under the regulations and under the rules.' And with what has come here before us today, you are going to destroy the value of those businesses. That to me is totally unacceptable. And I hope that those amendments do come through, no matter what happens today.

We have done a lot of work on financial planning and on getting things together. The crazy system where you can do an eight-day crash course to become a financial planner—we even found, in a recent inquiry, a one-hour course online: it will cost you nothing, you pass the test and you are a financial planner! It is called RG 146, Regulatory Guide 146. It is a farce. After our ASIC inquiry, the recommendation of the committee was to have the Parliamentary Joint Committee on Corporations and Financial Services look at those standards—and that is exactly what we are doing now, under the good chairmanship of Senator Fawcett. Hopefully we will soon have a recommendation to make sure that when you are a financial planner, you are actually an expert; that you have a degree, that you have had training, that you have the right attitude—that you are not someone who walks out of a shearing shed, does a one-hour crash course on the internet, and then tells people how to invest their hard-earned money.

The next thing we need to do is for the parliamentary joint committee to have an inquiry into financial products. I see in a listing just recently that since 2005, $37 billion of money invested in Australia was either frozen or the companies went belly up. We could take it back to the analogy of the cars—I sell you a Ford: 'This is the best vehicle for you'. You head off down the road, but the car I sold you did not have any brakes. You go down the hill, you hit a truck—no brakes; you end up in a mess. We have financial products out there that are shonky—they are dangerous; they are like cars with no brakes. That is the next inquiry we should look at, to see what we can do so that where people invest their money in this country—their hard-earned money, or the money that their parents may have worked hard for, or from their parents' house when they have passed on—their money is not put at risk. With some of the financial products we have seen, you might as well put your money on a favourite in the Melbourne Cup, for all the good the product was! It is pretty lucky to pick the winner in that—even though my chief of staff did pick me the winner this year.

We brought in these FoFA regulations, under Senator Cormann, to save the costs, to roll back the red tape, to make it better for people to seek advice—and to protect and grandfather the small businesses, with their investments, their hard work and their cash flow. And I want everyone in this chamber to realise that. Senator Whish-Wilson, you have a business brain—if you vote under the current disallowance, you will destroy the value of those businesses. It would be like us saying to you now, 'From tomorrow, all wine is banned from being sold in Australia'. Senator Whish-Wilson would say, 'Hang on a minute, I have spent a lot of money and done a lot of work to build a winery'—and we have just destroyed your business. This is no different whatsoever. So if you do not at least retain those grandfathering measures in this legislation, hundreds and hundreds of small businesses out there are going to be destroyed financially. And what does that lead to? I will tell you, Mr Acting Deputy President: financial pressure; disputes in the family; no mon, no fun; marriage break-ups; and sometimes, unfortunately, suicide. So, Senator Xenophon, Senator Lambie and Senator Muir—I know that Senator Madigan has listened to me—you are the ones that are the big players in this game. I hope that you see that those small businesses are protected in this country. That is the most important thing I ask for.

As time goes on, I hope that we can also clean up the standards of the financial planners—and I do respect those financial planners. Many of them have done the right thing and put their clients first, and they have given them the best products—safe products. I do apologise if we have damaged their reputations—because some in that field have been terrible; some of them at Commonwealth Financial Planning; some of them at Macquarie Private Wealth. They have all been highlighted and put out there in the media, but those bad eggs have destroyed the reputations of many good people in this profession. It is a most important industry. We have some $600 billion now in self-managed super funds. We want to grow that super. We want those people to retire with a good nest egg, so they are not a burden on the taxpayer of Australia. You know how the population of baby boomers is coming on and how big the population of elderly people is going to grow in the next 10 years. This is a very important issue. I repeat: Labor's FoFA and our amendments have never addressed the big issue, and the big issue is vertical integration. When we fix that problem, people will get put into the best financial products in their interest. At that, I once again call on those crossbench senators to make sure that they do not destroy the financial value and the livelihood of those small financial planning businesses who have worked so hard.

5:37 pm

Photo of Christopher BackChristopher Back (WA, Liberal Party) Share this | | Hansard source

I rise to contribute to this debate, as disappointing as it is that we have to conduct it.

Senator Wong interjecting

In answer to Senator Wong's question, no. Earlier, I simply spoke on a procedural motion.

I want to examine a number of things this afternoon. The first, of course, is the motivation of the Labor Party in trying to bring forward this disallowance. I want to comment on the good order of the parliament and the opportunity for the full Senate complement to debate the issue. I want to comment a little bit on ASIC provisions and on commitments that were given to Senator Muir and to the members of the Palmer United Party at that time. I also want to comment on the coalition's contribution.

Through you, Acting Deputy President, I make this comment to Senator Muir: this all goes back to 2012-13, when a review was undertaken of industry super and superannuation generally. Following that, the then minister decided that he would go well beyond the recommendations of what we already regarded as a very biased report. Through you, Mr Acting Deputy President, to Senator Muir, one of those outcomes was that legislation was introduced so that, under the Fair Work Commission process, industry super funds would become the default funds. In other words, if someone did not make a declaration at all as to what their preference was for superannuation, they were immediately to go into an industry super fund or, in the case of the public sector, to a public sector super fund. We violently objected to that because we thought that there should be the opportunity for competition and for the investor—the employee or worker—to actually be involved in that decision-making process. Once we came into government, we reversed it.

What was the motivation attending that legislation? I am glad that Senator Dastyari is in the chamber; the main incentive was to boost the industry and public sector superannuation funds. Senator Muir, I am not aware of whether or not you realise that, in terms of the decision you have made to actually change your position on the regulation that is before us, which Minister Cormann introduced and which had passed twice in this place.

This today, colleagues, is not about the small investor. It is not about the small investor, Senator Madigan—through you, Acting Deputy President. This is about protecting the interests of the industry and public sector superannuation funds. Senator Cameron made a comment about the big banks. Let me make this point: it was through the coalition government that Mr David Murray—obviously an eminent person in the banking and financial sector—was asked to undertake an inquiry into aberrations and failures of the banking system as it relates to advice to investors et cetera. That inquiry is about to be presented. We are eagerly awaiting the outcome of that inquiry, which, of course, has been the subject of an enormous amount of speculation. So the distraction, which Senator Cameron brought to this place this afternoon, about the big banks is totally irrelevant.

In the few moments of my earlier contribution during what should have still been question time—when Senator Day and others from the crossbench should have had their opportunity—I was able to draw to the Senate's attention the gross anomaly and hypocrisy that has gone on in this place. What is that to do with? One of the provisions that are now being argued by Senator Dastyari and others is the opt-in provision—the provision that financial advisers, be they big banks or whoever, should have to ensure that their investors opt in on a regular basis. Only now have we come to the understanding that the one group who are exempted from the need for the opt-in provisions are the industry and public sector superannuation funds. 'Who is that protecting?' I ask Senator Muir. Is that protecting the small investor? No, it is certainly not.

The second point that is of interest is fee disclosure. Financial advisers must disclose fees; the big banks, as providers of financial advice, must disclose their fees. I ask: what about the industry and public sector superannuation funds? Do they have to disclose their fees to their members? The answer to the rhetorical question is: no, they do not have to do that.

The third point is that industry super fund managers alone can change fees whenever they like, without consulting their members, and can actually charge for advice whether given or not. That is what we are talking about here: whether given or not. If time permits, I intend to come back in this discussion to some of the other anomalies that I see in the industry and public sector superannuation funds. I do not want to get into the controversy or the argument that went on earlier when Senator Seselja was making his contribution—Senator Cameron was inviting him to make his comments outside and Senator Wong was objecting. All I want to do is to actually get to information that is not in dispute regarding industry and public sector superannuation funds.

In the meantime—through you, to Senator Muir—what I want to do now is move on to the question of the good order of the running of this parliament and, particularly, the running of this Senate. As Senator Cormann has said, on two occasions already this matter has been dealt with by this chamber and it has been passed. Senator Muir, when he makes his contribution, can contradict me if he wants to, but it is my understanding—as a result of the dialogue between the minister, Senator Cormann, and Senator Muir—that whatever requests were made were met. I understand that there was a particular request that there be established a register of financial advisers; that has been done. If I am wrong, I am sure that Senator Cormann will correct me. Not only has it been done but it has been done at a cost to the advisers on a per-transaction basis. It is my further understanding that commitments that were made to the Palmer United Party have been met in the activities that Senator Cormann has brought.

I will not belabour the point as to why we have to have this debate this afternoon. The matter could be dealt with on Thursday next week. We have until that time. There would be opportunity for all 76 of us to contribute. Those who are not here this week because they have made other arrangements, because we had not planned to meet this week, will be denied the opportunity to contribute. I can think of Senator Reynolds, Senator Birmingham and Senator Edwards on our side, and I know there are others. All of us would want to make a contribution to this critically important debate. All of us have the interests of small investors, ourselves, our families and our friends in mind. Which of us do not have the interests of ourselves, our families, our associates and our constituents in mind? Which one of us is not looking after the interests of each of these people?

No-one has a mortgage on an interest in probity, ethics and honesty when it comes to the small investor. Senator Williams made the point—and I will agree with Senator Cameron—that the small investor must be protected. But this motion is not about the small investor, as I have already commented. Senator Cameron believes it is about the big banks. I have addressed the question of the big banks and financial advice. I believe that this is an extension, through Senator Dastyari and his motion, of protecting the large super funds, who are uniquely exempted in so many areas. Let me remind senators that, as of March 2013, the industry and public sector super funds were holding about one-third, about $350 billion, of the superannuation pool.

One of my colleagues gave me an assurance that ASIC has the power to introduce what I will call a patch for a period of up to six months to allow the industry to make an adjustment. If that is the case, if ASIC has that power, then what is the reason for us not allowing all senators to contribute to this debate?

