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Economics References Committee
Treasury Laws Amendment (2021 Measures No.1) Bill 2021, Provisions

MAZALEVSKIS, Ms Rita, Private capacity [by video link]

CHAIR: Welcome, Ms Mazalevskis. Thank you for appearing before the committee today. Information on procedural rules governing public hearings has been provided to witnesses and is available from the secretariat. Witnesses should speak clearly into the microphone and assist Hansard to record proceedings. I advise witnesses that answers to questions on notice should be sent to the secretariat by 5.30 pm on Wednesday, 16 June 2021. I inform you that we have Senator Brockman and Senator Walsh with us. Is there any additional information that you would like to give as to your appearance here today?

Ms Mazalevskis : I'm appearing as an individual who is a shareholder and a member of the community.

CHAIR: I now invite you to make a brief opening statement, should you wish to do so.

Ms Mazalevskis : I would like to make an opening statement with regard to the items that are being discussed today. I thank the committee for the opportunity to participate in this inquiry. It's very important that inquiries like this provide members of the general public an opportunity to voice their real concerns. This inquiry ties in with Treasury's public consultation regarding making permanent reforms in respect of virtual meetings and electronic documentation execution under the Corporations Amendment (Virtual Meetings and Electronic Communications) Bill 2020. I recommend that you also consider the submissions made to that public consultation. A vast number of the millions of Australians who own shares do not have the technical experience or capability to navigate the sometimes convoluted or complex procedures to log into a virtual AGM; this restricts the number of shareholders who participate. I know firsthand of many shareholders who have attended physical AGMs but have been unable to enter virtual AGMs. Most electronic notices for AGMs discriminate against many shareholders who rely on reading printed information, and there are many such shareholders. I don't consider virtual AGMs equal to physical AGMs. I've seen regular physical AGM attendees having all their submitted questions to a virtual AGM triaged by company staff, resulting in no questions being asked and the chairman falsely saying, 'There are no more questions,' and then closing the meeting. Large shareholders often gain privileged access to management and directors throughout the year; small shareholders have only this one day a year to question the board on company matters or concerns. It is already a low level of accountability.

My experience in participating in virtual AGMs over the last 12 months has been far from positive. The process is not fit for purpose and is not designed as a fair or transparent process for shareholders. Governance measures for transparency and accountability have diminished because of the virtual-AGM-only process. Issues include technical faults; incorrect and misleading log-in instructions; lack of fast real-time internet access; buffering; lack of technical support; and long delays on hold, where technical support is offered. Frankly, too many roadblocks are too convenient an excuse to shield directors from critical but fair questions from shareholders.

Companies often engage third-party moderators to run their virtual AGMs. Questions are submitted to the moderator's portal and then passed to the company holding the AGM who sometimes or often unfairly triages them; why? There is usually no direct communication that occurs at virtual AGMs. This process allows convenient side-lining or obfuscation of questions and issues in many cases. Answers which are not directly relevant to the question are deflected or conflated. I have experienced this as a cultural characteristic used to manipulate the genuine shareholder voice. The questioner has no come back to follow up or respectfully challenge such digression. The Macquarie Group, in their July 2020 virtual AGM, provided direct access via telephone for shareholders to the chairman, Peter Warne; no external moderator was required. Why couldn't others conduct their AGMs in such a manner, which was successful? I don't think COVID travels down the telephone line.

Electronic signatures on documents provide a safeguard mechanism of transparency and accountability of all parties who sign the documents. Commissioner Hayne exposed wrongdoing throughout the financial services royal commission. Allowing corporations to electronically satisfy their legal obligations would encourage an environment to continue to engage in further misconduct and wrongdoing. Electronic signatures which have been copied and pasted on financial documents, including borrower loan documents, account for horrendous impacts and losses on innocent borrowers who are unaware that their signatures have been used on documents they have never sighted; these documents and actions contribute to serious financial harm.

Regarding continuous disclosure, why was the Treasury granting temporary amendments in May 2020 for continuous disclosure obligations? Under the Corporations Act, civil penalty proceedings had no requirement to prove a mental element. Section 1041H of the Corporations Act provides for misleading or deceptive conduct civil liability only and states that a person must not engage in conduct in relation to a financial product or service that is misleading or deceptive or is likely to mislead or deceive. The letters patent, which directed Commissioner Haynes throughout the financial services royal commission, defined 'misconduct' in four ways. One was 'conduct that is misleading, deceptive or both'. The Australian Institute of Company Directors stated, 'Not only must the disclosure of information be timely; it must also be accurate and not misleading'. Failure to comply with the continuous disclosure requirements is an offence and can create a civil or criminal liability.

