House of Representatives

Second Reading Speech

Senator McGRATH (Queensland-Assistant Minister to the Prime Minister)

I table a revised explanatory memorandum relating to the Corporations Amendment (Asia Region Funds Passport) Bill 2018, and move :

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

Today I introduce a Bill that implements a series of enhancements to the capabilities of the Australian Securities and Investments Commission (ASIC).

ASIC is Australia's integrated corporate, markets, financial services and consumer credit regulator. ASIC is an independent Commonwealth Government body set up under the Australian Securities and Investments Commission Act 2001.

This Bill enacts key recommendations from the Financial System Inquiry and the ASIC Capability Review. It is further evidence of this Government's commitment to strengthening ASIC and to ensure the financial system delivers fair outcomes for Australians.

It builds on other key steps taken by this Government to improve ASIC's performance including:

providing ASIC with a stronger funding base through the introduction of the industry funding model. This will ensure the cost of regulation is borne by those that have created the need for it, rather than the Australian public who too often bear the costs of financial sector misconduct;

implementing other recommendations of the Financial System Inquiry that will provide new tools and powers to ASIC including the power to intervene in the sale and distribution of financial products, where there is a risk of significant consumer detriment; and

considering the recommendations of the ASIC Enforcement Review Taskforce, established by the Turnbull Government in October 2016 to assess the suitability of the existing regulatory tools available to ASIC.

Schedule 1 to this Bill amends the Australian Securities and Investments Commission Act 2001 to mandate that ASIC must consider the effects that the performance of its functions and the exercise of its powers will have on competition in the financial system. An explicit reference to take competition issues into account will require ASIC to consciously consider how its actions may impact on competition in the financial system.

This Government considers that competition, not regulation, is the best means of ensuring consumers get value for money in financial services. This measure complements other key initiatives undertaken by this Government to support competition including tasking the Productivity Commission to review competition in Australia's financial system and funding the ACCC to undertake in-depth inquiries into specific financial system competition issues.

This measure fulfils the Government's commitment to implement recommendation 30 of the Financial System Inquiry (FSI). This recommendation stated the Government should include consideration of competition in ASIC's mandate.

Schedule 2 to this Bill amends the ASIC Act to remove the requirement for ASIC to engage staff under the Public Service Act 1999 (Public Service Act). Consequential amendments are also made to the Business Names Registration Act 2011, Corporations Act 2001, and the Mutual Assistance in Business Regulation Act 1992.

Removing the requirement for ASIC to employ people under the Public Service Act will promote greater operational flexibility, bringing ASIC into line with Australia's other financial regulators - the Australian Prudential Regulation Authority and the Reserve Bank of Australia.

To be able to perform their roles effectively in accordance with their legislative mandate, financial regulators need to be able to attract and retain suitably skilled and experienced staff.

In ASIC's case, this means recruiting staff with knowledge of financial markets and financial services. ASIC is therefore often competing against the private sector, as opposed to other public sector agencies, when recruiting suitable staff.

Removing the obligation for ASIC to engage staff under the Public Service Actmeans ASIC will be able to compete more effectively for suitable staff. It will also allow ASIC to tailor management and staffing arrangements to suit its needs, ensuring it is fit for purpose to deliver effectively on its mandate.

ASIC staff who are APS employees immediately before the commencement of the Bill on 1 July 2019 will maintain their continuity of service with ASIC, but cease to be employed under the PSA. They will become employed on the same terms, conditions and will maintain the same accrued entitlements under the ASIC Act.

This measure fulfils the Government's commitment to implementing recommendation 24 of the ASIC Capability Review Report. This recommendation stated that the Government should remove ASIC from the Public Service Act as a matter of priority, to support more effective recruitment and retention strategies. A similar finding was also found in the context of the Financial System Inquiry.

The Legislative and Governance Forum on Corporations was notified in relation to the measures in this Bill as required under the Corporations Agreement 2002.

In conclusion, this Government is committed to ensuring Australia has strong and effective regulators governing our financial system. This is the best way of ensuring our financial system meets the needs of Australians and assists them in promoting their financial wellbeing. The measures in this Bill ensure that ASIC can consider competition when undertaking its activities and can recruit staff with appropriate capabilities.

Full details of the measures in this Bill are contained in the Explanatory Memorandum.

Ordered that further consideration of the second reading of these bills be adjourned to the first sitting day of the next period of sittings, in accordance with standing order 111.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.