Senator Whish-Wilson interjecting

If indeed ASIC can introduce that—to Senator Whish-Wilson through you, Mr Acting Deputy President Sterle—where is the problem associated with allowing a full debate by the Senate, so that all of us have the opportunity for input? Senator Xenophon mentioned the coalition of common sense. I say let us have the common sense of full opportunity. Let us have the coalition of full democracy as it relates to this place.

Mr Acting Deputy President, your associate Bernie Ripoll, from the other place, a person for whom I have high regard, chaired an inquiry following the Storm Financial collapse. The recommendations of that inquiry had unanimous support. But in introducing its legislation the former Labor government went well beyond the recommendations of the Ripoll inquiry, particularly in relation to opt-in provisions. I do not know who can tell me how a small investor's interests, security or safety are protected by an opt-in provision. I do not know. It is not something I understand. But if an opt-in provision is so valuable, colleagues—through you Mr Acting Deputy President to Senator Dastyari—if it is so important for the protection of small investors, why have the industry and public sector superannuation funds been exempted from it? Are they the only ones who do not need to be protected? Is that the rationale? There isn't any rationale. There is no logic. If the opt-in provision protects small investors then why are the industry funds, which represent one-third of the pool, exempted? I cannot understand the logic of it.

Somebody in discussion across the chamber this afternoon, or perhaps this morning, made the observation that people are at risk of losing their homes. Nothing I have seen in what we are debating in any way affects whether a person might or might not lose their home. Mr Acting Deputy President Sterle, we have all had harrowing representations from people who have lost money through crooks and criminals in the managed investment schemes which you and I have some knowledge of in the agricultural sector, but nothing that Senator Cormann has proposed or that Senator Dastyari is trying to disallow has any impact at all on that matter. They are dealt with in different forums.

What is of interest, of course, is a comment that was made to an inquiry by Mr Greg Medcraft, from ASIC. He said that only about one in five Australians are seeking financial advice at the moment. He said that is dangerous and inadequate, and that we should be aiming for one in two. So what will happen if this regulation is disallowed? Where will we find the small investor? Senator Cormann told us this morning about the estimate that the red-tape he has attempted to eliminate by way of his legislation will cost some $750 million up-front, if my record is correct, with additional compliance costs of $375 million.

Senator Whish-Wilson interjecting

As Senator Whish-Wilson and I both know, having been consultants and advisers and having provided services to people, those costs are paid for not by Father Christmas and not by the Easter Bunny, but by whom? They are paid for by the investor. They flow down to the small investor.

The big banks? They will be able to pick up these administrative costs. No problem. But what about the small financial advisers. One, from Rockingham, just near HMAS Stirling, wrote to me. I have known the person for many years. In fact, I know he has written to several of our colleagues telling us that his 36-year business is now at risk, as are the jobs of the people he employs. Many of his clients are Navy personnel from HMAS Stirling, both present and those who have stayed with him as they have moved on. He objects violently—through you, Acting Deputy President, to Senator Dastyari, if he is there, who I think chose his words in a very callous and cruel way. This fellow has actually repeated them. He says: 'I am not a crook and do not deserve to be treated as one by my national parliament. I object to Labor's solution to controlling a few poor advisers, because it treats all of us as criminals, undermines our capacity to continue doing good work for our clients and communities, and risks our capacities to support our families and those of our employees.' That is what we are about here—'those of our employees'.

We know that when the then Labor government introduced the legislation, they did something that used to be most unusual prior to Labor being in government—that is, the Prime Minister excused them from undertaking a regulatory impact statement, which would have required a cost-benefit analysis, when the opt-in and other legislation was brought into place. The simple fact of the matter is that the reason for not doing a cost-benefit analysis is that I think they had a fairly good idea that the costs would far outweigh the benefits.

With respect, Senator Lambie, Senator Muir and Senator Madigan, through you Acting Deputy President, I think you have been duped in this area, because nothing that is being proposed today is going to improve or increase protection to small investors. What it is going to do is put at risk the small financial advisers. It is going to do nothing to improve the lot of small investors. As has been put as a result of the Ripoll inquiry, the coalition made it clear prior to July, when Senator Cormann brought this matter into this place, that we supported sensible financial advice reforms that increase access to affordable, high-quality advice, as well as transparency, consumer choice and competition.

Secondly, we explicitly supported the introduction of a statutory best-interest duty for financial advisers, and the ban on conflicted remuneration or commissions that distort investment advice. That is in there. And we expressed our concern that investors receiving financial advice would face more red tape, increased costs and reduced choice. As Senator Bushby said so often in the discussion this morning whilst we were going through the procedural motions, all this is doing is removing equality in the sense that large investors will be able to afford the advice that will be required under those red tape provisions. It is the small investor, who so often desperately needs that advice, who will be funded and costed out of the process.

So I ask you to give some thought and consideration to what are the obvious motives, in my belief, of Senator Dastyari in moving this disallowance motion. Through you Acting Deputy President, if it was a level playing field, Senator Madigan, Senator Xenophon, Senator Whish-Wilson, Senator Lambie and Senator Muir, if all of them were on the same level playing field, I would have a little bit of interest in it. But when one player, representing a third of the size of the oval, has a significant advantage—they do not have to comply with opt-in, or worry about advising fees, and do not have to comply with corporate law in relation to a majority of independent directors, and have only just recently had to declare what fees are paid to their directors and executives, only as a result of a few weeks ago—I am saying to you that this is not a level playing field. I am saying to you that there are players in this game who are getting an advantage, and I have to say that, unfortunately, I think you have been taken advantage of. You need to give that some careful thought. We can debate this with the full Senate by next Thursday.

5:57 pm

Photo of Ricky MuirRicky Muir (Victoria, Australian Motoring Enthusiast Party) Share this | | Hansard source

I would like to note that this is not my first speech. I rise to speak briefly in support of this motion to disallow the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014. This motion is about ensuring that significant legislative change is made in a way that is consistent with proper parliamentary and democratic process.

Since announcing my decision this morning to support the disallowance of the corporations amendment regulation I have been repeatedly accused of backflipping on my previous decision to support the regulation. I can accept the pretences that this is based on. However, I would like to make it clear that in the first sitting period after 1 July all the new senators were bombarded with a very large amount of legislation to negotiate, without the ability to speak with constituents and stakeholders in a timely manner. Decisions made in this time were made with the best available information. However, I find it an important part of my job, especially as an independent senator, to listen to all information, including information I may learn as time goes on. If this information leads to me changing my mind, it is not an attack on anybody; it is about keeping to my Senate commitment to make informed decisions.

The regulations make significant changes to the operation of the Corporations Act and by doing so prevent parliamentary scrutiny, which would normally occur. Consumer groups such as Choice, National Seniors and the Council on the Ageing have all voiced significant concerns about the changes. I have heard the concerns of many consumers and investors who have lost everything. We have an opportunity to re-address the bill and to debate the legislation further, hopefully with an outcome that will suit investors and financial planners, especially the small businesses.

The Senate Standing Committee on Regulations and Ordinances scrutinised the regulations and at page 10 of its report stated:

The appropriateness, desirability and cost-benefit implications of particular measures for regulating a specific industry are not matters which go to the substance of the key concern raised by this (and the Scrutiny of Bills) committee, which is that the regulation makes fundamental legislative change that may be more appropriate for parliamentary enactment (that is, via primary rather than delegated legislation).

I am also of the understanding that the government can work with ASIC to create a transitional period for financial planners and suggest they consider it.

I have heard both sides of the story about the changes to FoFA, but I would like to be clear about one thing. I am not interested in hearing about whether the government thinks this is all about the industry super funds and the union movement, nor am I interested in hearing about whether the opposition think this all about keeping the big banks happy. What I am interested in is protecting consumers and protecting my constituents. This disallowance motion ensures that any proposed changes to financial advice laws that impact on consumers are properly scrutinised by the parliament.

6:01 pm

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Muir, and Senator Lambie, to her credit, said what is important here tonight—that is, what is in the public interest. Whatever you think of this FoFA debate, the major consumer group in this country Choice and the two major groups that represent seniors are arguably those who have been most impacted by financial scandals and they are not happy with the government's amendments to FoFA. That is a fact and nothing is going to change that—they are not happy. So it is very important to note that in line with what Senator Muir is going to talk about with the advice from the committee on the regulations, which I will not go into myself, these regulations were rushed through prior to 30 June and they would not have passed this place if they had been put in the form of legislation, and that is because we have significant concerns with the changes and the watering down of financial advice laws in this country. I would like to put it in my words, in layman's terms, why FoFA and why the FoFA laws are important.

They were designed to send a very clear message to consumers who need to get financial advice. Let us all be clear: the more Australians who get good, independent financial advice the better because it helps them manage for their future and has all sorts of flow-through effects on the economy. It was designed to get good financial advice to as many people as possible. And that needed trust, the glue that would bring the Australian people into the offices of financial planners, be they big financial planners or small financial planners. That glue was missing because of the large financial scandals, which we cannot ignore are a reality. They occurred around the world in the GFC and of course they have occurred here with a number of very high profile blow-ups.

These laws were designed after four or five years of consultation—and I have to hand it to Labor; they championed these laws—and they were designed to send a big message. Perhaps in some people's view that message was overkill, that maybe financial planners had to do more paperwork, that it might have impacted on their cost of doing business. From my point of view, that cost was outweighed by the potential cost of a person or a family losing their life savings because of the risks from poor financial advice.

