Address to the CCH Forum

2017 | 2016 | 2015 | 2014 | 2013 | 2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000 | 1999 | 1998
Address to the Sydney Institute
July 16, 2003
Graeme Samuel – Doorstop Interview, Melbourne
July 18, 2003
Address to the Sydney Institute
July 16, 2003
Graeme Samuel – Doorstop Interview, Melbourne
July 18, 2003

Address to the CCH Forum






17 JULY 2003

Well thank you very much for this opportunity to talk to you about the

financial services reform agenda. But before I do that I would like to

give you a brief snap shot of the way in which we see corporate regulation

moving in Australia and some of the objectives that we as a Government

have in the way in which we are treating it.

When I first became a member of the Commonwealth Parliament there was

no national regulator in the corporate area. There were six corporate

affairs offices, there was a cooperative model called the NCSC, corporations

law was state based and could vary from state to state. And that was

in 1990.

And as I look back over the last ten or thirteen years, we have made

enormous strides in setting a uniform corporations law, in modernising

and making it flexible, having one national regulator, getting uniformity

of treatment between the different states. But it has been a big job.

And it has been set back on numbers of occasions by High Court challenges

trying to undermine the constitutionality of the scheme because, as you

know, the Constitution has a limited power for the Commonwealth in relation

to corporations law.

Back in those days Australia’s system of corporate regulation was out

dated and inefficient and bad corporate laws cost the community in a number

of ways. Through higher transaction costs, ill informed markets and duplication

of resources. We paid a price for our system of outdated corporate law.

Before becoming Treasurer in 1996, I committed an incoming government to a

thorough overhaul. We announced a program called the Corporate Law Economic

Reform Program, and financial services was very much the centre of our objectives.

But for the community to receive the full benefit of law reform, it is not just

a question of getting the right laws on the statute books. Those laws have to

be vigorously and effectively enforced.

We have adopted in Australia a model of regulation which is known as the “twin

peaks” doctrine. One regulator to deal with prudential supervision, APRA,

another to deal with corporate enforcement, ASIC.

ASIC, the Australian Securities and Investment Commission, was created on

1 July 1998 and it has been charged with the object of educating business and

consumers and enforcing the laws which the Parliament passes.

ASIC’s ability to use a civil penalty regime has enabled it to move

quickly and successfully to enforce the laws. And this is where a major step

forward has been made in relation to corporate regulation, in the use of a civil

penalty regime. Professor Hall of the Sydney University Law School said recently:

    “… the regulatory technique in Australia I think is at

    the forefront of using banning orders. Europe is looking at using

    them and is paying close attention to what is happening in Australia.”

ASIC’s results are impressive. In the past 3 years:

  • ASIC has taken 500 civil and criminal cases;
  • 70 offenders have been sentenced to jail for 251 years;
  • $1 billion has been protected, recovered or ordered in compensation;
  • 40directors have been removed from office; and
  • 95 people have been removed from the securities and financial planning


ASIC Chairman David Knott noted recently that in the view of ASIC it

“could do more to influence corporate behaviour through one successful

court case than 10 volumes of speeches”. And I don’t want

to undermine the business of CCH.

Look at the performance of ASIC in relation to the collapse of the HIH.

Whilst the Royal Commission was still engaged in hearings, ASIC took

successful penalty proceedings against Adler, Williams and Fodera. Adler

and Williams were banned for 20 and 10 years respectively and ordered

to pay $7 million in compensation. The Court of Appeal has upheld the

penalties and confirmed the seriousness of the breaches.Mr Adler has

been committed to trial over criminal charges, and criminal charges have

been laid against three defendants in relation to allegedly sham reinsurance


ASIC is now working with the Director of Public Prosecutions on remaining

referrals received from the Royal Commission. And the Government has

provided ASIC and the Director of Public Prosecutions with a total of

$42.2 million over the next 2 years to undertake criminal prosecutions

related to HIH.

Over the last 3 years there has been a 33% increase in ASIC funding.

