Greens prepared to back ASIC veto powers
Australian Financial ReviewDec 18 2016 7:04 PM
Sally Patten
The Greens are prepared to side with the government and back proposals to give the securities regulator the ability to ban financial products, ignoring opposition from the banks and lawyers.
Greens treasury spokesman Peter Whish-Wilson said he supported the plans, which include a requirement for banks and other financial service providers to market their products only to customers who actually need them. He said if the legislation was well drafted, his party would pass it in the Senate.
"I'd be quite confident we can pass these laws. We've done a lot of work in this area and a lot of it is sensible development. I'd need to see the details but I want the Australian Securities and Investments Commission to have these powers," Senator Whish-Wilson said.
Still, he acknowledged the need to have the legislation agreed upon by the Greens party room.
If the Greens voted with the government in the Senate, this would remove the need for the Coalition to get independent crossbenchers and Labor on board.
The Turnbull government wants ASIC to ban products that it deems too risky, in the hope of avoiding a repeat of disasters such as the collapse of Storm Financial, Opes Prime and Timbercorp and fending off calls for a royal commission into the banks.
The changes would also allow ASIC to take "direct action" where it "identifies the risk of significant consumer detriment". Products that will be subject to the intervention powers include insurance products, margin loans, contracts for difference and managed funds sold by banks, brokers, fund managers and insurance companies.
Legal experts and wealth managers have argued that the regulator already has sufficient powers to deal with any problems and said the proposals could trigger a repeat of the row over the Future of Financial Advice laws.
Senator Whish-Wilson said that ASIC's inability to ban products caused huge harm for investors in failed managed investment schemes, including Timbercorp and Great Southern, which collapsed in 2009 causing some mum and dad investors to lose their homes.
"No one had the power to ban these products or the resources to thoroughly investigate them. Four billion dollars was wasted on forestry and agricultural schemes," the Greens treasury spokesman said.
Great Southern went bust after 47,000 investors sank almost $2 billion into the agricultural scheme. Timbercorp went bust owing creditors, including ANZ Banking Group, $750 million. More than 18,500 investors were caught out.
"These products were always higher risk," Senator Whish-Wilson said. Many investors lost not only their investment and prospects of future income but were also saddled with the burden of repaying the loans and interest on a worthless asset.
The report of a Senate committee inquiry into managed investment schemes, published in March this year, recommended that ASIC's powers be strengthened to provide more robust investor protection measures by enhancing and expanding banning powers and giving the regulator the power to intervene in the marketing of products.
Granting ASIC the power to ban financial products was recommended by the 2014 financial system inquiry, although its chairman, David Murray, a former chief executive of Commonwealth Bank of Australia, has conceded that the proposals were controversial.