One of the key risks from poor financial advice was advisers selling products to people that were not necessarily in their financial interest. I would argue against Senator Cormann that that has not really been changed in his regulations or in his attempt to actually change the FoFA legislation or the amendments. I argue that that incentive is still fundamentally in place. Although we can argue about what is a commission and what is not a commission, a sales-based culture still exists in a number of the large financial services companies.

I would like to address the issue of small business very quickly. Unlike a lot of the senators who have spoken tonight about the impact on small business, I have met with dozens of small financial planners during the FoFA legislation and I listened to what they had to say. It actually informed my view and the Greens dissenting report. I can tell you that amongst all the financial planners I met, some had their licences through big financial services companies and some were genuinely independent, they all disagreed on various aspects of FoFA, whether it was opt-in, a catch-all phrase or what was conflicted remuneration—they all had different views. Some were okay with the FoFA laws as they stood; others wanted different things changed. I know that their association has put out a media release today saying all sorts of negative things about what we are discussing here today. But I know that I can sleep well tonight because I have spoken to these businesses.

I have also worked in a large bank. I have been part of a sales-based culture. I have a lot of friends still working in banks and I do not think that sales-based culture has changed. There is nothing necessarily wrong with a sales-based culture but there is something wrong with a culture that still has inbuilt conflicts of interest, where it is in an adviser's interest to recommend a product. That is still in place.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

Why aren't the industry super funds involved?

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I do not want to get into the industry super fund thing. I think it is a distraction—

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

Why are the rules different?

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source


Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I think it is a distraction from what we are trying to discuss here today. I made it very clear in my five-minute speech earlier today that I have no sway at all with the industry super funds in this argument. I do not come from a union background.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

Why are they different?

Photo of Glenn SterleGlenn Sterle (WA, Australian Labor Party) Share this | | Hansard source

Senator Macdonald, order!

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

I come at this as someone who has worked in a bank, understands financial planning and has grave issues about consumers of financial products

Also, I have seen firsthand the disasters that have been wreaked by a cultural problem in the financial services industry—and it is in the big end of the financial services industry. I do not necessarily see that issue amongst smaller independent financial planners. I have also met with smaller financial planners who had their licences through big firms, and I will say that lot of them are good people. They provide good service—good advice. If we have their interests at heart, if we have small businesses' interests at heart, what we have to do here tonight is disallow these motions, bring the legislation back, get it right for all stakeholders and send a message, through our legislation, that we do have tough laws in this country to provide the right financial advice for people and to provide the confidence that Australians need to go and see their financial planners. That is good for financial planners. That is good for the growth of their industry. They want more Australians to go and seek advice. Australians want to feel confident. They want to know who is an independent financial planner. They want to know that they can trust their financial planners. I accept the blow-ups and this whole debate that we have had in parliament have impacted the reputation of their industry. That is absolutely the reason why it is crucial for those small businesses, as well as for the customer who is seeking financial advice, that we actually get this legislation right.

Let me reiterate again that, whatever you say and whatever your argument, the fact remains that the key consumer group in this country and the key groups representing hundreds of thousands of pensioners do not agree, Senator Cormann—through you, Acting Deputy President—with the government's amendments to FoFA. They wanted to see a strong message sent. Let me also say this: on the so-called costs—this idea that we need to get the balance right and that somehow the provision of financial services is going to price out of the market financial services to a lot of people—those numbers were provided by the banking industry. They have not been tested. This legislation is only just coming into effect.

The Greens sensibly suggested that we have a five-year period where the full FoFA reforms were put through—but we will look at amendments—and where we then have an evidence-based approach for an independent assessment of the costs of financial services. I am sorry, but sometimes—while I am primarily focused on the public interest in this debate—special interests are not the same as public interests. I am very concerned that the banking sector lobbied—and we have all the evidence we need on this—very hard, it is no surprise, to get these changes to FoFA, and to get them through before 30 June. We have that evidence from the Senate inquiry. They lobbied very hard and Senator Cormann delivered for them. I am not bashing the banks; I have worked for one. I understand the financial system; I taught international finance for years at university. What I am concerned about is that special interests are not the same thing as the public's interest. We need to get this legislation right for the public, for the small businesses and for the reputation of the entire industry, which includes the banking industry.

The last thing that I would like to address is the idea of Fact Check—the ABC Fact Check. I noticed Senator Cormann—through you, Acting Deputy President—very deftly, in his interview with Alan Jones recently, avoided quite an important question by quoting Fact Check, and I have seen Senator Cormann do it in the chamber several times. No-one is disputing that commissions have been taken off the sale or the provision of individual products. That is not the issue here. The issue is that, in aggregate, we still have a volume-based incentive in place. That cannot be denied. In fact, I have the exact quote from your own legislation on the regulations, Senator Cormann, that actually talks about this. It is on page 27 of your own explanatory memorandum. It says:

… the Government intends to introduce a targeted 'general advice provision' that specifies that monetary benefits paid in relation to general advice are not conflicted remuneration as long as certain conditions are met.

And then it adds:

It is important to note that neither the no commissions limb, nor the general advice provision, prevents the payment of a salary or a performance benefit (such as a performance bonus paid subject to a balanced scorecard).

That is clearly the provision for a volume-based sales incentive program. And I will repeat it: you can call it commissions, you can call it a bonus, you can call it whatever you want, but I like to use the word 'incentive', because that word 'incentive' goes to the heart of conflicted remuneration. While there are incentives in place for financial advisers to recommend a product—because, whether it is on that individual product or whether it is at the end of the month or at the end of the year, they get a bonus based on the number of products they sell—that is still conflicted remuneration in anyone's language.

I will reiterate what I got told by an employee at one of the major banks recently. He said to me that his job was at risk because he had not met his sales targets. When his boss had talked to him about this, he said, 'I haven't necessarily felt that these products were the right things for the people I have been meeting,' and he was told in no uncertain terms his job was to make money for the bank. I was only told that in the last few weeks. Having worked at a bank, and having seen, through the Senate inquiry, what caused the Commonwealth Bank financial planning scandal, I know it was not just a culture at the financial planning level in these big vertically integrated organisations; it was up through the management, because they all benefited when their advisers are riding lots of business. That is why they covered up this scandal for so long, because while the music was playing they were all dancing, and they did not want to stop. They were all doing very well out of it, thank you very much.

I hope the Murray financial services inquiry will be looking at these types of issues. Why did we rush through these regulations before the Murray inquiry has released its findings? It is the government's own inquiry and it is critical to this debate. So let's get the legislation back. We know through ASIC that there will be no chaos, as we heard from Senator Abetz and others today. There is a grace period. We can go back to the FOFA—which, by the way, the banks were preparing for anyway, as were the financial planners. They were preparing for this for years. The idea that somehow they are all going to go out of business is just plain fearmongering.

I will finish with this. If we want to look after the small businesses and Australians who need financial advice, and even the reputation of the big banks—and let us not doubt that ANZ is under the pump with what we are discovering at the moment around the Timbercorp collapse; and there is a lot more stuff to come out, particularly if we get a royal commission up on banks—and if they want to do the right thing by their reputation, they should accept a strong set of laws and put their own self-interest, with unfounded estimates of cost blow-outs, aside and give it a chance to work. Give the Australian people the confidence they need to get financial planning advice and let's see if it works. Let's assess how many more people get financial planning advice, assess what it costs and do that properly. Let's not just take the word of the big banks that somehow this is going to blow out their costs or kill small business. Let's give it a go. We cannot do that until we disallow these regulations and get a proper set of legislative measures in place that satisfy all stakeholders. That reputational damage will not be removed till the key consumer groups in this country and the key stakeholders are satisfied. That is what we need to be doing as parliamentarians and that is what the Australian people expect.

6:16 pm

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

Following on from Senator Whish-Wilson, I too have met with businesses to discuss this issue. Only a month ago, I was in Stanthorpe, which is south-west of Brisbane. I went to dinner there and I was expecting to talk about 457 visas for growers, wine equalisation tax issues and tourist issues, but there was a small business man there who has a financial advice business in Stanthorpe, with offices in Warwick. He thanked me, but he was really thanking Minister Cormann for the work he has done to take a huge regulatory burden off his business. It is a small business in a small town of only a few thousand people, and these changes that Labor introduced a few years ago had a massive impact on his business. Every two years, he has to ask his clients to sign back up with him. Imagine that if you were in any other business. Imagine if you were in any other business, you had an ongoing relationship with your clients and your customers, and you had to go back to them every two years and re-sign a contract. It is an unreasonable, unfair and unbalanced requirement on the small businesses of this nation that provide financial advice in our towns.

I heard Senator Whish-Wilson talk about how we want to encourage Australians to seek financial advice, and I agree completely, but people in regional areas who will rely on small businesses particularly to provide that advice will have more limited opportunities if we disallow these regulations today, because this regulatory burden will be put back on those businesses.

I took note of Senator Muir's contribution as well. I congratulate and commend him on the fine words in his first contribution—I think it was his first contribution—to this place. I particularly took note, Senator Muir, of your statement that we should make sure we have sufficient parliamentary scrutiny of measures that go before this place, and I absolutely agree, but why, then, are we rushing this debate today? Why are we putting this through today when we could have another week to look at it? What was the urgency of having to announce this overnight in a deal done between different parties behind the scenes and, as you admit, Senator Muir, to break a commitment you made with the government? Why can't we have sufficient parliamentary scrutiny to assess the implications of these changes? We all know the reason for that. As you said, Senator Muir, you were worried about other people talking to you about the other implications of what might happen. Why shouldn't we wait for that? Why shouldn't you make the time and have the respect for this place to wait for this to come before the parliament?

