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Wednesday, 31 October 2012
Page: 12767


Ms O'NEILL (Robertson) (11:53): 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.

In accordance with standing order 39(f) the report was made a parliamentary paper.

Ms O'NEILL: by leave—It is always a pleasure to be able to report on the work of the Joint Parliamentary Committee on Corporations and Financial Services and, indeed, to be in the parliament and hear the reports of fellow chairs of committees indicating the work that goes on in this place. We live such busy lives in this place that we often move around and do not hear about the great work that is going on. I am sure people sitting in the gallery today will find that they have heard much more by sitting in the chamber than they might through other sources.

Regarding this report, I am very pleased to report that we are fulfilling our responsibilities for the oversight of the Australian Securities and Investment Commission. As the House would be aware, section 243 of the ASIC Act directs the committee to inquire into and report on ASIC's activities and matters relating to those activities to which the parliament's attention should be directed. In fulfilment of this statutory function, the committee currently holds four oversight hearings per year and routinely directs matters of interest to the parliament's attention.

Today I am pleased to speak to the committee's report, which draws on evidence from the oversight hearing held in September this year. I would like to draw this House's attention to three matters arising out of the oversight hearing: firstly, the collapse of Trio Capital and our continuing inquiries into that matter; secondly, the Australian superannuation industry and reports regarding that sector; and, thirdly, ASIC resources.

Regarding the collapse of Trio Capital, the committee's response and our continuing determination is to ensure that people who were caught up in that collapse understand that we do not believe that our inquiry into the collapse of Trio Capital ended with the tabling of the committee's report in May this year. Indeed, the committee continues to monitor ASIC activities in response to the 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—all vital work arising out of the context of that collapse.

The committee considers that such 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 and actual role of gatekeepers such as custodians and research houses. The committee will certainly continue to monitor developments in this area with interest and will continue to report to the House on ASIC's activities. People who are particularly interested in this area will, I am sure, be reassured by that ongoing activity by ASIC in this area.

Regarding Australia's superannuation industry, ASIC reiterated its advice that the continuing growth of the superannuation industry will strongly influence Australian financial markets in the coming 12 months and indeed the coming decades. The committee was informed that the superannuation industry is an area of high-level focus for the commission. I am pleased to report that ASIC has established 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 self-managed superannuation fund task force. It is the committee's view that the task force should comprise representatives from other regulators of Australia's superannuation and SMSF sectors, such as the Australian Taxation Office and the Australian Prudential Regulation Authority. The committee will actively seek from ASIC updates on the work of this important task force and will appraise this House of ASIC's activities.

The committee also received considerable information from ASIC regarding their resources. In August this year, when tabling the committee's third oversight report for 2012, I drew the House's attention to the resources that are available to ASIC. Further detailed information about ASIC's resources and expenditure was provided at our September oversight hearing. Indeed, we received a detailed analysis of the commission's allocation of its resources, which it then uses to undertake surveillance activities.

In summary, ASIC considers that Australia's financial system is based on self-execution and relies on gatekeepers doing the right thing. ASIC chairman Mr Greg Medcraft advised that the commission is not resourced to look into everybody's accounts and situations. Accordingly, it takes a considered 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. The committee reiterates its previously stated view that the commission must be appropriately resourced to take all necessary and reasonable action to promote fair, efficient and safe financial markets.

However, enforcement and surveillance are only one part of an appropriate regulatory model. The committee considers that proactive education is a necessary aspect of a well-balanced, effective regulatory framework, and the committee is interested in measures that the commission has previously taken, is currently taking and could take in further extension over the coming months to improve financial literacy and investor education.

The importance of the Australian Securities and Investments Commission to the proper functioning of Australia's financial markets cannot be overestimated. Parliament established the commission to ensure the fair and efficient regulation of Australia's markets. The parliament also tasked the Parliamentary Joint Committee on Corporations and Financial Services to monitor ASIC's activities and ensure that the commission is fulfilling its statutory responsibilities to maintain, facilitate and improve the performance of Australia's financial system.

The breadth of the regulator's responsibility is substantial, covering gatekeepers in Australia's financial system, Australia's superannuation system and 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.

At the next ASIC oversight hearing, the committee will be seeking ASIC's advice regarding the following matters: the regulator's continuing response to the collapse of Trio Capital; the work of the self-managed superannuation fund task force; ASIC's continued supervision of real-time trading on Australia's domestic licensed markets, and in particular Australia's unlit markets; and the commission's enforcement and litigation strategies, particularly in the light of the High Court of Australia's decision in the Fortescue Metals case—to name some substantive things we will be engaging in, not to exclude any further matters that might be of interest to the committee. The committee will hold its fourth ASIC oversight hearing for 2012 on Friday, 23 November 2012. The report for this hearing will be tabled in the 2013 autumn sittings.