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Monday, 26 October 2009
Page: 7128

Senator CONROY (Minister for Broadband, Communications and the Digital Economy) (9:29 PM) —I thank all of those who have made a contribution to the debate on the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009. As has been described by both the previous speakers, this bill will give effect to a COAG agreement to provide for the national regulation of margin lending and trustee corporations. The bill will also make long-awaited improvements to the regulatory regime governing the issue of debentures.

The bill will introduce three major changes. The first is the introduction of national regulation for margin loans. Until now margin lending has not been subject to any specific regulatory regime at all. This is a serious problem, particularly because non-standard margin loans contain some features that borrowers often find difficult to understand. As we all saw from the fallout from several recent high-profile financial collapses, when investors put their money into sophisticated financial products, they often do not fully understand that they stand to lose hundreds of thousands of dollars and sometimes their family home. The financial services modernisation bill will change that. Lenders and advisers will need to be licensed and regulated by ASIC, consumers will have access to independent, free and fast dispute resolution services, and, importantly, under the new responsible lending requirements, advisers will be required to only provide advice that is appropriate to the client’s needs and circumstances.

The second area covered by the bill is the traditional activities of trustee corporations. These include personal trusts and deceased estate administration services. Trustee corporations which carry out these tasks are currently regulated by states and territories but the regulatory coverage is often inconsistent. Under the Commonwealth system there will be a single licensing regime administered by one, single well-resourced regulator, ASIC. Under the financial services modernisation bill, the traditional services of trustee corporations will be deemed to be financial services and will be covered by the consumer protection and disclosure requirements of the Corporations Act 2001 and the ASIC Act 2001.

The third area covered by the bill is debentures and promissory notes. The bill will amend the regulatory framework in the Corporations Act to align the regulation of promissory notes and debentures and also provide additional protection for investors by removing uncertainty in the law. This is a much-needed change following the collapse of Westpoint, which tried to use the issue of promissory notes with face values of at least $50,000 to avoid the operation of the law.

By introducing national regulation for margin loans and improving the regulatory framework governing trustee corporations, debentures and promissory notes this bill will make important changes—changes which will bring far greater consistency, clarity and fairness to our consumer credit regulatory regime.

Question agreed to.

Bill read a second time.