I want to say something that bears on the point that you made, Senator Muir, that we need scrutiny of regulatory and legislative changes. We absolutely do, but what you may not realise is that, when the former government put these reforms in place, they did not get the scrutiny they were meant to have. They got no scrutiny from the proper regulatory impact statement processes that both sides of politics have signed up to. Both sides of politics agree that major regulations have to go through a process before they go to cabinet and definitely before they come to this place. That is to make sure that, when we place these imposts on small businesses like those in Stanthorpe, there is not an undue regulatory burden placed on them. There is a good reason we have those processes. But, in this case, when there were major changes proposed to the financial advice regulatory landscape in this country, no regulatory impact statement was prepared. The regulatory cost of these changes was around $750 million up-front for the businesses all around the country. The ongoing cost is expected to be $350 million a year—not an insubstantial amount of money—but no regulatory impact statement was done by the former government.

The reason they did not do that was that they knew the answer they would get. In government, there is a solid rule: you do not ask a question if you do not know what the answer is going to be—but they knew what the answer was going to be. They knew that, if a regulatory impact statement was done on these changes, it would come back negative, for the reasons that Senator Back and Minister Cormann have outlined: this is an undue impost on small businesses. It is also unfair in that these two-yearly opt-in provisions that I discussed earlier are a requirement for private businesses or those providing individual advice but not a requirement for those who are involved in providing advice through an industry superannuation fund. Intrafund advice under the laws is exempt, and there is no good reason for that at all. On this side, we believe in fee disclosure. We believe that people providing advice should have to disclose their fees, but industry super funds are exempt under these laws from disclosing their fees to their clients. Why should they be exempt? Why shouldn't the clients of industry super funds have the same access to information as clients of a different type of financial advice? There is no good reason and there has not been one provided in this debate. The issue has been ignored—and ignored for good reason by those on the other side.

I also say to Senator Muir: there has been parliamentary scrutiny of these changes that the government has put forward. There have been two Senate economics committee reports on these changes, both of which have recommended that they be enacted. There have been submissions taken by those inquiries and hearings conducted. There has been lots of scrutiny.

The other thing is that the people have been able to scrutinise these changes, too, because the policy of the coalition has remained consistent for years now—right from the start when Labor introduced these reforms and we knew they had not done a regulatory impact statement. I saw Senator Cormann develop the government's position in opposition when it was his portfolio responsibility and I have seen Senator Sinodinos, when it was his responsibility, and, of course, now we have Minister Cormann conducting this—and it has been consistent the whole way through. The people voted on this last year. It was put to a vote and the government received a mandate on these changes. It was assessed by the people. So we have now had parliamentary scrutiny and we have had the democratic scrutiny we have through elections, but apparently that is still not enough. Why is it not enough?

I believe what has happened in this chamber today is extremely regrettable. We have decided to make a change overnight to what the landscape was and to what the regulations in our country were. And we all know why we are doing this. I believe we are going to do this because individual members of the Palmer United Party want to split with their party and cause division. That is going to have a multimillion dollar impact on small business—all for the interests of a minor party in this chamber.

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

Mr Acting Deputy President, I rise on a point of order. The honourable senator is impugning the motives of another senator, basically saying that they are going down a path to vote for legislation for motives that appear to be malicious. That seems to be quite improper.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

That is not a point of order, Senator Xenophon.

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

As I was saying, Senator Xenophon, we all know why this deal has been done. We know it and you know it.

Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

Mr Acting Deputy President, I rise on a point of order. Unless Senator Canavan is a psychic, he does not know unless I have said so.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Xenophon, that is a debating point; it is not a point of order.

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

Let's be clear: we are putting a multimillion dollar impost on small businesses because certain PUPs and the Australian Motoring Enthusiast Party want to unleash the dogs of war in this chamber. That is why we are doing this. We are doing this to satisfy the personal and sectional interests of particular senators.

Honourable senators interjecting

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Sorry, Senator Canavan, can I just get you to clarify that word. I thought you said 'sexual'.

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

I said 'sectional', as in a section or a part. When I got here a few months ago, we all as new senators were imbued with a lot of pride and honour. I made the point at the time—and someone told me this, because I did not know it—that this was the third largest intake of new senators in our nation's history after an election. There was a lot of talk of having a new set of crossbenchers to provide new clarity and scrutiny of the government—which I believe. I believe in this chamber. I believe in its right to exist. I believe in the merits of having a review mechanism. I said at the time, 'Well, maybe we will get a new culture. Perhaps we can make a difference.'

I believe that the country got sick and tired of what happened in the previous parliament. They got sick and tired of those overnight deals that were done, where you wake up the next morning and you have a different PM, you wake up the next morning and suddenly you have a carbon tax and you wake up the next morning and you have a major change to the EPBC Act—all because there were deals done behind the scenes without parliamentary scrutiny. So I was hopeful that perhaps that would change and that perhaps we would have proper committees and have legislation go through in a methodical way—exactly how the government has progressed with these changes through the committee process. But, unfortunately, some senators have not decided to go down that route; they are still continuing the dirty deals that were done in the former parliament—the dirty deals that were done by a former government and crossbenchers—which so dirtied this place, and the Australian people rejected it overwhelmingly last year.

I also said, 'If we do not change things as new senators, the Australian people will kick us out too, just like they did the last mob.' That is what they will do. They will get tired of us very quickly if we continue to behave in this way. Yesterday we were not going to disallow the financial advice reforms and today we are. What changed overnight? What changed in this country overnight? Was the temperature different? Did the water change? No, no; we just woke up and decided we were going to do a different thing. How does it give people out there any confidence in this place if every day we just decide to do different things, if we get out of a different side of the bed and we decide to change our laws? I think we should have more consistency than that. I recognise, Senator Muir, that it is hard; that there are lots of things that go through this place. But I also note that crossbenchers are given more advisers to help them, and we all have processes and ways of trying to assess these things. But to every day change our positions on things is the kind of culture—

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Canavan, I would just remind you to direct your comments through the chair, please.

Photo of Matthew CanavanMatthew Canavan (Queensland, Liberal National Party) Share this | | Hansard source

Thank you, Mr Acting Deputy President. I take that admonition. We have to provide more consistency as a parliament, because people expect that. I was at a dinner with some businesspeople the other night and they were bemoaning the fact that when they go overseas and they are talking to people in China or in Asia they have to spend ages talking about the Australian Senate, how it works and the risks of it.

Senator McEwen interjecting

Sorry, Senator McEwen, but that is exactly what they said. Maybe they were lying to me, but they said they had an hour meeting with a major investor in China recently and they spent 30 minutes talking about the Australian Senate—30 minutes of that hour talking about it. That is because of us. We have contributed to that. We have all contributed to that, and we are all continuing to contribute to that with our behaviour today.

I had hoped that we would have a different future. I had hoped that, with the change, things would be different—and I think for the last few months they have been. The Palmer United Party and others have taken a different approach and we have passed legislation. It has taken us a long time. We had to sit late the other night, but we got it done. But, today, we are going back to that different approach which is ad hoc and which means that we wear a different colour shirt every day depending on who we are talking to. I hope that can change in the future.

I want to finish by commending the work that Minister Cormann has done in the last few years in prosecuting this issue. He has remained consistent. I do hope that we can find a different way to remove this multimillion dollar regulatory burden on the small businesses of this country, for those businesses that provide financial advice that are not involved in big companies. Minister Cormann made a very good point earlier in this debate—that is, that it is not the big businesses in this country that have to worry about the changes that we are making today; it is the small businesses. They are the people who cannot do this. They must be pulling their hair out right now, thinking they have just got a new framework, it has been put in place and it had the confidence of this parliament—it was voted on by this place—and now, today, we are going to change it all for them.

Who have they got to help them? Who have they got to help them provide their advice? I know that we complain that we do not have enough advisers. It is hard for us. Who do they have? Who do they have to provide advice for them on the changes that we are going to make now? They are going to have to do it all themselves. They are going to have to stay back this weekend and get across it in more detail. They are going to have to spend less time with their kids because of the things we have done in this place. I know that I am not going to change what is going to happen tonight, but I want to put on record that what we are doing is hurting small businesses in this nation. It has to stop and we have to have a different approach.

6:30 pm

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

I do not want to keep the chamber very long. I think it is important that we try to, at least, give some certainty about what is happening here. I want to make a couple of points. I see that Senator Williams has joined us in the chamber, and I heard some of the Labor speakers, or perhaps it was Senator Muir, talking about the big banks and the government bending over to them. The government and government senators have been, perhaps, the most assiduous in chasing the big banks and making sure that they do the right thing. Senator Williams, I want to congratulate you on the work you have done in that regard.

Right from the beginning I have been involved in this through friends, very often, and colleagues, or people I know who were impacted by Storm Financial, which I am embarrassed to say emanated out of Townsville, the place where I have my office. I have spoken to hundreds of people. I have spoken at public meetings. In fact, in one of the early public meetings before other senators even became aware of this, I remember speaking to 500 people, who were in various stages of great distress, about what happened with Storm. I remember saying publicly then, 'Banks like the Commonwealth Bank need to look at this, because in the global financial crisis it was the government, that is, the Australian taxpayer, who gave them the guarantees that allowed them to continue.'

At that time it was pretty touch and go that some of the Australian banks might have been in some trouble. The taxpayers, through the government at the time, came in and helped them out. I made a public statement to any bank that was listening, 'We helped you, and now is the time for you to repay the taxpayers by not standing on the letter of the law but by helping people out.' Over a period of time, thanks to many people—and again I mention Senator Williams, and Senator Cormann in a different capacity—some of the banks have done, partly, the right thing. I just want to raise that to refute the suggestion that this is a government that is beholden to the big banks.

