Second Reading SpeechMr FRYDENBERG (Kooyong-The Treasurer)
That this bill be now read a second time.
The government is committed to arming our financial services regulators with the powers needed to take strong action to protect consumers and to deter and prosecute corporate and financial sector misconduct. This is not only necessary to ensure that individuals and corporations who do the wrong thing are appropriately punished but also an essential part of rebuilding community trust in the financial services industry.
It is clear, through the work of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, that some financial institutions have engaged in conduct that falls well short of community expectations. This is not acceptable. This bill delivers a clear message to those financial institutions and individuals that complying with the law is not negotiable. If the law is breached, the courts will have a broader range of penalties to impose, which will act as a significant deterrent.
The bill amends the Corporations Act 2001 to more than double maximum imprisonment penalties for some of the most serious white-collar crimes, bringing Australia's penalties in closer alignment with leading international jurisdictions.
This bill will increase several penalties for individuals by more than fivefold and increase civil penalties for corporations by more than tenfold.
Courts will also be empowered to consider even greater penalties where the profits from misconduct are high or where the company's annual turnover exceeds $105 million.
For example, in circumstances where a financial institution breaches its licence to provide financial services efficiently, honestly and fairly, at the moment there is no penalty apart from taking licensing action, including taking their licence away. Under the new law, individuals could face a maximum civil penalty of three times the benefit gained, or just over $1.05 million, and companies could face a maximum of $10.5 million or three times the benefit gained, or 10 per cent of annual turnover (capped at $210 million).
Courts will have the power to strip people of their ill-gotten gains to ensure contraveners can no longer profit from their misconduct.
This bill includes important reforms that put consumers first. In addition to the stronger penalty framework, the Corporations Act will be amended to ensure courts prioritise compensating victims over collecting penalties from offenders.
The Legislative and Governance Forum for Corporations was consulted in relation to the bill and has approved the bill as required under the Corporations Agreement 2002.
The government is committed to taking action to reform the financial sector. These reforms are part of the government's comprehensive reform agenda, which has already:
- created a framework to hold banking executives accountable for their actions under the government's Banking Executive Accountability Regime;
- boosted banking and financial services competition to benefit consumers; and
- provided the Australian Securities and Investments Commission with an additional $70 million of funding, significant new powers and also appointed an additional deputy chair, in Mr Daniel Crennan QC, with a key focus on enforcement action.
A stronger penalty framework is one more step towards restoring the public's confidence in our financial sector, establishing a clear deterrent to financial institutions breaking the law, and ensuring consumers are protected from misconduct.
Full details of the measure are contained in the explanatory memorandum. I commend the bill to the House.