Modern effective laws. Active, vigorous enforcement. Transparent, orderly

markets. These are the hallmarks that we want to see in our corporate environment


But our laws need always to be state of the art, which brings me to our

Corporate Law Economic Reform Program. And I’m sure you’re

all familiar with CLERP 6 – the Financial Services Reform Act.

This is to put in place a harmonised licensing, disclosure and conduct

framework for all financial products, markets and service providers.

These reforms are designed to put Australia at the forefront of financial

services regulation. I can tell you from international work which is

being done through IOSCO and other organisations that the countries which

are leading in this area are Australia and Britain.

In many respects the United States is still long behind Australia, certainly

in relation to insurance and prudential regulation where they are still

operating state based systems. But Australia and the United Kingdom are

very much at the forefront of this area and are providing the lead international


It is the globalisation of financial markets and the changes in financial

services and products that are the key drivers which are requiring adaption

and change.

Once upon a time we used to regulate by institution. Our Reserve Bank

regulated products offered by banks. Our Insurance and Superannuation

Commission regulated products offered by insurers. Our corporate affairs

offices regulated prospectuses. But convergence meant that like products

were being offered by different institutions and like products being

offered by different institutions because they fell under different regulators

were subject to different rules. Convergence is driving this industry.

And what the Financial Services Reform Act is about is trying to produce

a uniform licensing system, so that regardless of who is offering the

product, the standard of regulation and the rules will be like.

It is designed to develop a more efficient and flexible regime for financial

products and markets with an intergrated regulatory framework.

It is designed to eliminate artificial distinctions from financial products

that have previously stifled innovation. And the Government wants to

ensure that we achieve the right balance between investor protection

and commercial flexibility.So for that reason we have undertaken extensive

consultation. This is one of those areas where we published our proposals

long in advance and are undertaking consultation. For providers, the

new system will establish a comprehensive and harmonised licensing, disclosure

and conduct framework.

Similar services will be regulated in a consistent way. They will operate

under a comparable disclosure regime. And ultimately this will reduce

administrative and compliance costs.

As well, it will create a streamlined regulatory regime for financial

markets, clearing and settlement facilities. And this should encourage

competition and increase industry efficiency.

The new regime also simplifies the licensing process. Companies which

provide financial services need only one type of licence — an “Australian

Financial Services Licence”.But the system also has benefits for


This regime should promote consumer confidence because financial services

providers must be properly trained and must comply with high standards

of (inaudible).

For retail consumers the FSRA requires the disclosure of relevant information,

such as adviser conflict of interest, to help consumers seek out independent


In relation to a financial product you want to buy, you must receive relevant

information to assist you in making an informed decision. And if something does

go wrong, there are a range of relief measures including cooling-off provisions,

and for retail clients, access to complaints handling and compensation schemes.

Through a combination of licensing, conduct and disclosure obligations, consumers

are better protected and able to determine the basis for financial advice they

receive. Now time is running out for the transition to the FSRA. The transition

period ends on 11 March 2004.

The Government, ASIC and industry have all been working together to ensure

the transition is as smooth as possible.

And as the statutory body responsible for the administration of this

regime, ASIC has been provided an additional funding of $90.8 million

over four years for implementation and enforcement.

Where necessary, the Government has made legislative amendments to address

impediments which have been identified during transition. But there are

only 238 days to go, and we are actively encouraging businesses in their

transition to the new regime.

ASIC has already granted over 500 licences. That said, more companies

need to apply.

And ASIC advises that, to avoid “peak hour” applications, to lodge

before September to ensure licenses are granted by 11 March 2004.

As my Parliamentary Secretary, Senator Campbell, has made clear and I repeat

it, the Government will not be extending the deadline for transition beyond

11 March 2004. Ladies and gentlemen, the Government is committed to ensuring

the long-term health of our financial services industry.

We recognise the importance of a regulatory framework to balance the

needs of business and consumers.

Through six years of ongoing and thorough reform, we have worked towards objectives

of market freedom, investor protection and quality disclosure.

We have built a robust and pro-growth regulatory framework to encourage efficiency,

whilst facilitating confident investor and consumer participation.

The Financial Services Reform Act is a very important part of the framework,

and I commend it to you.

Thank you all very much for your time.