I want to say to those two senators, who looked at this very carefully over the period of time when these measures were being very closely looked at, that I assume those senators understood what was being put to them. As I understood it those senators said: 'Look, we think you're generally on the right track, but we want this done, we want this done and we want this done, and we're prepared to sign our names to that. If you do these things that we want you to do, we'll support you.' So, Senator Cormann, as I understand it, did not what Senator Muir and Senator Lambie asked of him. That was the deal. Senator Lambie and Senator Muir said: 'We don't like this, we don't like this and we don't like this. If you fix those up we'll support this.' So, Senator Cormann went out believing that these people were honourable people and actually did that. It cost, I think, a bit of money and a bit of rearrangement of things. Senator Cormann performed his part of the deal.

If I could say to those two senators: it would be like this—and this is a hypothetical if one senator were making her mark in the world because of the alleged maltreatment of the pay of Defence Force personnel—if I were the Prime Minister and went up to that person and said, 'Look, I understand your issue. I promise you we will double their salaries, but I want you to vote for our legislation to do that.' So, that senator said, 'Okay, I'll vote for this legislation today, that legislation tomorrow and that legislation the next day,' and then voted for all the government legislation. Then the government said, 'Oh, well, look, I know we promised we'd double the money, but we have a different view on life now. I know we made that solemn promise with you, but, sorry, you've done your part of the deal, you voted with this. We're fine. Now we've just decided that we're not going to bother about doing what we promised we'd do for you.' How would any senator here feel if that happened? They would not be very happy at all, because you deal with governments and you deal with senators on the basis that they are honourable people. It was not just a deal, and I do not like using the word 'deal', it was a discussion that said, 'We’re almost there with you, but we don't like this, this and this.' Then the government goes away and fixes this, this and this, which costs money. So the government would well expect then that the other party would do their part of the deal.

Here, today, for reasons which we can only guess about, it is not happening. It is not too late. I would appeal to the honour of those senators involved to stick by the agreement, because the government has done its deal with you. Can I repeat, if we say: 'We're going to double the pay of the Army, and we know that you're vitally interested in that. We know that you're totally committed to that.' The senators say: 'Okay, you've won us. We're going to do it.' So you immediately start voting with the government on everything, even things you do not agree with. But you do your bit and then in six months' time when the issue comes up the government says, 'Ah, sorry, we've changed our mind.' How would any senator feel?

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Senator Macdonald, you have been here a lot longer than me but please address your comments through the chair.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

Thank you, Mr Acting Deputy President—I am not talking to anyone, but how would you feel, how would any senator feel, if this deal had been made? I have had my challenges with Senator Lazarus. I think he is a good guy—I like the man—and I hate being nasty to him in committees but I again say that he got himself into this. He got himself into that Palmer inquiry in Queensland. I know he did not want it, I know he knew nothing about it, but he was told to do it by someone else. Senator Lambie might well appreciate that. While I am on the subject, perhaps you will now vote with us to get rid of that committee.

Photo of Peter Whish-WilsonPeter Whish-Wilson (Tasmania, Australian Greens) Share this | | Hansard source

Through the chair, Senator Macdonald.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

Thank you, Mr Acting Deputy President—you are quite right. I take the members of the Palmer United Party and Senator Muir as honourable people. I do not agree with them on some things but I think they are honourable people. I am appealing to them to stick by the deal. It will come back to bite them if they get a reputation for not being able to be trusted.

I want to raise again the matter that Senator Back so forcefully and eloquently raised today, and I think it was also touched on by Senator Cormann and Senator Canavan. Why are the industry super funds being excluded from this? If what is being proposed by Labor and the Greens is good for part of the industry, why is this other part of the industry not being included? Can anyone tell me? Could it possibly be that those industry super funds are creations of the union movement? Could it be that they are closely associated with the union movement? Could it be that Senator Cameron, when he was a union heavy, when he was a union boss, was on the board of one of those industry super funds? He has never told me what he got as a salary as a director of those funds—I guess one day he will tell us about that.

Photo of Dean SmithDean Smith (WA, Liberal Party) Share this | | Hansard source

I don't think it was charity.

Photo of Ian MacdonaldIan Macdonald (Queensland, Liberal Party) Share this | | Hansard source

I am sure it was not a charity, Senator Smith—you are quite right there. Forgetting the political implications, can anyone tell me why it is that part of the financial advice industry is going to be subject to these rules but another part is not? If anyone can give me a reasonable explanation of that I would be very keen to hear it. That is why I am very much supportive of the regulation as it has been proposed and oppose this disallowance motion.

Finally, can I indicate to all of those literally hundreds of small businessmen who have approached me about this issue over a long time that I am sorry if this goes through today. I know what it will do to your small business; I know the impact it will have on you. I cannot honestly tell you why you are being treated differently from the union industry super funds. I am sorry if it costs your employees' jobs—that should not be happening. Senator Cormann has worked very hard to get the right balance here, to make sure there are protections for these Storm-like victims. He has done that assiduously. I think the arrangements that were in place had that nice balance between the need for regulation and oversight and not imposing undue demands on small businessmen.

I am still hopeful that honourable senators may rethink the position they have taken so far in the debate and stick by the deal done. Those two senators will be here for another 5½ years at least, and they need to ensure they do not get a reputation for not being able to stand by their commitments. These are not just commitments that they have made; they are commitments that they almost bought by asking the government to do certain things, which the government then went out and did. The government did them. The government did what you wanted. The government did not want to do those things but they did, on the basis that you would support them and maintain certainty in the industry. That is why they did it, only to find that, having played their part in the deal, suddenly you, for reasons best known to yourselves, reneged. That is very, very, very unfortunate and I appeal to the senators involved to stick by the arrangements they made, which would provide a better regime that is fair to consumers and fair to the small businesses involved.

6:43 pm

Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

What is happening in this chamber today is very sad. It is not sad for any one of us individually, because probably none of us in this chamber are going to be impacted personally by this. To the extent that what is happening here today will push up the cost of advice, we will be able to afford it. But many people across Australia who need access to high quality advice will see the cost of that advice being pushed up and they will find it harder to access advice, so for them this is a very sad development. We have a responsibility in this chamber to act in the public interest. We have a responsibility to very carefully consider public interest considerations, and that is very much what the government has done.

We are not having this debate today because of any change to policy settings. Nothing has changed since the Senate twice voted to support the reforms the government has put forward, reforms aimed at creating a better and more appropriate balance between consumer protection and ensuring access to high-quality and affordable advice. The only thing that has changed since then is that there is now, clearly and manifestly, a split inside the Palmer United Party—and a split between the Palmer United Party and the Australian Motoring Enthusiast Party. That is why we are now, for the third time in four months, having this debate about disallowing a regulation that the Senate has previously supported.

In his contribution, Senator Muir suggested that he was not really interested in whether this would help industry funds or whether it was targeted against banks. But he does not have the luxury of saying he is not interested—because industry funds do have clients. If the Senate has the view that the clients of advisers working for banks need to have protection which forces them to re-sign contracts with their adviser on a regular basis, why should the same protection not be available to clients of industry super funds? That is an absolutely valid policy question.

The overwhelming majority of people across Australia—the silent majority, the forgotten people—are not part of organised labour and are not represented by Choice. Choice is not representative of the overwhelming majority of people across Australia. They have always run a left-wing policy agenda. That is what Choice is all about. Choice is not representative of mainstream consumer interests. When people come into this chamber and say that what Choice says somehow provides justification for what is happening here, I completely reject that.

The truth of the matter is that the changes the previous government made went too far. The reasons have been well articulated in this chamber all day today. They went too far because the then minister, Bill Shorten, wanted to look after his friends in the union movement. He sought to impose additional burdens on small business financial advisers and their clients that did not apply to industry funds and their clients. I flag here that if the Senate is of the view that those burdens ought to be imposed on small business advisers and their clients then, in the interests of competitive neutrality, the government will consider moving amendments to the legislation to ensure that these requirements are extended across the board.

Right now, industry funds charge all of their clients a fee, a fee which is not disclosed. It is a charge for what Bill Shorten has fancily described as 'intrafund advice' but which, in effect, is personal advice or general advice. Industry funds charge their clients that undisclosed fee for that advice whether it is accessed by the client or not—and the client of an industry fund does not even have the capacity to opt out of that ongoing fee arrangement. That is not to mention that industry funds are not subject to the requirement to re-sign their clients to ongoing fee arrangements every two years. The government will explore whether, in the interests of competitive neutrality, we can make some relevant changes.

Let us go back to the basics. The government reached an agreement with the Palmer United Party on some very important policy matters. There was a key moment in all of this—and I am sure Mr Palmer will not mind me saying so. You might recall that in early July Mr Palmer was making public comments that the Palmer United Party would vote against our changes to the Future of Financial Advice legislation. That was because he then believed—he had assumed—that the assertions being made by Labor about the effects of our changes were true. Labor, through the shadow Treasurer, the shadow minister for financial services and others, had been out there dishonestly asserting that the government was abolishing the 'best interests' duty, that somehow we were removing the requirement in the Corporations Act for advisers to act in the best interests of their client. That was not true. That requirement remains in the Corporations Act. We did not touch it at all. When I was able to point that out to Mr Palmer, that persuaded him to engage in an ongoing and constructive conversation about how our streamlining measures could be further improved.

Labor also asserted, dishonestly and inaccurately, that we were bringing back commissions for financial advisers. That was also untrue. I think it was you, Mr Acting Deputy President Whish-Wilson, who were suggesting—it might have been somebody else, but somebody in the debate was suggesting it—that it did not mean anything that the ABC Fact Check had concluded that Labor's claims were wrong. But it does mean something. The ABC Fact Check said that Labor's claim that the government was bringing back commissions for financial advisers through these FoFA changes, that we were bringing back conflicted remuneration, was inaccurate and that it was scaremongering. The ABC's fact checkers are hardly apologists for the coalition!

