House of Representatives

Financial Sector Reform (Consequential Amendments) Bill 1998

Second Reading Speech

Senator IAN CAMPBELL (Western Australia-Parliamentary Secretary to the Treasurer)

I table the explanatory memorandum and move:

That this bill be now read a second time.

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

Leave granted.

The speech read as follows-

This bill contains consequential amendments to the package of financial sector reform bills introduced into the House of Representatives by the Treasurer on 26 March 1998. These bills put in place a new regulatory structure to improve the efficiency and competitiveness of the Australian financial system while preserving its integrity, security and fairness. These reforms represent the Government's response to the recommendations of the 1997 Financial System Inquiry chaired by Mr Stan Wallis. The Treasurer set out the rationale for the reforms and the detail of the measures being put in place in his second reading speeches when introducing the initial package of bills in the House of Representatives last sittings. These bills represent the first stage of implementation of a new regulatory regime and will, among other things, establish the 2 new financial system regulators, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). APRA and ASIC are expected to commence operation on 1 July 1998. The amendments included in the bill introduced today simply ensure that other Commonwealth legislation is made consistent with the new regulatory arrangements.

A number of the amendments in this bill are consequential to the amendments to the Banking Act 1959 contained in the Financial Sector Reform (Amendments and Transitional Provisions) Bill. Generally, these consequential amendments change references to the words "bank", "banker" and "banking" in other Commonwealth legislation to equivalent references to Authorised Deposit-taking Institutions (ADI). Similarly, this bill also includes amendments as a consequence of the repeal of the Insurance and Superannuation Commissioner Act 1987. References to the Insurance and Superannuation Commissioner in Commonwealth legislation are to be amended to refer to either APRA or ASIC, or both, depending upon which organisation will adopt regulatory responsibility.

Finally, a number of the consequential amendments give effect to the proposed renaming of some of the financial sector levy acts (in particular, those applying to excluded superannuation funds) as amended by the financial sector reform package.

I also foreshadow that I will shortly circulate draft provisions which would make further consequential amendments implementing the Government's financial sector reforms.

This course of action is necessary because the Commonwealth is required under the terms of the Corporations Agreement to consult on these amendments, which relate to the national scheme laws for corporations, with the Ministerial Council for Corporations (MINCO). The support of two States is required before amendments of this kind may be introduced into the Commonwealth Parliament.

Following these MINCO consultations, I propose to move government amendments to this bill in a form similar to the draft provisions I will circulate.

The additional amendments will do two things.

First, they will amend references to the word "bank" and like expressions, and to the "Insurance and Superannuation Commissioner" in the Corporations Law and the Australian Securities and Investments Commission Act 1989.

Secondly, they will confer on ASIC sole responsibility for consumer protection in relation to financial services. These proposed amendments are part of the on-going implementation of the Financial System Inquiry recommendations. In particular, recommendation 3 was to the effect that ASIC should have sole responsibility for administering consumer protection regulation within its jurisdiction over the financial sector. For this purpose, consumer protection provisions comparable to those in the Trade Practices Act 1974 were recommended to be included in ASIC's legislation.

The amendments included in the first package of bills introduced on 26 March 1998 (including the Financial Sector Reform (Amendments and Transitional Provisions) Bill 1998) will confer on ASIC specific market integrity and consumer protection functions under the various pieces of legislation listed in proposed section 12A of the ASIC act. To the extent that those acts deal with consumer protection matters, ASIC will already be taking on consumer protection responsibilities. For example, ASIC will have responsibility for the administration of section 72 of the Retirement Savings Accounts Act 1997, which prohibits a person from engaging in misleading conduct in publishing an advertisement in relation to a retirement savings account.

The Financial Sector Reform (Amendments and Transitional Provisions) Bill does not, however, confer general consumer protection functions and powers on ASIC. Currently, the Australian Competition and Consumer Commission (the ACCC) exercises this general function in the financial system through the provisions in Parts IVA and V of the Trade Practices Act.

The amendments will explicitly transfer responsibility for consumer protection in the financial system from the ACCC to ASIC. This will implement the Financial System Inquiry recommendation by making ASIC the sole regulator of consumer protection in the financial system.

I commend the bill to the Senate and present the explanatory memorandum.

Ordered that further consideration of the second reading speech of this bill be adjourned until the first day of the spring sittings, in accordance with standing order 111.