Second Reading SpeechMr Hockey (Minister for Financial Services and Regulation)
That the bill be now read a second time.
Today I introduce a number of bills which make up the second tranche of the financial services reform legislation. The first part of this legislation is contained in the Financial Services Reform Bill 2001 which I introduced on 5 April. The second reading speech for the Financial Services Reform Bill contains more detail on the contents of that bill.
This package of legislation will introduce a harmonised regulatory regime for market integrity and consumer protection across the financial services industry. The comprehensive package of reforms proposed will facilitate the development of a financial services industry that is both globally competitive and consumer focused.
The Financial Services Reform (Consequential Provisions) Bill 2001 will make provision for the transition to the regulatory regime proposed by the Financial Services Reform Bill. It will also make a range of amendments to other Commonwealth legislation that are necessary as a consequence of the Financial Services Reform Bill.
The bill provides highly flexible and responsive transitional arrangements for the financial services industry in moving to the financial services reform regime. It will allow for a smooth and gradual move from existing regulatory regimes to the new regime, reducing the cost and disruption of the change in regulatory arrangements.
The transitional provisions in the bill are of two types: those that deal with when the financial services reform regime begins to apply to different people and those that deal with how a person moves from their existing regulatory regime into the financial services reform regime.
Generally, the bill allows for the provisions in the Financial Services Reform Bill to be phased in over two years.
When I introduced the Financial Services Reform Bill on 5 April, I indicated that the government is working towards a commencement date of 1 October 2001. The transitional arrangements for financial service providers and financial products will ensure that this commencement date will simply give those existing participants who are ready on that date the opportunity to comply if they so wish. Others who need more time to prepare will generally have up to 1 October 2003 to comply with the requirements of the Financial Services Reform Bill.
This will enable those financial service providers and product issuers who are ready by 1 October this year to take advantage of the efficiencies offered by the new regulatory regime at the earliest possible time, while not forcing an unrealistic commencement date on those who need more time.
Existing financial services providers will have up to a two years to comply with the new regime. During this period, they will be able to continue to operate under their existing regulatory regime.
This two-year period will provide current industry participants with sufficient time in which to arrange their affairs in order to comply with the new legislation and to apply for and be granted an Australian financial services licence.
New entrants will have to comply with the new regime from commencement.
Representatives of those who provide financial services will also be covered by the transitional arrangements.
During this period, existing participants will be able to choose when they wish to apply for a new licence. So those participants who are anxious to take advantage of the range of benefits which this new regime offers will be able to apply for a new licence immediately on commencement. Those who require more time to make the necessary changes can apply later for their new licence.
The bill also allows for some existing participants to automatically obtain a licence. This will minimise the administrative burden by ensuring that those who are currently complying with a similar regulatory regime will be automatically eligible for a licence covering their current activities.
There is also provision for insurance multiagents to be granted a special, restricted licence during the transitional period. This will facilitate the transition for multiagents who wish to seek a licence in their own right rather than continuing to act as agents.
Issuers of financial products will also be given a two-year transitional period for existing products, that is, products that are in a class of products which they had issued prior to commencement. During that time they will still have to comply with any existing disclosure regime. They will be able opt in to the new regime at any time during this two-year period.
For new products, the regime will apply immediately on commencement.
The bill also includes transitional provisions for securities and futures markets and clearing houses which are approved under the current regulatory regime.
In brief, the minister will be required to issue a licence under the new regime to the main markets regulated under the current regime and to currently approved clearing houses in relation to activities they are currently entitled to provide-that is, existing main markets and approved clearing houses will be grandfathered in respect of their existing activities.
Other authorised markets, such as those which are currently regulated as exempt stock markets, will have two years to bring themselves under the new regulatory regime although there are limitations on expanding their business before doing so.
Similar transitional arrangements will apply to financial markets and clearing and settlement facilities which are not required to be approved under the current regulatory regime, but will be required to be licensed under the financial services reform regime.
Special provision is made for markets and clearing and settlement facilities which are approved but not operating at the time the new regulatory regime commences.
The Financial Services (Consequential Provisions) Bill also provides for regulation making powers and powers for the Australian Securities and Investments Commission to make determinations dealing with transitional issues connected with a person moving from their existing regulatory regime-if any-into the new financial services reform regime.
These arrangements will ensure that such transitional issues can be addressed flexibly and effectively. This is particularly important in a transition that involves moving from a significant number of existing regulatory regimes into a single new regime.
The bill also makes amendments to a number of other Commonwealth acts. These involve repealing a range of existing provisions that will be replaced by provisions of the Financial Services Reform Bill.
There are also amendments to other Commonwealth acts that contain references or concepts that will change under the Financial Services Reform Bill. The objective of these consequential amendments is to maintain the current effect of the existing provisions.
I have consulted the relevant state and Northern Territory ministers about the provisions of this bill in accordance with the corporations agreement and have obtained the approval of the Ministerial Council for Corporations for those amendments included in this bill for which the council's approval is required under that agreement.
The Financial Services Reform Bill contains groundbreaking reforms to the regulation of the financial services industry that will directly benefit the 330,000 people employed in the industry and the 17 million consumers of financial products.
The bills I am introducing today are important elements of that regulatory regime. The Financial Services Reform (Consequential Provisions) Bill is vital for ensuring a smooth transition to the new regulatory regime.
I commend the bill to the House and I present the explanatory memorandum to this bill.
Debate (on motion by Mr Swan) adjourned.