Senator Whish-Wilson then said, 'Yes, but you are still allowing incentive payments to continue in the context of general advice and you are still allowing incentive payments through balanced scorecard arrangements.' But that was not our measure. As far as that goes, our regulation implements Mr Shorten's own legislation. I have said this before. The previous government had been quite explicit in saying that their FoFA changes were not about abolishing or prohibiting incentive payments in all circumstances. The previous Labor government indeed themselves envisaged circumstances where incentive payments to advisers were not conflicted remuneration and would be allowed. For example, Bill Shorten, in his second reading speech introducing the FoFA bills, said:

If … a particular stream of income does not conflict advice, then these reforms do not prevent them from receiving that income.

Further, his explanatory memorandum to the bill said:

… if … the remuneration could not reasonably be expected to influence the choice of financial product recommended, or the financial product advice given … the remuneration is not conflicted and is not banned.

Performance pay is a very important part of lifting performance in workplaces right across Australia. But performance pay in this industry needs to be structured so that it does not conflict with the advice given. For example, it should be able to encourage compliance with the law; it should be able to encourage more training; it should be able to encourage better attitudes towards customers; it should be able to encourage better engagement with stakeholders and a whole range of other things. And, in a very small way that does not conflict with the advice given, it should be able to encourage performance in terms of providing advice in relation to products. But commissions have been explicitly banned, and we have made that ban even more explicit. I refer to a particular section in the regulations that the Senate is considering the disallowance about. The explicit prohibition that we have introduced in our regulations prohibits:

      This prohibition comes on top of requirements that:

        So the person accessing general advice in those circumstances has to be told and has to be aware of who he is dealing with. Then it is up to the client to make an informed judgement as to whether they want to continue that conversation.

        We did reach an agreement with the Palmer United Party and an agreement also with Senator Ricky Muir. We promised to do certain things, to make certain improvements, and in return the Palmer United Party senators and Senator Muir promised that they would not support the disallowance and that they would support the passage of the FoFA legislation when it came up. I guess the problem from the government's point of view is that these sorts of processes can take a while, so we delivered on our side of the bargain. But then certain senators decided to change their tune—to not deliver on their side of the bargain. What I would say to Senators Muir and Lambie—through you, Mr Acting Deputy President—is that the key currency in this business is trust. If you want to be able to deal with each other, if you want to be able to reach agreements on common ground and on sensible public policy ways forward, then you have to be able to trust that any agreement will stick. That is the basic foundation for the way things work here.

        I remind the chamber that here we have Labor asserting—inaccurately, I say again. This is an area which is highly technical, where people with a vested commercial interest or a vested political interest can easily mislead people. Mr Palmer initially was misled because he assumed that Labor was telling the truth. When I explained to him what we were actually doing, he realised he had been misled and he worked with us on behalf of the Palmer United Party and the Australian Motoring Enthusiast Party on working up some sensible further improvements. Labor said we were getting rid of the best interests duty—not true. In our agreement with Palmer United we made a provision that there ought to be a requirement in the Corporations Act that certain things are explicitly listed in the statement of advice provided by financial advisers to their client, and signed off by both. No. 1 was that the adviser is required to act in the best interest of their client and to prioritise their client's interest ahead of their own, consistent with the requirements in sections 961B and 961J of the Corporations Act. Indeed, we have circulated amendments in the chamber to the substantive legislation to give effect to that part of the agreement.

        We have also agreed that any fees be disclosed and that the adviser will provide a fee disclosure statement annually if the client enters into, or has entered into, an ongoing fee arrangement after 1 July 2013. This is already required under our amended financial advice laws, of course. Labor wants this to be imposed retrospectively. Imposing such a requirement retrospectively adds nothing at all to consumer protection. All it does is impose massive additional cost of implementation, which means that it will significantly push up the cost of advice for clients of small business financial advisers. So do not tell me this is about additional consumer protection; this is a bloody-minded change made in a way that imposes additional cost without actually protecting consumers in any additional way.

        But I say again that, if Labor thinks that this is required, in the interests of competitive neutrality such a retrospective change ought to be imposed across the industry as a whole. So the government will consider very carefully not only whether we should impose additional fee disclosure requirements moving forward on industry funds in relation to the currently undisclosed fees that they charge to their clients for intra-fund advice, general advice and personal advice, but also whether that should be imposed retrospectively in relation to fees charged for advice that may or may not have been provided prior to 1 July 2013. I assume that, if the Senate takes the view that clients of small business financial advisers ought to be protected that way, then clients of industry funds ought to be protected the same way, because what is good for the goose is good for the gander. If, in the judgement of the Senate, small business financial advisers have to incur the costs which they then have to pass on to their clients in order to comply with this sort of onerous and inappropriate retrospective change, then that same change should be imposed across the board.

        In our agreement we also agreed that a client has the right to return financial products under a 14-day cooling-off period, in accordance with relevant requirements in the Corporations Act. We agreed to various other bits and pieces but, importantly, at the specific request of Senator Muir we agreed to set up an enhanced public register of financial advisers, including employee advisers—and this is all covered in the letter that was tabled previously in the Senate. In good faith, within two days of signing that agreement and giving effect by supporting the regulation change in the chamber here at that time, we started a process of consulting on that change. I announced a couple of weeks ago now that this register will be established and it will be fully operational from March 2015. Indeed, every single financial adviser, as a result of this change, will be charged an additional $5 when they renew or register their licence.

        So we thought that was okay because we were going to deliver $190 million in efficiencies by not imposing unnecessary and costly red tape, which was just pushing up the cost of advice without actually improving consumer protections. We were actually making a genuine and sensible change through this public register, providing more transparent information to investors across Australia wanting to access financial advice, empowering them to access the register and check out the adviser that they might be considering accessing advice from. They can then make a more informed decision on whether it is sensible to access advice from that particular adviser because the information included would be about their status in the industry, their qualifications, their history in terms of whether there have been any issues, any complaints or disciplinary issues in the past and who they are working for. All that sort of information is going to be on that register.

        I delivered on my side of the bargain. Now that it comes time for Senator Muir to deliver on his side of the bargain as a result of an explicit agreement that he was a party to, he says: 'Thank you very much for doing your side of the bargain. I'm now going to leave and I'm not going to follow through on my side of the bargain.' Not only that, the first time that he had the decency of having a conversation with me about this was this morning. So here we are: I, in good faith, not only entered into a deal and into an agreement with the Palmer United Party and the Australian Motoring Enthusiast Party, I also acted on all of the requirements in that agreement, and when the time came for Senator Muir and Senator Lambie to honour their side of the agreement they walked away as if nothing ever happened, without any notice, without any conversation. If they had had genuine and legitimate concerns you would have thought that they would have given the government the courtesy and treated these things with the decency that those sorts of circumstances require, which is to have a proper conversation with us rather than to essentially ambush the government with this move today, as the Labor Party has initiated.

        Senator Dastyari and Senator Muir have both suggested that there is no problem with abolishing this law today because you can just put in a transitional period through ASIC. I have taken that on board, Senator Dastyari and Senator Muir. I have spoken to ASIC, given that, without any other action, the disallowance would have the effect of reintroducing laws which have never previously reached their hard implementation date. Indeed, the government regulations took effect on 1 July 2014. Over the past five months, new arrangements consistent with the government's policy commitments made in the lead-up to the last election have been the applicable law of the land. To provide certainty to the market, to the financial services industry and to investors, I have asked ASIC to go back to a facilitative approach until 1 July 2015. In the circumstances that we are facing, I have asked ASIC to take a practical and measured approach to administering the law as it will stand following the disallowance of the regulations.

        In the meantime, the parliament will have the opportunity to deal with the substantive legislation. In practice, nothing will actually change as a result of that. Particular issues will, of course, arise which will need to be addressed, in particular in relation to retrospective fee disclosure for statements for the period pre 1 July 2013, which were not required under the law that was in place for the last five months, so it would not be appropriate to now expect companies to comply with that sort of requirement as of tomorrow. So there will be a transitional period to 1 July 2015 in effect to which ASIC has agreed. I see Senator Dastyari nodding, indicating his agreement. Hansard does not pick up Senator Dastyari nods, so I will just put it in.

        7:03 pm

        Photo of John MadiganJohn Madigan (Victoria, Democratic Labor Party) Share this | | Hansard source

        I have listened long and hard about this tonight and today, and I acknowledge the contributions of Senator Cameron, Senator Cormann, Senator Abetz, Senator Williams, Senator Canavan, Senator Muir and many others. Let me assure Senator Abetz, Senator Cormann and others that I am all for a level playing field—that rules that apply to one should apply to all without fear or favour, that the same disclosure and fees et cetera should apply to all so that you have a true level playing field. I am all for comparing apples with apples, in effect. Whether they be industry super funds or non-industry super funds, there are discrepancies there, and I note the contributions of people pointing out some of those discrepancies. They need to be addressed without fear or favour.

        Earlier this afternoon, in response to Senator Day's frustration at losing his question today—I can appreciate how he feels—I and Senator Xenophon approached the ALP and asked them would they be prepared to give Senator Day a question next week. If not, both Senator Xenophon and I are prepared to give up either of our next questions to Senator Day to make up for that. But I would ask it of the ALP, as they did one other time in this place where question time was taken away and I lost my question and the ALP gave me my question. Mr President, I think that that would be the fair thing to do.

        In light of all my remarks thus far, I am unable to ignore the thousands of Australians who have had their lives ruined by poor financial advice, and I would like to acknowledge the heartfelt work that I know that Senator Williams has put into this area. These regulations, I fear, have not been given proper scrutiny. These regulations are an abuse of process because they pre-empt the parliament. These regulations are not minor changes to the law. I believe they fundamentally change the operation of part 7 of the Corporations Act. The minister, I believe, has been caught out on these regulations by the Senate's own Regulations and Ordinances Committee. I do not say this to have a go at Senator Cormann personally, but, in the words of the committee, these regulations, in effect, suspend the law.

        Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

        I rise on a point of order. Given what Senator Madigan has just said, it is very important for the chamber to be aware that the Regulations and Ordinances Committee decided to withdraw the notice of disallowance. So they responded to my advice.

        Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

        That is not a point of order; it is a debating point.

        Photo of John MadiganJohn Madigan (Victoria, Democratic Labor Party) Share this | | Hansard source

        Minister, if I have that wrong, I am happy to withdraw it, but I am happy to have this discussion with you. You are, Minister, of course, entitled to bring proposals for change to the parliament through legislation, but this is a controversial law with, what I believe, is the stroke of a pen and then you expect the Senate, the parliament to fall into line. I believe in so doing that you put the cart before the horse. I am concerned about the policy detail of these regulations and, in the interests of brevity, I specifically addressed item 7. I believe the best interests duty in these regulations removes the only component that clearly requires an adviser to act in a client's best interests, the so-called catch-all.

        Senator Cormann, Senator Williams, Senator Canavan and Senator Macdonald, I note your concern and I share your concern about the small business operators, the majority of whom act honourably and honestly. And this is no reflection on those people. Those people need surety, as do the people who have lost their life savings, to whom Senator Williams has referred. We need transparency, accountability, creditable deterrence and, if the law is broken, it must be applied without fear or favour. We have a duty of care to all Australians, not to individual vested interests. Time and time again I have had people come into my office, both here and at home, who have told me of the shocking advice, the poor advice they have received from some, and I have heard the same names come up time and time again of some dodgy advisers.

        I note many of the issues which have been raised here tonight by the minister, by Senator Macdonald, by Senator Canavan and by Senator Williams and I note all of your concerns, seriously. I also note the serious concerns of people in the ALP from their point of view, but at the end of the day, we have to get past this, 'He said, you said, she said,' and we have to act in the interests of all Australians and clean up this mess. I note the comments made by the government and the minister that there are large anomalies in what was proposed by the former government. We need to address those anomalies. We need to get on and do it.

        I also acknowledge the government's frustration with where we are at, but to be fair, if we are going to play the blame game, we are never going to sort this mess out and I, for one, want to sort this out, as I said in the best interests of all Australians in a fair, equitable and transparent manner.

        7:10 pm

        Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

        I commend Senator Madigan on his contribution—thoughtful, considered and balanced. I hope I take the same tone as Senator Madigan. This is a mess. We do need to sort it out and we can sort it out with goodwill. I want to address a couple of preliminary matters.

        In respect of advice and industry superannuation funds, I know Senator Cormann has spoken on that. That is an issue I take very seriously. I note a commentary in CrikeyI am not sure how that is characterised but Senator Cormann characterises it as a left-wing publication—

        Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

        They would characterise themselves that way.

        Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

        I am sure. I think labelling people is not helpful. A report by Bernard Keane on 9 July makes reference to comments Senator Cormann told TheFinancial Review journalist Nassim Khadem—I think this helps clarify or at least puts into context the issue of industry super funds. Senator Cormann is quoted as saying to TheFinancial Review:

        What I will do, if the Senate is indeed of the view for example that opt-in and retrospective fee disclosure requirements should stay in place for small business financial advisers, is consider whether in the interest of competition neutrality, those requirements should apply equally across the financial services sector, including to all advice provided through industry funds.

        That to me is the nub of the issue and I have some sympathy for the issue. It is interesting that Mr Keane gave credit to Senator Cormann, stating:

        Cormann—who to his credit is about the only Coalition minister who genuinely engages with people on social media, despite the personal abuse he receives—and I had something of a running battle on Twitter … as I tried to get him to explain what he actually meant ... Industry Super Australia, the industry peak body, joined in—

        and the debate went down the path as to 'intrafund advice', which is, as Mr Keane points out, standard advice given by funds to clients about matters relating to their existing accounts.

        Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

        Itisn't; it's general or personal advice.

        Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

        Yes. The minister, to be fair to him, says it is general or personal advice. I want to give the flavour of this because this is an important issue and I think it needs to be dealt with. Mr Keane makes reference to:

        A good example is the advice thousands of people would have been given during the financial crisis, when the share market was in freefall and they rang their funds asking if they could switch into cash.

        So the view taken by Crikey is that it asserts that Senator Cormann was talking about 'intrafund advice' and the rebuttal from Crikey was that:

        The Association of Superannuation Funds—which covers the whole super sector and isn't aligned with industry, retail or SMSF—described intrafund advice this way last month:

        Intrafund advice is not new—Superannuation providers have been providing advice to members as part of their general service offering to members for some time. …

        The intrafund advice regime did not flow out of the recommendations of the Parliamentary Joint Committee on Corporations and Financial Services inquiry (Ripoll review) as it was in place well before the inquiry process.

        Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

        Small business financial advisers are not new either.

        Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

        Yes, and notwithstanding those comments, I think there is a legitimate and genuine debate. There are some broader issues which the opposition may not like being discussed at this stage, even though it is not relevant to this particular debate—that is, whether the composition of the boards of industry super funds ought to be changed, whether they should be opened up. It is something Senator Sinodinos has commented on for some time. I think there ought to be a legitimate debate about that.

        I also think all industry super funds ought to have a quasi annual general meeting so that their investors can actually turn up and ask questions of the board in a way similar to a shareholders' annual general meeting. I think they are the sorts of reforms that we need to look at and I commend the debate that Senator Cormann and Senator Sinodinos, when he was Assistant Treasurer, raised in respect of this. These are legitimate issues that I think need to be discussed.

        I also want to pay tribute to Senator John Williams for the work that he has done on this issue. The point of disagreement I have with him is that I have a genuine concern that these regulations actually weaken consumer protections.

        Before I go any further, I want to take this opportunity to set the record straight in relation to the issue of gags or otherwise. During this debate, I have been accused of supporting motions that would have the effect of gagging debate. Indeed, some of my coalition colleagues got quite exercised about it, quite angry, as they are entitled to, but I am afraid it is water off a duck's back in relation to that. That is part of the job. I am sorry if I make my colleagues angry in relation to this, but I want to put this in context because I think there is some misapprehension on their part as to what the facts are. I take exception to the view that was put to me in cross-chamber talk and the criticisms that have been levelled at me. They are not justified. I have always been very clear. I have never and will never support a motion that gags debate on a substantive issue, as opposed to a machinery motion, which we all know is so often used to avoid the debate and ultimately a vote on a substantive matter. I think, in their heart of hearts, my colleagues from the coalition would understand that what was happening today was an attempt to avoid a debate on the substantive issue, whether it is a piece of legislation or an amendment. They are quite disingenuous to suggest otherwise.

        I have in the past supported motions to allow certain legislation or other matters to take precedence over other business, which is what I have done today. I have supported motions to have the question before the chair put, which may have the effect of ending a procedural debate but does not impact on any debate on the substantive issues in question and may indeed provide more time to deal with a substantive matter. To suggest otherwise is disingenuous at best. Let us make that very clear. I hope it is nothing more than a misunderstanding, in this case, by some members of the coalition. I believe my comments will have clarified the situation.

        I will be voting to disallow these regulations in respect of financial advice because it is quite simply the right thing to do, for a number of reasons. All interested parties need to acknowledge that there are serious, legitimate concerns raised by many credible interested parties regarding the current regulations. I accept that the former government's approach was not without its flaws, but now the pendulum has swung too far away from consumers. These regulations have given comfort to a small minority of financial advisers who could use them as protection against unscrupulous advice or activities. I am sure that is not what the government attended. Disallowing these regulations today will in practical terms mean we are back to the regulations that were in place prior to 1 July. This is by no means ideal but it is preferable to the alternative.

        I do not think it is unfair to suggest that the government's regulations should have, given their scope and significance, been dealt with as part of a bill rather than subordinate legislation. Indeed, I remind my colleagues of the concerns raised by the Regulations and Ordinances Committee and the Scrutiny of Bills Committees in relation to this matter. In particular, the Regulations and Ordinances Committee wrote, in their most recent delegated legislation monitor of 29 October 2014:

        … the minister's response has not satisfactorily addressed the key scrutiny concern raised by both the Scrutiny of Bills committee and this committee—namely, that the regulation makes fundamental legislative change that may be more appropriate for parliamentary enactment (that is, via primary rather than delegated legislation). While the minister cites both the need for 'swift action' and the estimated savings or benefit to industry, the minister has not addressed the committee's concern that such imperatives may not amount to sufficient justification for effecting significant policy change via regulation (and therefore without the full scrutiny and approval of the parliament).

        The committee also raised concerns about the potential for such regulations to create a precedent for using delegated legislation over primary legislation because of its convenience. The committee concluded:

        The committee considers that the potential for this approach, in this and future cases, to 'permit a temporary mechanism to turn into a permanent legislative artefact', or to continue in operation despite the clearly expressed will of the Parliament (for example, if the bill were passed with an amendment to remove one of the measures in the regulation), is critical to the assessment of whether the legislative approach offends the committee's scrutiny principle …

        It is also important to note what significant consumer groups have said in support of this disallowance and in opposition to the regulations. I know the minister has characterised Choice as a left-wing organisation, but can I assure the minister and Mr President that I will get advice whether it is from a left-wing or a right-wing organisation . Indeed, there are times when I think the Institute of Public Affairs make sense on some issues—not often but—

        Photo of Kim CarrKim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | | Hansard source

        You've got to draw the line somewhere!