A serious problem with the proposed changes by Treasury to apply the fault element to the Corporations Act is forcing consumers into a legal position. How is this fair? For example, with the practice of securitisation and a lack of transparency, which the bank rely on to mislead and deceive us, one would consider their misleading and deceptive action is proof enough, without having to prove what they were thinking. If the boot were on the other foot and someone was in a bank robbing it, would the robber's actions be proof enough of what his true intentions are, and would anyone care about what the robber was thinking? The Corporations Act protects hardworking Australians. Why is our government constantly stripping back our protections? The above proposed changes are not in the best interests of the Australian people, and they only benefit corporations.

CHAIR: Thank you for that opening statement. I'll hand to Senator Walsh to start.

Senator WALSH: Thank you, Ms Mazalevskis, for being here and for your interest in this issue. I'll start with the issues that you're raising in relation to schedule 1, which is around virtual AGMs and some of the other issues that you've raised there. I note that, in your submission, you have some experience of the temporary measures, having attempted, I think, to participate remotely using platforms like Lumi. Can you just give us an overview of what your experiences have been?

Ms Mazalevskis : Yes. With the external moderator portals that the companies engage with, on the notice of meeting, you usually have a link that you can go to where a shareholder has to put in their shareholder number, either their pin number or SRN number. Some of these companies take eight digits and some take 10. Some want a prefix letter and some want a prefix of two zeros before it, but there has been no instruction whatsoever. So people had problems logging on, in the first instance, to put their questions in prior to the commencement of the AGM. They were then forced to contact the moderator, whether it was Lumi, Link or Computershare, and were placed on hold, and the AGM had already started. When some people had the opportunity to put questions in, the question had already passed and, in a virtual AGM environment, you don't have the opportunity to look up what someone has said, get clarification or anything. In a virtual AGM, once they go past a question, they don't come back. So, when you have this sort of technical problemit may not be an issue from the shareholder's side; it could be a technical issue from the moderatoryour hands are tied, and it impacts your ability to attend the AGM fairly.

Senator WALSH: Can I just try to get clear what your position is in relation to virtual AGMs? You're not opposed to them occurring or those tools being used, but you'd like to see some checks and balances on how they're used? Could you explain that to the committee?

Ms Mazalevskis : Yes. A lot of people in the community can't attend AGMs. You can imagine that, during COVID, there are people who would have relied on public services, like libraries or other places, where they could go to access a computer. If they were restricted and couldn't get to one of these places, their opportunity to attend the AGM would be blocked; they couldn't attend. I think there should be a hybrid model which would allow people to attend virtually if they wanted to, such as people from regional and remote areas or people who can't travel interstate because of their financial circumstances, which is affecting a lot of people at the moment, and that would still give the people who can attend in person the opportunity to attend; I think that's only fair. When shareholders buy shares, they know that they have the right then to attend an AGM and to meet and greet directors and ask them questions about the business, now that they're owners in the business, and that's been taken away.

Senator WALSH: Would you be supportive of a hybrid meeting model going forward? If so, would you wish to see any particular additional protections being put in place in that sort of hybrid model?

Ms Mazalevskis : I'd agree to a hybrid model, as long as the physical and virtual aspects of that were set up correctly and were fair to all shareholders, no matter which way you were to attend. I also think that the actual process with the information that's provided needs an overhaul. I realise that this was the first time that it happened. But there were plenty of complaints in the beginning, and subsequent companies that held virtual AGMs didn't make any changes, and shareholders still had to experience all of these difficulties. They need to be very particular in the information that they require on these platforms to ensure that there's going to be no limitation. If a corporation is holding an AGM, it relies on the moderator, so there have to be checks and balances in place between the moderator and the company holding the AGM so that the shareholder isn't impacted or affected negatively in any way. I think we still have a long way to go with that.

Senator WALSH: You are also opposed to the changes in schedule 2 around introducing the fault element to shareholders wanting to bring cases against companies. I think the way you described that was having to prove intent and comparing it to someone robbing a bankhaving to prove what was in their mind, as opposed to it just being clear that the outcome was that the bank was robbed.

Ms Mazalevskis : Yes.

Senator WALSH: Can you explain to us further what your concerns are there? What sort of impact do you think the changes might have on shareholders' ability to seek justice?

