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Wednesday, 8 February 2017
Page: 232


Mr HUSIC (Chifley) (10:50): We passed a critical milestone yesterday. In the amendment that we put forward, we had said to the government: 'Drop this half-baked bill; bring in one proper bit of legislation, and do it by the first sitting day of the parliament.' That did not happen. On one level, I can appreciate why—the coalition had a lot on their hands yesterday, and they were probably not in a position to be able to introduce new legislation that would fix this the first time. But the problem is this: we now have a situation where we are going to wait for another bill to come along—another bill to correct, effectively, the shortcomings of this bill. It has always been the case with this reform, particularly in terms of equity crowdfunding, that there has been delay, stumble, and delay.

It is worth remembering that this reform in relation to equity crowdfunding was first flagged when Labor—when in government—referred this to the Corporations and Markets Advisory Committee back in 2013. CAMAC brought down their report in May 2014. We were told that this would be subject to consultation, which was good. There were a lot of contentious elements to what CAMAC put forward, and they needed to be sorted out. We had flagged back in December 2014 that, while we were broadly supportive of what CAMAC was doing, and while we thought it was an important first step, there were a lot of things that were very heavy-handed in what they were putting forward. The government put through their discussion paper on equity crowdfunding as well; they then said that they were going to do all this consultation, and that they would do whatever they could to bring this legislation in with as much speed as possible. When they did bring in the legislation, it ended up here in December 2015. So we went from May 2013 to December 2015, and when they brought the legislation in it was widely criticised because it was too restrictive and the caps in place were too onerous in terms of assets and turnover. It has also been indicated that a big stumbling block is the compulsion by the coalition that a company has to turn itself into an unlisted public company to avail itself of this legislation. It is remarkable that the coalition believe that government should force a commercial decision on a private sector player merely to gain access to capital. We said this was not workable and it was not right.

We then had a situation where the bill did not proceed and we got to a point where this new bill was brought forward. This new bill does take on board Labor's recommendations to lift the asset and turnover caps. That is a good thing. We support that. But it fails on one hand to deal with the biggest stumbling block that exists in terms of forcing the creation of an unlisted public company, with no explanation, and it also changes the cooling-off period for investors. It reduces the amount of time that retail investors have to change their mind on whether they will proceed with what will potentially be a big investment in these companies. These are things that are of great concern. There is no explanation as to why, for example, we are still forced to have this unlisted public company regime in place.

We were told another bill is coming. We were told today by the Treasurer that it will be occurring in the near future. But they will make their media drops, they will talk to their favourite outlets, they will get the coverage on suggesting that this new bill will come forward, that everything will be fixed and start-ups will have a much easier pathway to capital, but it will take ages. In fact, I am so confident that the Treasurer is going to take so long to get that bill in place that I will bet him an iTunes card that he will not get it in place by the end of the year. If he thinks that his bill will come to this House and will allow for start-ups to be able to access capital and that, as a result of this bill, all these start-ups will be out there creating their own pathways to consumers or other businesses and they will have their services out there, I would be interested to see that. The problem the whole time has been that Treasury has resisted and has been exceptionally conservative and risk averse in making changes to the Corporations Act to allow for a carve-out, for a safe harbour, in relation to this aspect of capital raising. They cannot get past their minds the notion that disruption is not a concept that just occurs within the private sector and that it also forces government to think differently about the way regulation occurs. We said to the government that we were prepared to work with them on a bipartisan basis on this. I have spoken with other ministers in relation to this matter.

I understand that the Treasurer will allow me to speak for a little bit longer. I want to put some questions to him. We certainly did raise with the government our preparedness to work with them on it because we know this is contentious and sensitive. Anything to do with the Corporations Act is not easy to do, but we wanted to give a green light to exploring how this could all be done. (Extension of time granted) I respectfully say that, while representatives of the Treasurer's office did meet with us, they met with us to say, 'This is the bill that's coming forward to the parliament,' but it still contained some of the objections that people have. They cite support from the sector. I would have to say that support is riding off the wave of resignation. There are people in the sector who support this bill merely because, after waiting for so long, they finally want to get something in place. This bill is half baked. It is a resignation from those opposite, those in government, that they are unable to come up with something that works and they just want to put this in place.

There are some people brave enough within the sector to call out this legislation for what it is. The quote that really stuck out in my mind last year was from Andy Giles, the co-founder of Veromo.com. He said:

Currently, the thought of switching to a public company to avail ourselves of a potential wider investor base is unthinkable ...

In the inquiry that was launched into this that is being done by the other place, the University of New South Wales said:

Currently the Bill excludes over 99.7% of companies from accessing CSF.

That is what they are saying. This bill restricts access to equity crowdfunding through the way it provides this restriction. It is just not acceptable. It is unfathomable that they could not fix this properly with an opposition that are saying they are willing to work with the government. They still cannot find a way to bring it forward and they still make a promise that somehow they will be able to flick a switch and have that eureka moment where they are able to sort this out.

There are a number of questions that I have of the Treasurer. I am grateful for his presence today. Why are you forcing this bill through now? Why are we doing this in a two-step way instead of just doing this all at once and allowing for this to happen, knowing that it will take time for the systems to come into place anyway, the systems that are used by platforms externally will then have to be amended again and there will be red tape or extra work forced on smaller companies and platforms to accommodate a new or updated regime? Why are you still insisting on the unlisted public company regime? What protections do you believe are offered as a result of having an unlisted public company regime? You talk about a regulatory sandbox in the ASIC realm and you have talked quite often about that. Why can't you create a cordoned-off area within the Corporations Act that still requires reporting to investors along the lines of what would be required of a venture capital firm if they were providing support for a small, early-stage innovation company, and put those types of reporting and protection measures in place? Why are you changing the cooling-off period? Why are you reducing the cooling-off period and limiting the amount of time that new investors—retail investors, mum-and-dad investors—have to consider whether or not they will go ahead with a considerable investment? Why are you reducing that?

Why aren't you offering, for example, an alternative? ASIC, as the Treasurer has acknowledged, has been given additional funding to regulate this sector, giving them the teeth to bite down on those companies that are deliberately gaming the system to thwart the fundraising campaigns of others. The reason the cooling-off period reduction has been advocated is that it is a way of sidestepping other companies gaming the system and ruining things for these early-stage innovators. Why are you reducing the cooling-off period and making investors wear that burden instead of the regulator making sure that is in place?

The other question, Treasurer, is: can you give a guarantee that, by the end of this autumn sitting, you will have legislation that you can put forward to the House to allow for a viable equity crowdfunding platform to work in this country? Those are the questions I would like to ask of the Treasurer.