Treasury Laws Amendment (2016 Measures No 1) Bill 2016 - Commentary on Ministerial and Other Responses [2017] AUSStaCSBSD 91 (22 March 2017)

• Treasury Laws Amendment (2016 Measures No. 1) Bill 2016
• Consultation prior to making delegated legislation 73

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Treasury Laws Amendment (2016 Measures No. 1) Bill 2016

Purpose	This bill seeks to amend various Acts relating to insurance, corporations, taxation and financial services to: • clarify that losses attributable to terrorist attacks using chemical or biological means are covered by the terrorism insurance scheme; • make employee share scheme disclosure documents lodged with the Australian Securities and Investments Commission (ASIC) not publicly available for certain start-up companies; • add six organisations as deductible gift recipients; • provide ongoing income tax relief to ex gratia disaster assistance payments to eligible New Zealand special category visa (subclass 444) (SCV) holders; • provide greater protection for retail client money and property held by financial services licensees in relation to over-the-counter derivative products
Portfolio	Treasury
Introduced	House of Representatives on 1 December 2016
Bill status	Before the Senate
Scrutiny principle	Standing Order 24(1)(a)(iv)

2.277 The committee dealt with this bill in Scrutiny Digest No. 1 of 2017. The Minister responded to the committee's comments in a letter received 8 March 2017. Set out below are extracts from the committee's initial scrutiny of the bill and the Minister's response followed by the committee's comments on the response. A copy of the letter is at Appendix 1.

Consultation prior to making delegated legislation ^[73]

Initial scrutiny – extract

2.278 Proposed subsection 981L(1) provides that ASIC 'must not make a client money reporting rule [delegated legislation] unless ASIC has consulted the public about the proposed rule'. The explanatory memorandum notes that 'this ensures that stakeholders have the opportunity to review and comment on draft rules before they are made'.^[74] Proposed subsection 981L(2) does not limit the ways in which ASIC may comply with the consultation obligation, however it provides that ASIC is taken to comply with the obligation if ASIC makes the proposed rule available on its website and invites the public to comment on it.

2.279 Where the Parliament delegates its legislative power in relation to significant regulatory schemes the committee considers that it is appropriate that specific consultation obligations (beyond those in section 17 of the Legislation Act 2003) are included in the bill and that compliance with these obligations is a condition of the validity of the legislative instrument.

2.280 The committee therefore welcomes the inclusion of the consultation obligation in proposed subsections 981L(1)–(2). However, the committee notes that proposed subsection 981L(3) provides that a failure to comply with the consultation obligation does not invalidate the client money reporting rule. The importance of consultation in this instance is emphasised in the explanatory memorandum, which states that ASIC would be expected to consult the Office of the Australian Information Commissioner where proposed rules potentially involve the handling of personal information that could impact on the privacy of individuals.^[75]

2.281 The committee requests the Minister's advice as to why a 'no-invalidity' clause has been included in proposed section 981L of the bill so that a failure to appropriately consult prior to making a client money reporting rule will not invalidate the rule.

Minister's response

2.282 The Minister advised:

Consultation with industry and consumer representatives is important to the Government, because open and effective discussions with stakeholders are fundamental to successful regulation. The Australian Securities and Investments Commission (ASIC) consults with stakeholders in the formulation of regulatory instruments it proposes to make as a matter of course. This is reflected in the large number of consultation papers available on ASIC's website.
The Government expects that ASIC will consult with stakeholders in developing the client money rules and for this reason has included explicit consultation requirements in the Bill. Proposed section 981L of the Bill is designed to promote certainty among regulated entities by ensuring that a technical failure to comply with the consultation requirements does not affect the validity of the client money rules. It also provides ASIC with the flexibility to use targeted consultation with affected stakeholders in appropriate situations.
There are additional safeguards to ensure that ASIC undertakes proper consultation, including that the client money rules are disallowable by the Parliament. ASIC is also regularly called to appear before Parliamentary Committees to explain its actions.

Committee comment

2.283 The committee thanks the Minister for this response. The committee notes the Minister's advice that proposed section 981L of the Bill is designed to promote certainty among regulated entities by ensuring that a technical failure to comply with the consultation requirements does not affect the validity of the client money rules and provides ASIC with the flexibility to use targeted consultation The committee also notes the Minister's advice that there are safeguards to ensure proper consultation, including that the client money rules are disallowable and ASIC may be called before parliamentary committees.

2.284 The committee takes this opportunity to reiterate its general view that where the Parliament delegates its legislative power in relation to significant regulatory schemes it is appropriate that specific consultation obligations (beyond those in section 17 of the Legislation Act 2003) are included in the bill and that compliance with these obligations is a condition of the validity of the legislative instrument. Providing that the instrument remains valid and enforceable even if the standards body fails to comply with the consultation requirements undermines including such standards in the legislation.

2.285 While the committee welcomes the safeguards mentioned by the Minister, the committee notes that they do not offer a direct method to enforce the consultation requirements. Although the instrument may be disallowable, it may be difficult for parliamentarians to know whether appropriate consultation has taken place within the timeframe for disallowance. Additionally, a parliamentary committee would not have the power to direct that consultation be undertaken before client money rules are made.

2.286 The committee draws its scrutiny concerns to the attention of Senators and leaves to the Senate as a whole the appropriateness of excluding review of any failure by ASIC to appropriately consult before making client money rules.

2.287 The committee also draws this matter to the attention of the Senate Standing Committee on Regulations and Ordinances for information.

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[73] Schedule 5, item 14, proposed section 981L of the Corporations Act 2001.

[74] Explanatory memorandum, p. 80.

[75] Explanatory memorandum, p. 80.