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Wednesday, 16 August 2006
Page: 101

Ms BURKE (4:36 PM) —On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee’s report entitled Statutory oversight of the Australian Securities and Investments Commission.

Ordered that the report be made a Parliamentary Paper.

Ms BURKE —by leave—As always, the ASIC oversight hearing covered a range of topics and produced much valuable information for the parliament—and for the public at large, if anyone in the gallery cares to cover the hearings. I want to thank Mr Jeffrey Lucy and Mr Jeremy Cooper for their patience during a long and broad-ranging hearing. I also want to thank the secretariat for their excellent work at the hearing and I particularly thank Andrew Bomm for his work in digesting the hearing and producing a succinct and readable report from all our ramblings.

I wish in my short time to touch on a few issues from the report. First, I want to again congratulate ASIC on its shadow shopper exercise into superannuation advice. Sadly, again, this exercise, which is a valuable tool, even indeed for the financially literate public, produced some disturbing results. I read from the report:

2.28         In the committee’s view, the survey results are of major concern. ASIC found that superannuation advice did not, overall, meet its expectations. The survey revealed that:

  • given the client’s individual needs, 16 per cent of advice was unreasonable;
  • one third of advice suggesting a switching funds lacked credible reasons;
  • unreasonable advice was between three and six times more likely where a conflict of interest (eg high commissions) was present; and
  • advisers failed to give a requisite Statement of Advice (SOA) on 46 per cent of cases (though one fifth of these were verbal advice to stay in an existing fund).

Most consumers do not have sufficient time, understanding or experience to digest and compare superannuation products. Advice given by advisers should ensure that consumers are making informed choices about switching funds and not be directed to a fund because the adviser will get the best commission from this deal. Lack of real, comparable advice about the fund the consumer is leaving for the one they are being encouraged to take up means that many individuals are losing vast amounts of their retirement income in fees and charges. The report quotes ASIC:

That is for the industry. In our shadow shopping work, we show that there is a fairly worrying correlation between commission models, conflicts and so on and advice that does not have a reasonable basis. We will leave it at that.

The government introduced super choice. It should ensure that informed choice is available to assist individuals to make this very important life choice. Today the Australian government has sent us Understanding money—how to make it work for you. It says: ‘Get advice from an adviser.’ What it does not tell you is that some of the advice from advisers is not worth the paper it is written on and that you do need to shop around. We need to provide greater financial literacy to people to be able to make these important choices—choices that can have a vast impact on their quality of life in retirement.

The financial services regulation was again covered. Again it goes back to this notion of advice given to people. Advice does not need to be good. It is a bit like answers in question time—they only need to be relevant; they do not actually have to be a good or honest answer. Advice under the FSR also does not need to be good. This leaves consumers very exposed. Again I read from the report, quoting ASIC:

In a sense the industry is lucky that the legislation does not say that you actually have to give good advice because I am not sure that we, as a regulator, are actually qualified to judge whether advice is good or not. I think that is a policy platform that obviously was not taken up by the government.

If ASIC cannot judge whether the advice is good or not, how does the consumer out there, who knows so little about superannuation, make good, informed choices about switching funds? Much more needs to be done in this area. I again commend ASIC for leading the charge.

One of the other areas I would like to very quickly cover is in relation to the Vizard case. Yet again there was some disturbing information presented at the hearing in relation to the Vizard case and some information that came to light after the case. Extracts from Crikey have been incorporated into the report because there was a very interesting exchange between Crikey and Mr Lay’s lawyer, Mr Lederman. Mr Lay is the accountant who was critical of ASIC’s decision not to proceed with criminal charges against Vizard. I quote from Crikey:

Lederman writes: We are able to state categorically, both on our instruction and our personal knowledge, that at no stage did Mr Lay refuse to testify against Mr Vizard. The simple truth is that—notwithstanding the relevant publicity associated with public statements by personnel of the Australian Securities & Investments Commission and by Mr Damian Bugg—at no point of time was Mr Lay asked to give sworn evidence against Mr Vizard, nor was he ever served with a subpoena to do so.

ASIC was a little taken aback by this advice printed up on Crikey, and in a letter to the committee responded:

Following the publication of the material, ASIC contacted Mr Lay’s lawyer expressing concern about the statements and querying whether ASIC had misunderstood the position or whether Mr Lay had reconsidered his position. ASIC again invited Mr Lay to meet to discuss this matter further.

Mr Lay, through his lawyer, continued to decline to meet or engage in any further discussions on the matter.

This leaves open the whole question of criminal proceedings against Mr Vizard. It exposes again the weakness in the system about actions being brought against white-collar crime. This is a very serious case of insider trading. Yes, Mr Vizard has had his wrists slapped, but it does not appear that justice has really been done or that the full force of the law has been applied. Again the committee explored why ASIC had not used its complete powers to compel witnesses to testify in the ASIC case. As we go more and more into the realm of people trusting advisers, buying shares and investing their super money to ensure that they are providing for their own retirement, the public needs to be assured that there are no grey areas in matters of financial concern—that people are not manipulating the financial market. We are all now shareholders. We all need to have faith in the system. More needs to be done in this regard.

I will be, as the report says, keeping a clear eye upon the discussions between ASIC and the DPP to ensure that they can more fully investigate claims brought in respect of the corporate world in a more timely manner. I commend the report to the House. It would be really valuable for most consumers out there to have a look at it and to also look at the ASIC website, which provides very valuable information to consumers.

The DEPUTY SPEAKER (Hon. DJC Kerr)—Does the member for Chisholm wish to move a motion in connection with the report to enable it to be debated on a future occasion?