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Chapter 1
Introduction
Terms of reference
1.1
On 27 May 2009 the Parliamentary Joint Committee on Corporations and
Financial Services resolved that:
Having regard to the recent collapses of Timbercorp and Great
Southern, the Committee will inquire into and report by 7 September 2009 on
agribusiness managed investment schemes (MIS), with particular reference to:
-
business
models and scheme structures of MIS;
-
the
impact of past and present taxation treatments and rulings related to MIS;
-
any
conflicts of interest for the board members and other directors;
-
commissions,
fees and other remuneration paid to marketers, distributors, related entities
and sellers of MIS to investors (including accountants and financial advisers);
-
the
accuracy of promotional material for MIS, particularly information relating to
claimed benefits and returns (including carbon offsets);
-
the
range of individuals and organisations involved with the schemes, including the
holders of the relevant Australian Financial Services Licence;
-
the
level of consumer education and understanding of these schemes;
-
the
performance of the schemes;
-
the
factors underlying the recent scheme collapses;
-
the projected returns and
supporting information, including assumptions on product price and
demand;
-
the impact of MIS on other
related markets; and
-
the need for any legislative
or regulatory change.
Conduct of the inquiry
1.2
The inquiry was advertised in The Australian newspaper and
online. The committee invited submissions from interested organisations, government
departments and authorities, and individuals. The closing date for submissions
was 26 June 2009, and the committee agreed to table its report by 7 September
2009.
1.3
The committee received 60 formal submissions, along with associated
correspondence and supporting material. Appendix 1 lists the individuals and
organisations that made public submissions to the inquiry, as well as tabled
documents and additional information provided to the committee.
1.4
The committee held a public hearing in Canberra on 15 July 2009.
Appendix 2 contains a list of witnesses who gave evidence at that hearing
and responses to questions on notice taken at that hearing.
Acknowledgement
1.5
The committee thanks those organisations and individuals who made
written submissions and gave evidence at the public hearings.
Note on references
1.6
References to submissions in this report are to individual submissions as
received by the committee and published on the internet. References to the
committee Hansard are to the proof Hansard, and page numbers may vary between
the proof and the final Hansard transcripts.
Report structure
1.7
Chapter 2 outlines the structure and operation of agribusiness managed
investment schemes (MIS); the Australian regulatory environment for MIS; the
tax arrangements that apply to agribusiness MIS; and the current state of the
sector.
1.8
Chapter 3 discusses agribusiness MIS structural issues, including the
incentives for MIS investment and related market distortions; the effect of
high costs and uncertain revenue assumptions on scheme performance; the ability
of the MIS structure to withstand restricted access to capital; potential
measures to prevent responsible entity (RE) failure; and arrangements for
managing competing interests when an RE collapses.
1.9
Chapter 4 examines the advice that leads people to invest in
agribusiness MIS; the accuracy of disclosure material provided to investors;
the appropriateness of limiting the availability of these products to
sophisticated investors; and the importance of educating consumers about
investment risk.
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