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Wednesday, 31 October 2012
Page: 8677


Senator BOYCE (Queensland) (16:53): On behalf of the Chair of the Parliamentary Joint Committee on Corporations and Financial Services, I present the report on the statutory oversight of the Australian Securities and Investments Commission, together with the Hansardrecord of proceedings and documents presented to the committee.

Ordered that the report be printed.

Senator BOYCE: I move:

That the Senate take note of the report.

The Parliamentary Joint Committee on Corporations and Financial Services is responsible for the oversight of the Australian Securities and Investments Commission. As the Senate would be aware, section 243 of the ASIC act directs the committee to inquire into and report upon ASIC's activities and matters relating to those activities, including those to which the parliament's attention should be directed. We currently hold four oversight hearings a year to fulfil that function and we often direct matters of interest to parliament's attention. This report, of course, is no exception.

This report is based on our oversight hearing held in September this year. There are three matters I would like to raise and urge senators to look at the report for more details on these: the collapse of Trio Capital is the first; Australia's superannuation industry is the second; and ASIC's resources—the resources of the organisation itself—is the third.

The committee's response to the collapse of Trio Capital did not end with the tabling of our report into this matter in May this year. We continue to monitor ASIC's activities in response to this corporate collapse. At the September hearing, ASIC noted that it is undertaking a report on the custodian industry, consultation on the regulation of research houses and the development of regulatory guidance to improve disclosure by hedge funds. The committee considers that steps are fundamentally important. The Trio collapse highlighted weaknesses in key checks and balances in Australia's financial and superannuation system and expectation gaps between the perceived role of gatekeepers, such as custodians and research houses, and the actual role of custodians and research houses.

We will continue to monitor developments in this area and we will be reporting further on ASIC's activity in this area. It is a vitally important one to get right as part of our continuing effort to improve the confidence in our financial sector.

With regard to the superannuation industry, ASIC reiterated its advice that the continuing growth of the superannuation industry will strongly influence Australia's financial markets in the coming 12 months and, indeed, the coming decade. The committee was told that the superannuation industry is an area of high focus for ASIC, and I am pleased to say that ASIC has set up a self-managed superannuation fund task force to examine the advice currently available to investors and consumers, and to consider options to improve investor awareness and financial literacy.

The committee is particularly interested in the work of the SMSF task force. It is argued that the task force should be comprised of representatives from other regulators of Australia's superannuation and SMSF sectors, such as the Australian Taxation Office and the Australian Prudential Regulatory Authority. The committee will be actively seeking updates from ASIC about the work of this task force and we will certainly be keeping the Senate informed about what is happening there. From a personal perspective, I would add that I think it is a matter of regret that, whilst ASIC has oversight of the self-managed superannuation fund industry, it has no role in the industry super funds area, an area that certainly needs to be looked at carefully and monitored more closely than it currently is.

In terms of ASIC's resources, in August this year, when we tabled our third oversight report for 2012, I drew the Senate's attention to ASIC's available resources. Further information about ASIC's resources and expenditure was provided at the September hearing and the committee received a detailed analysis of the commission's allocation of its resources to undertake surveillance activities. In summary, ASIC considers the Australian financial system is based on self-execution—that is, on gatekeepers doing the right thing.

ASIC's Chairman, Mr Greg Medcraft, advised us that the commission is not resourced to look in at everybody and, accordingly, takes a risk based approach to surveillance. The committee appreciates ASIC's candour regarding its interpretation of its statutory duty to enforce the Corporations Act and related legislation. We would want to vociferously reiterate our previously stated view to the government that ASIC must be appropriately resourced to take all necessary and reasonable action to promote fair, efficient and safe financial markets

It is not legitimate to continue to increase the responsibilities of ASIC without increasing the resources that they have to undertake that work. However, enforcement and surveillance are only one side of an appropriate regulatory model. We consider that proactive education is an essential part of a well balanced, effective regulatory framework. We are interested in all the measures that ASIC is taking to improve financial literacy and investor education. I would like to congratulate Mr Medcraft and his staff on what seems to be a sharpened focus in this area of improving financial literacy.

The importance of the Australian Securities and Investment Commission to the proper functioning of our financial markets cannot be overestimated. Parliament established the commission to ensure the fair and efficient regulation of Australia's markets and, as a parliament, we gave the job of monitoring that to the parliamentary joint committee. The breadth of the regulators' responsibilities is substantial and growing—covering gatekeepers in Australia's financial system, Australia's superannuation system, Australia's national business names register as well as trading on Australia's domestic licensed markets. These are a few but by no means all of the areas within the regulator's purview. You will have seen in recent days in relation to the Banksia organisation that ASIC is looking at further areas where the soft landing may need to be regulated.

At the next oversight hearing, we will be asking ASIC to give us their continuing response to the collapse of Trio Capital. We will be hoping to have a report on the work of the self-managed superannuation funds task force. We will be asking about their continued supervision of real-time trading on Australia's domestic licensed markets and Australia's unlit markets. As you would all know, dark pools have become a source of some concern in a vast area of the market that is not currently transparent or regulated. ASIC is also looking into this area, and we are waiting with great interest to hear their views on the topic next year.

The commission's enforcement and litigation strategies, particularly in light of the High Court of Australia's decision in the Fortescue Metals Group, is something else that we will be very keen to discuss. We look forward to completing our last oversight hearing in November this year. I seek leave to continue my remarks.

Leave granted; debate adjourned.