Ms Mazalevskis : Currently, obviously, there's misleading and deceptive conduct which provides protections within the Corporations Act and other areas of legislation. Misleading and deceptive conduct has been around for in excess of 50 years. If there was wrongdoing against an everyday, hardworking AustralianI'm not just talking about shareholders; it can be anybodyyour process would force them into a legal position of having to engage a lawyer to have to prove one of the fault elements, one of the mental elements that you have to prove. A lot of people have wrongdoing against themobviously, I'll speak about the area of financial wrongdoing, because I have seen a lot of financial wrongdoing and I've also been victimised myselfand, once this happens, you're left in a very restricted financial position, if not destitute, because everything has been taken from you. If you have to go and get a lawyer or legal representation to prove one of these fault elements, it's going to be totally out of reach for a lot of people who become victims throughout the community; it's that simple. I realise that there is still misleading and deceptive conduct under the ASIC act, but we could provide you with thousands of bank victims where ASIC has done nothing in relation to wrongdoing by financial institutions. That goes from brokers to banks to smaller financial institutions, superannuation funds, insuranceeverything. Whilst it says that ASIC still has the opportunity, under misleading and deceptive conduct, to enforce in relation to wrongdoing, it actually doesn't, and that is very concerning to the community. As I say, there are many thousands of bank victims in Australia that have written to ASIC. I don't know what the issue is; all we know is that these concerns and cases that are being raised and reported are not being addressed; they're being closed, without investigation or reason. It's quite an unfair process. To then remove the Corporations Act provisions to have to have someone apply this fault element through a legal process would be horrifically unfair.

Senator WALSH: If it is the case that the legislation would make it difficult for shareholders to bring an action, as you've described, what do you think the implications of that might be for corporate behaviour? At the moment, we've heard evidence that we have reasonably high levels of compliance with corporations providing information to the market and, therefore. investors being able to have confidence in the decisions that they make. What would your concerns be, if it did become more difficult for shareholders to bring actions, in terms of what sorts of behaviours we might see or allow from corporations?

Ms Mazalevskis : There is a serious concern in regard to corporations being able to self-report. Obviously, a lot of remuneration and bonuses are driven by company performance and performance by executives. If they actually did self-report all of the breaches, of wrongdoing, that would impact them personally; so that creates one issue. But retail investors are not complex investors. Someone who just applies for a loan doesn't understand the full process. Unfortunately, with the other component of this inquiry to do with electronic signatures, we've seen many documents where signatures have been copied and pasted, and obligations have been falsely recorded against individuals in Australia. Financial institutions are then taking enforcement against people who were never aware, in the first place, that their signatures had been copied and pasted electronically on subsequent documents.

Once your loan is securitised, a trustee creates bonds and the subsequent investment has happened, a retail investor has no idea how they've been exposed to the horrendous risks that apply to them. The process isn't described to them, there's not full disclosure and it has been a secret process that should be disclosed for each and every person in Australia who makes a financial investment, and it's not. I'm sure that, if you sat someone down and explained the whole process to them and then someone says to them, 'Okay, now do you want to sign your loan?' I'm pretty sure that a lot of people would walk away. It's just a very unfair process. To increase the legal perspective in regard to how you could fight against wrongdoing against you, Australian people, Australian consumers, hardworking people, are just not going to have a leg to stand on; it's going to crucify them.

Senator WALSH: Ms Mazalevskis, in your evidence today, you've talked about concerns regarding transparency. What is your feedback on the consultation process around these proposals? We've heard that there hasn't been any specific consultation by the government on this legislation, although there have been related reviews in the past. Are you aware of government consulting any investor groups about these proposed changes; and what are your concerns about the level of consultation around these changes?

Ms Mazalevskis : Not being a legal person, my concern is that these processes or this consultation, if it is being had with industry participants, is not involving the community. You will know through the submission process that not a large number of community members engage in this process, unless they understand what's going on, and I think there's a serious imbalance in a lot of these consultation processes. As I said before, this process ties in with the previous Treasury consultation on making permanent reforms in respect of virtual AGMs and electronic document execution. If you look on Treasury's website, you will see that they're all corporations; the 62 submissions are those of corporations. I, as well as a lot of other individuals, also provided submissions to that public consultation, and they haven't been uploaded to the Treasury website. So the public isn't fully aware of what's going on. It's kind of like they engage the main players and protect business, and they are the ones who have the ultimate goal because they have the financial advantage. A lot of the investments that happen in Australia, as simple as a home loan, can't be done without everyday Australians, as the vehicle applying for those loans, and for them to be able to then make their subsequent financial investment.

I think that, once you sign on the dotted line, the community is then put to the side, and it just becomes a process for business. A lot of the process is secret; we don't know what's going on. I feel that there's not a lot of engagement through the community. I think there has to be another process that engages community members, because a lot of them don't understand this process that we're doing today. A lot of them may not know that they've been victimised or they don't understand what's going on. They don't actually know where to go, who to speak to or who to write to. But they still have a voice, and they should have a voice in this process. It shouldn't be left to business to make all of these decisions, on behalf of the Australian people, when those decisions actually are to the detriment of the Australian people.

Senator WALSH: Thanks, Ms Mazalevskis.

CHAIR: Thanks, Ms Mazalevskis, for appearing before us today. There are no further questions. We really appreciate your making time for the committee this morning.

Ms Mazalevskis : Thank you. I appreciate the opportunity.