Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard    View Or Save XMLView/Save XML

Previous Fragment    Next Fragment
Tuesday, 4 November 2003
Page: 22000

Mr ANDREN (8:53 PM) —I say to the parliamentary secretary that I will try to be as brief as I can. I commend the optimism and enthusiasm of the member for Werriwa and his promotion of savings schemes. Given the working poor that I see in my electorate adding to our record household debt by purchasing weekly groceries on a credit card, while I hope the savings culture does return I somehow fear it is a long way off and that debit, not credit, is the way of household budgets—especially for the disadvantaged.

My comments on the Financial Services Reform Amendment Bill 2003 are in relation to the provisions dealing with the regulation of unsolicited offers to purchase financial products off market. This issue was raised with me earlier this year by constituents in relation to the conduct of one David Tweed and his National Exchange Corporation Pty Ltd. Other members have also discussed this character and this scheme. The bill also contains other measures in relation to financial services designed to counter certain glitches that have arisen as a result of the government's Financial Sector Reform Act 2001, which is half-way through the transitional phase of its introduction, begun on 11 March 2002. As the parliamentary secretary pointed out in his second reading speech, the financial services reforms aim to promote investor protection and improve market efficiency. The consumer is protected through improved conduct and disclosure requirements, as well as closer regulation of provider training, competence, skill and integrity. These measures will undoubtedly benefit those Australians fortunate enough to be consumers of financial services products. However, the quality of financial advice and the qualifications of those who provide it need constant review in light of a compulsory superannuation environment where consumers are captive to an industry that is pretty big on spin but still, in many cases, low on expertise and, indeed, integrity.

With regard to the bill's measures to combat unsolicited offers to purchase financial products off market, we can only hope the bill is more watertight than preceding regulations that attempted to curb the activities of operators such as Mr Tweed and his company, National Exchange Corporation Pty Ltd. I was alerted to Mr Tweed's activities at a local level by constituents Ronnie and Peter Hazelton. Peter's parents, John and Nancy—86 and 84 years of age respectively—had received an unsolicited offer for their IAG, formerly NRMA, shares from National Exchange. Without going into the details of Mr and Mrs Hazelton's financial affairs, it was very much a standard example of Mr Tweed's methods. A letter bearing National Exchange's letterhead arrived out of the blue, offering to buy the Hazeltons' shares at half their market value, with no mention anywhere of what the true market value was at that time. The Hazeltons incorrectly assumed that National Exchange was somehow linked to the Australian Stock Exchange and, as the NRMA had been in the news with board elections and so on, they signed the letter and returned it. The Hazeltons usually manage their affairs through a stockbroker but this particular parcel of shares was issued to them independently. After seeking advice, they wrote to National Exchange stating they did not wish to proceed with the sale, and they received a reply from Mr Tweed threatening legal action.

The Hazeltons were unlucky that this occurred before the government's Corporations Amendment Regulation 2003 commenced on 8 April 2003. This regulation was designed to ensure that unsolicited offers to purchase shares or other financial products off market include a clear specification of the market price or at least a fair estimate of that price. It was hoped this regulation would prevent the likes of Mr Tweed preying on unsuspecting or less able shareholders. The Hazeltons' solicitor took up their cause, writing to National Exchange and advising that all correspondence to them be directed through him. This did not occur, and the Hazeltons received a further request for their dividend statement. Interestingly and coincidentally, their lawyer then received an unsolicited offer from National Exchange for unrelated shares at well below their market value and with no indication of what that value was. This offer was dated 5 May 2003, well after the government's regulations had come into effect requiring that the market price be clearly stated. Mr Tweed had found a way around the regulation by re-activating an existing securities trading licence. The regulations only applied to a person making below-market unsolicited offers, rather than a licensed trader.

The provisions in 1019C through to 1019H essentially provide for a specific counter to the practice of unsolicited off-market offers for financial products within part 7.9 of the act dealing with disclosure generally. The hope is that this regime, along with the government's amendments, will prove to be comprehensive enough to put an end to the unscrupulous practices of the likes of the National Exchange Corporation and David Tweed. I support this effort. I note that the Senate Economics Committee had some concerns over the removal of the limitation to ASIC's power to make exemptions and modifications of legislation with regard to conduct and/or people in the financial services sector. It seems to warrant amendment. I will be interested in the Senate's response to this, but otherwise I commend this bill to the House. It will be welcomed by unsuspecting investors like John and Nancy Hazelton, so the bill should be commended.

Debate interrupted.