I am pleased to speak in support of the Corporations Amendment (Financial Market Supervision) Bill 2010 and the Corporations (Fees) Amendment Bill 2010. Australia has one of the most robust financial systems in the world.

We saw that through the global financial crisis, and we also see that in the movement of funds to Australia over the last few years as Australia, particularly Sydney, I would suggest, moves towards becoming a financial hub of Asia through some of the initiatives of the Rudd government—initiatives that were mocked during the 2007 election campaign, I seem to recall. However, there seems to be some egg on the faces of those opposite as funds do move to Australia because we do have such good regulation and such good governance. It shows foresight on the part of the Rudd government to see what we might be. There is no greater proof of this than how we performed, obviously, in the global financial crisis. I will take my hat off to the former member for Higgins and Treasurer, Peter Costello, for some of the initiatives that he brought in in terms of making sure we do have a strong financial system. He was following on from the work and reforms of Paul Keating and Bob Hawke, but I do acknowledge some of his contributions, which did help us during the global financial crisis.

However, the Rudd government believes that more can be done to ensure the integrity and transparency of the financial markets. In August last year the Treasurer and Minister for Financial Services, Superannuation and Corporate Law announced that the responsibility for supervision of Australia’s domestic licensed financial markets would be transferred from market operators, which is essentially self-regulation, to the Australian Securities and Investments Commission. Anyone who operates a financial market in Australia must obtain a licence to do so or otherwise be exempted by the minister. This bill ensures that licensees are no longer required to supervise the markets. If you like, in shorthand, there will no longer be Caesar judging Caesar. Under this bill ASIC will be responsible for supervising trading activities by stockbrokers which take place on a licensed financial market. Individual markets, such as the Australian Securities Exchange, will continue to have responsibility for supervising the entities listed on them.

The government believes that there is no need to change the way ASIC and the Australian stock exchange currently work together to supervise listed entities. ASIC is well placed to take on the role of whole-of-market supervisor. Unlike some of the members opposite, I actually have a lot of faith in ASIC. I acknowledge that there have been a couple of legal hiccups lately. It is interesting that some of the prosecutions that were launched under the previous government actually ended up not being successful, and now those opposite say, ‘I don’t know why they took this on.’ It is a typical case of Monday’s experts saying, ‘No, I wouldn’t have done that.’ It is easy to be an expert on Monday. Obviously you need to pick the form on the Friday before the game. As I said, some of those prosecutions were commenced under the Howard government. I do actually have a lot of faith in ASIC. The balancing act of the public interest test is difficult to get right. You also have to be able to prove in the court, to the satisfaction of the judicial system, some things which are very complicated. Recently, as part of the caucus economics committee, I went for a tour of the ASX. I had no idea how complicated the cheats out there can be, but the ASX are even more complicated at tracking down these irregularities. It is incredible. I was very impressed. So that will continue.

Not only will ASIC provide transparent and independent oversight of the market; as a government agency it also removes any perceived conflict of interest. This is in line with Australia’s G20 commitment to protect the integrity of financial markets by avoiding any such conflicts. A discussion topic quite focused my understanding, at the G20 meetings. It also mirrors the trend towards centralised or independent regulation in other countries. Instead of a situation where all licensees act as supervisors, ASIC will consolidate this responsibility into one entity, streamlining supervision and enforcement and providing unified supervision. One whole-of-market supervisor will provide far greater stability and integrity for Australia’s financial market.

The bill also empowers ASIC to set market integrity rules, with full enforcement powers to respond quickly to emerging market situations. Any breach of these rules can be enforced through the courts. Once up and running, this new function is expected to cost around $1.8 million a year, which will be met through cost recovery. The related bill before the House, the fees bill, ensures ASIC will be able to recover the cost of supervision. Under this provision ASIC will be able to collect fees from the financial entities which they regulate. I am sure most people would agree that the costs of financial regulation should be borne by those who benefit from it. How these fees will be calculated will be contained in the regulations which are currently being developed. This bill needs to be passed soon to ensure ASIC has enough lead time to prepare for its new role from October this year and to ensure a new era of transparency of our financial markets. I commend the bills to the House.

02/23/10

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