        Photo of Nick XenophonNick Xenophon (SA, Independent) Share this | | Hansard source

        Senator Carr says you've got to draw the line! But on some issues—in terms of government accountability, data retention and those issues—I think that they have hit the mark. So I will take my advice where I think there is some substance in what people are saying, despite whatever their politics may be. Indeed, I even listen to Senator Di Natale at times, on health issues!

        Choice, in their letter to the Senate Standing Committees on Economics of 15 September 2014 made a number of very salient points in respect of this:

        CHOICE's concerns include changes to the obligation to act in the client's best interest, scoping of advice, conflicted remuneration, opt-in arrangements and annual statements.

        The Bill makes several amendments to the definition and scope of the best interests duty. These changes leave only a 'tick-a-box' checklist of procedural steps to assess if an adviser has acted in a client's best interest.

        Choice go on to set out in relative detail what these concerns are. For instance:

        CHOICE is concerned some information now required will be misinterpreted by consumers. For example, the statement that "the provider of the advice genuinely believes that the advice given is in the best interests of the client, given the client's relevant circumstances (within the meaning of section 961B)" could lead a reasonable consumer to conclude that an adviser will act in their best interests. This simple conclusion is easy to reach without a thorough understanding of how s961B restricts and adds loopholes to the obligation for an adviser to act in a client's best interest.

        I am a mere suburban lawyer who specialises in personal injuries claims, but the lawyer in me tells me that there is an issue here in terms of drafting. I see it as something that is particularly open to misinterpretation and that could be seen as a loophole in some circumstances.

        I think it is worth reflecting on a very good opinion piece by Peter Martin that appeared in The Age of 24 June 2014, in which he questioned the constitutional validity of these regulations. He said, 'regulations are meant to support the aims of laws, not negate them'. I think there is an argument as to the constitutionality of these regulations. I also think it is worth quoting an excerpt of Mr Martin's column because it goes to the nub of these issues. I know that Senator Whish-Wilson has referred to this particular tragic case. I quote:

        Recently, the ABC's 4 Corners program told the story of Noel Stevens. When Stevens was phoned by his local branch of the Commonwealth Bank and asked to switch his life insurance policy from Westpac to the Commonwealth he didn’t know that the teller received a referral fee of $444.60. The bank-employed financial planner received almost twice as much plus an ongoing commission.

        When Stevens was diagnosed with pancreatic cancer and given six months to live the bank refused to pay. It said he had a pre-existing condition.

        A judge later found the planner did not act in Stevens' best interests. Commissions and kickbacks might have influenced the advice. Commissions will continue under the changes the Coalition is planning to sneak through. So long as the commissions are part of a 'balanced score card' of rewards and so long as the tellers are not making 'recommendations' the banks will be in the clear. But it’s easy to get confused.

        Mr Martin refers to an interview on the ABC's 7.30 with Steven Munchenberg, the chief executive of the Australian Bankers' Association—someone who I think is a particularly good bloke to deal with, but, with his views on this, I think he is defending the indefensible in some respects. When Mr Munchenberg was quoted in an interview with Greg Hoy, he slipped up and said something about banks recommending, and then he wanted to rephrase it, because it was legally incorrect. I think it goes to show the level of confusion that exists as to how these regulations would operate and that is a real concern. CHOICE released the following statement in response to the motion to disallow:

        CHOICE says that if the regulation is disallowed, consumers will be able to feel more confident that they are getting impartial financial advice they can trust.

        If this disallowance motion passes, consumers will notice practical benefits:

        Financial advisers will have a clear and strong obligation to act in a client's best interests.

        The advice received will not be clouded by financial incentives that reward advisers based on how much of a particular product they sell.

        Advisers will be required to disclose the fees on a regular basis and will have to make contact with their clients from time to time, to make sure they are happy to keep paying fees.

        In June this year, Ian Yates, the CEO of COTA and a South Australian whom I know quite well—I am not sure whether COTA is known as a left-wing organisation—issued a media release with the following statement:

        To be very clear, COTA is not siding with any special interests in this debate and resents any such suggestion—we are acting on strong legal advice about the impact of these reforms and deep concern expressed by members, and we would oppose the FoFA changes whether proposed by the government or Labor.

        Mr Yates's statement continued:

        COTA will be advising older Australians to be very cautious of the financial advice they receive from banks and financial advisers if this legislation goes through—people will not be able to be assured that their best interests are always being put first.

        Retirees simply can't afford bad or conflicted financial advice. They have no opportunity to recoup lost investments or assets and they need the best possible advice to maximise their retirement income.

        These are only two of the many organisations that have spoken out against these regulations and the winding back of consumer protection reforms.

        Members of the government have asked repeatedly why we are moving this motion today, why we are seeking to suspend standing orders, and why this is so urgent. The politician's answer to that is to ask why the minister felt that the changes made by these regulations—changes that wind back significant consumer protections—were so urgent that they had to be made through regulation and not primary legislation and, therefore, would not be subject to the parliamentary scrutiny that a bill would be subject to. But a humanist would answer with an example like this one. In 2000, Naomi Halpern received advice from her financial planner that she should invest in a number of managed investment schemes, including Timbercorp. The adviser also advised her on margin lending and borrowing against her home to make further investments. Eight years later, after the collapse of each of the seven managed investment schemes in which she had been advised to invest, she was left with $650,000 of debt and only $11,000 in superannuation. Since then, she has re-mortgaged her home twice in an attempt to keep up repayments on loans she did not know she had. She is not sure when, or even if, she will ever be financially secure enough to retire.

        John McDonald was also advised to invest money in Timbercorp. At the direction of his financial adviser, he signed what he thought were buy-in forms but were actually loan applications. When Timbercorp collapsed, John owed them $240,000. Since then, that figure has almost doubled. Bernard Kelly and Meredith Byrne are in similar situations. We know these names because these brave people gave evidence at the Senate Economics References Committee hearing into managed investment schemes last Wednesday in Melbourne—just one week ago today. But there are hundreds, even thousands more people whose names we do not know. And to the government I say: that is why we are pushing this disallowance today. That is why it is urgent and that is why we will vote to disallow these regulations. We are not talking about abstracts here. We are talking about people. Too often we forget in this place, as we argue back and forth about standing orders, procedure and votes, that real people—people like us and like our parents and spouses and children and friends—are the ones who are paying the cost for the lack of protection in the financial services sector.

        I want to thank Naomi, John, Bernard and Meredith for sharing their stories and those of people who have been similarly affected. It is not an easy thing to do, but it is an incredibly important thing to do. The evidence they provided to the committee was vitally important and has truly illustrated the human cost of poor regulation.

        Mr President, I am supporting this disallowance because I believe it is the right thing to do. There are far more arguments against supporting these regulations than there are arguments for supporting them, and the cost of allowing them to remain in place is simply too great. I hope the government will take this opportunity to rework the relevant legislation, in consultation with the relevant interest groups and opposition and crossbench representatives. There is a genuine opportunity here to work in good faith to create a better scheme that provides appropriate protections for consumers and that requires financial advisers to live up to the trust we place in them. Many already do that, but we need to ensure that those 'bad eggs' in the financial services sector are subject to the safeguards that are essential to protecting consumers.

        7:29 pm

        Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

        I am going to be fairly brief because we heard some very powerful words there from Senator Xenophon and from Senator Madigan before him. It is important not to forget why we have come to the situation we are in here today. I want to dispel a couple of the falsehoods that have been put as part of this debate. Firstly, I was disappointed that during the course of this debate some speakers claimed a number of provisions in the original FoFA laws did not apply to some sections of the industry, specifically the opt-in provisions. This is wrong and those members opposite who have said so know better. The opt-in provisions apply for all new clients who seek personal financial advice when ongoing fee arrangements are put in place—no exception.

        Photo of Mathias CormannMathias Cormann (WA, Liberal Party, Minister for Finance) Share this | | Hansard source

        That is not true.

        Photo of Sam DastyariSam Dastyari (NSW, Australian Labor Party) Share this | | Hansard source

        No. Industry super funds along with retail funds and public sector funds can provide information to their members about their interest in the fund via intrafund advice. This is paid for form from the general administrative fee for the fund. The Cooper review found it cost members less than 2c a week. Whether they are an industry fund, a retail fund or a public sector fund, it is actually the same. There is no special arrangement and all super funds are treated the same.

        I want to go back to why we are having this debate and why we are here today. Minister, I believe the process that got us here is the wrong process. Is this the best way to deal with this issue? Unfortunately, it is not, but it is the situation we have arrived at. Frankly, the process where regulations were put in hours before they were to be enacted at the end of June this year was the wrong way to proceed and it left us with no other option than to go through a disallowance process.

        I note the minister is also of the view that there should be some kind of a facilitative approach and a facilitation process as part of this. I think he commented that I had nodded. I certainly agree. A sensible and reasonable way of approaching this is by making sure that there is a grace and transition period. I think everyone in this place would believe that that is a reasonable approach. I reject the notion, however, that there is no difference in that happening. ASIC has been very clear about this in the past: the difference is about intent, about whether people are intentionally going out of their way.

        I want to thank everybody who has participated in this debate. I want to thank the many speakers and the many contributions they have made. Minister, I urge you as part of this process to talk to the opposition and the crossbenchers, and when you are looking at the legislative approach that you make sure there is a good representation of the wide-ranging views that have been outlined here today.

        Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

        The question now is that the Corporations Amendment (Streamlining Future of Financial Advice) Regulations 2014 be disallowed.

        7:39 pm

        Photo of Stephen ParryStephen Parry (President) Share this | | Hansard source

        This means that the Corporations Amendment (Streamlining Future of Financial Advice) Regulations 2014 have been disallowed and cease to have effect immediately.