Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Assistant Treasurer, Senator Coonan. I refer the minister to Tuesday’s budget announcement, which provided significant additional funding to the Australian Securities and Investments Commission for surveillance and enforcement activities. Does the minister recall the Treasurer’s comments that:

An appropriately resourced ASIC will benefit all Australians by maintaining the integrity of Australia’s financial framework and ensuring ongoing confidence in the Australian financial markets.

Doesn’t the fact that ASIC required a 25 per cent increase in funding to be appropriately resourced simply confirm that the Howard government has failed to appropriately resource ASIC to date? How many mum and dad investors could have been protected from schemes like Westpoint if ASIC had, in the Treasurer’s words, been ‘appropriately resourced’ before now?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

The answer to that is no. Clearly ASIC has been appropriately resourced. Together with all government agencies, from time to time there are bids for additional funds. The government listens to what is required, makes an assessment about what is needed to resource an agency and responds appropriately. Clearly, in the circumstances, ASIC has been appropriately resourced. I certainly take issue with the suggestion implicit in the senator’s question that ASIC’s resources were in any way attributable to any perceived lack of action in the Westpoint matter.

As I mentioned a couple of days ago in relation to this matter, ASIC started investigating the Westpoint mezzanine financings back in 2002. It is worth reminding the Senate of its main actions that it has taken in relation to this matter. It certainly took steps to attempt to force Westpoint to provide regulated disclosure of information to investors in relation to the mezzanine financings. When direct discussions with the company in 2003 and 2004 failed, it took court action in May 2004. The initial decision by the court was not as conclusive as ASIC wanted, and that is not ASIC’s fault. It therefore appealed against the ruling, and a final ruling is still outstanding. It kept investors informed about court proceedings against Westpoint. An announcement on the case was put up on its website in May 2004. In June 2004, ASIC wrote to each investor in the two mezzanine financing schemes which formed the substance of the court action, informing them about ASIC’s concerns. It started a general campaign in 2003 to warn investors against the risks of investing in high-yield debentures. Warnings of this nature were posted on its website in May 2003 and again in May 2004. A surveillance report on high-yield debenture prospectuses was released in February 2005. The accompanying media release stated that these debentures were risky instruments and that there was no guarantee that investors would get their money back.

It is important to understand that ASIC does not prudentially regulate companies such as Westpoint. I mention that because Senator Webber did mention Westpoint in her question. Westpoint directors were providing statements that Westpoint was solvent as late as 2005. Westpoint auditors were at the same time providing unqualified financial statements for the Westpoint entities. Once ASIC had appropriate evidence in late 2005, it successfully took action to stop Westpoint from operating further. Just recently, it has taken further action to support Westpoint investors, including taking action to trace and secure as many assets as possible for distribution to the Westpoint investors. ASIC has therefore obtained a Federal Court order appointing receivers to the personal assets of the main directors, including those of group founder, Mr Norman Carey, forbidding them from leaving the country and freezing some assets. I do not think it could be said, as has been implied by Senator Webber, that ASIC has not been taking appropriate action in relation to Westpoint. In fact, if you look at what ASIC has done, you will see it has been absolutely exemplary as an agency in what it has undertaken.

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Can the minister confirm that part of ASIC’s additional funding will be used for oversight of investment schemes similar to that of the Westpoint property scheme? Isn’t it true that thousands of elderly and retired Australians have lost almost $400 million worth of superannuation and savings in this scheme? Minister, is the reason for ASIC’s failure to take action on Westpoint, despite being advised about its potential shortcomings way back in August 2002 by the Western Australian state government minister, due to a lack of resources provided by your government?

Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Link to this | Hansard source

Senator Webber is clearly dead wrong in the allegation in her primary question and in her supplementary question. I have spent about four minutes detailing the actions that ASIC has taken. Quite clearly, ASIC is a responsible regulator that will behave in an appropriate way to protect investors where it has a responsibility to do so.