Navigation: Previous Page | Contents | Next Page
Chapter 5 - Conclusions and recommendations
Final Bill should be passed
5.1
The Committee concludes that there is general
support for the broad thrust of the draft Bill. Almost all submissions,
however, included detailed comments on individual provisions in relation to
their application or technical drafting. The Treasury has assured the Committee
that all of these concerns will be taken into account in the final Bill, which
would include drafting changes to ensure that the Bill, as it comes before
Parliament, precisely expresses its policy intent. Therefore, subject to the
Committee’s further recommendations set out below, the Committee recommends
that the draft Bill proceed as the basis for the final Bill to be introduced
into Parliament.
Adverse effects of the draft Bill on the delivery of financial services in
rural and regional areas
5.2
The Committee accepts the overwhelming and
unanimous evidence presented by the regional banks, building societies, credit
unions and the major banks that, as presently drafted, the inclusion of basic
banking products within the ambit of the draft Bill imposes requirements on
approved deposit taking institutions which would have a devastating effect on
the level of services offered by agencies of these institutions in regional areas.
In many cases these institutions would be forced to terminate their rural
agencies, which would have an unacceptable effect on the local community.
Indeed, in some cases the withdrawal of the agency would mean that the business
operating the agency would not be viable.
5.3
Moreover, the Committee also recognises that the
disclosure and training requirements associated with more complex financial
products - which are by nature investment products – are inappropriate for
basic banking products where there have been few concerns expressed about
inadequate consumer protection. Furthermore, the Committee recognises that such
requirements on basic banking products are not aligned with the express intent
of the Wallis Inquiry on this matter.
5.4
Accordingly, in order to solve this problem, the
Committee recommends that the draft Bill be amended as follows :
AMENDMENT TO DEFINITION OF
FINANCIAL PRODUCT
A facility or arrangement
provided by an authorised deposit taking institution within the meaning of the
Banking Act 1959 (Cth) shall not be taken to be a financial product where:
-
- the
facility or arrangement is a deposit of funds received in the course of banking business; and
- the
amount of funds held on deposit cannot, under the terms and conditions governing
the facility or arrangement, diminish other than as a consequence of one or
more of:
- a
withdrawal or transfer on the instructions or by the authority of the
depositor;
- a
debit authorised by the depositor for the payment of fees or charges; or
- a
payment of government charges, or duties, on receipts or withdrawals; or
- the
exercise of any right to combine accounts or any right pursuant to a contract,
lien or charge arising by operation of any Act, law or custom; or
- compliance
with a court order or statutory obligation; and
- the amount of any return
to the depositor, or the interest rate for calculating any return to the
depositor, is fixed under the terms and conditions governing the facility or
arrangement;
OR
- under
the terms and conditions governing the facility or arrangement, the funds held
on deposit may be withdrawn upon the demand, or under the authority, of the
depositor;
OR
- the
facility or arrangement provides a means of payment by which funds are drawn or
transferred from, or paid to, a facility or arrangement described in (1) or
(2).
The information economy and e-commerce
5.5
The Committee concluded that the e-commerce and
other issues, particularly the issue of advice on non-financial products,
raised by Telstra have merit and recommends that they should be
addressed directly in the final Bill if appropriate or in the regulations or
policy statements. In relation to the issues of non-financial products the
Committee recommends that the draft Bill be amended as follows:
[
insert at 766B (6) ]
For
the purposes of this section, information that:
- is provided to a person in
relation to the provision of a good or service that is not a financial product;
and
- is not
provided wholly or predominantly in relation to the provision of a financial
product;
is
not financial product advice.
Australia as an international financial centre
5.6
The Committee concluded that the Australian
Stock Exchange (ASX) evidence raised important issues relating to the
international competitive position of Australia and its role as a global
financial centre. The Committee accepts the ASX advice that its concerns are
vital to these matters. In this context the Committee noted that a stated
purpose of the financial sector reform process was to strengthen these areas.
5.7
Accordingly, the Committee recommends
that the final Bill or the regulations address the concerns of the ASX. In
particular, the Committee recommends that the transitional and
administrative measures suggested by the ASX be adopted.
The impact on small business
5.8
The Committee concluded that the disclosure of
commissions on risk insurance products has the potential to impact unfairly on
small business. The Committee supports retaining the requirement that persons
selling these products are required to indicate on the Statement of Advice that
they will receive a commission. However the Committee recommends that
the requirement that a quantum be disclosed on risk insurance products (where
return is unaffected by the level of commission) be removed.
Co-regulation and the position of professional bodies
5.9
The committee concluded that the concerns
expressed by the Law Institute of Victoria (LIV) and the Accounting Bodies in
relation to their members are valid. The Committee recommends that the
final Bill or the regulations should clarify the position. In relation to the
broader issue of co-regulation and professional bodies, the Committee recommends
that the co-regulation model be expanded to include as wide a range as possible
of other areas of the financial services sector.
Proper recognition of corporate structures and the retail/wholesale client
definition
5.10
The Committee concluded that the concerns
expressed by the Commonwealth Bank, the Australian Bankers’ Association and
others about the failure of the draft Bill to recognise that a typical
Australian financial corporate structure was a conglomerate, are valid. The
Committee believes that no conglomerate should be exposed to additional costs,
disruption or especially capital gains tax, as a result of this apparent
deficiency in the draft Bill. The Committee therefore recommends that
the final Bill expressly provide exemptions in relation to the operation of
related entities within a conglomerate. Anomalies in the distinction between
wholesale and retail clients should also be addressed.
Start date of the bill
5.11
Throughout the many submissions received by the
Committee the issue of starting date was continually raised with a number of
organisations requesting a start date of 1 July 2001. Given the scope,
magnitude and significance of the bill the Committee recommends that
consideration be given to the timing concerns expressed by those who have made
submissions to the Committee’s inquiry.
Senator Grant Chapman
Chairman
Navigation: Previous Page | Contents | Next Page
Top
|