There will be few people who have conducted their businesses under the auspices of the Financial Services Reform Act who will not believe that it is high time the Commonwealth and states agree to a formula for bringing the mortgage broking and other lending industries under stricter control.
The Minister for Superannuation and Corporate Law, Senator Nick Sherry, has been signalling for months that the Commonwealth was close to reaching an agreement with the states on this segment of the financial services industry, and last week’s release of a green paper marks a major step forward.
While no one will be surprised that the mortgage broking sector was dealt with at length in the green paper, some eyebrows will have been raised by the green paper proposing that the Commonwealth play a role in controlling the unregulated margin lending industry.
While margin loans are widely accepted and well-used by experienced investors, the long bull market encouraged many less experienced investors to borrow money to buy shares with some disastrous outcomes, particularly in the immediate wake of the sub-prime crisis.
There is nothing revolutionary in what is being proposed in either the green paper or the many statements that have been issued by Senator Sherry. The simple bottom line is that mortgage broking and margin lending are two areas that, thanks to jurisdictional issues between the states and the Commonwealth, fell outside of the Financial Services Reform Act.
Nor should Senator Sherry take too much credit for the progress that has been made because it is arguable that the former Howard Government was equally committed to ending the jurisdictional ambiguity that surrounded these products.
Irrespective of the recommendations in the green paper and, indeed, Senator Sherry’s comments, there is no absolute certainty that the states and Commonwealth will be able to reach an agreement on the necessary jurisdictional changes.
And in circumstances where a number of the Labor state governments are finding themselves in trouble and looking down the barrel of electoral defeat, it is to be hoped that Sherry does not run out of time implementing what represents highly important changes. If Australia achieves nothing else from having Labor Party Governments in power in all states and territories, it could do worse than fix up what has been a long-standing legislative and jurisdictional anomaly.
– Mike Taylor