Treasury Laws Amendment (2023 Measures No 3) Bill 2023 - Commentary on Ministerial Responses [2023] AUSStaCSBSD 158 (6 September 2023)

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Treasury Laws Amendment (2023 Measures No. 3) Bill 2023^[84]

Purpose	This bill seeks to amend various Acts to: • prohibit schemes designed to avoid the application of a product intervention order relating to a credit facility; • remove tertiary education requirements for financial advisers with 10 or more years’ experience and a clean disciplinary record; • address certain limitations in the education requirements for new entrants into the financial advice profession and financial advisers who are registered tax agents; • implement and enforce requirements on a monopoly provider of clearing and settlement services to achieve competitive outcomes; • provide the Australian Competition and Consumer Commission with the power to conduct binding arbitration to resolve disputes regarding access to certain clearing and settlement services; and • make amendments to the First Home Super Saver Scheme.
Portfolio	Treasury
Introduced	House of Representatives on 14 June 2023
Bill status	Before the Senate

Significant matters in delegated legislation

Broad discretionary power^[85]

2.112 Item 1 of Schedule 1 to the bill seeks to insert proposed section 1023S into Part 7.9A of the Corporations Act 2001 (the Corporations Act) to provide for a general prohibition to prevent persons from engaging in conduct to enter into, begin to carry out, or carry out a scheme with the intention of avoiding the application of a credit product intervention order. Proposed section 1023U of the bill provides that the Australian Securities and Investments Commission (ASIC) may, by disallowable legislative instrument, exempt a scheme, or a class of schemes, from this general prohibition. The exemption is subject to any conditions imposed by ASIC.

2.113 A similar exemption power is introduced in item 8 of Schedule 3 to the bill, which seeks to insert proposed section 828R into proposed Part 7.3A of the Corporations Act. Proposed Part 7.3A seeks to regulate competition in the clearing and settlement (CS) of cash equities and seeks to introduce the power for ASIC to make rules that deal with CS services and facilities. Proposed section 828R seeks to provide ASIC with the power to, by disallowable legislative instrument, exempt a person or class of persons from all or specified provisions in proposed Part 7.3A and regulations and rules made under it.

2.114 In Scrutiny Digest 9 of 2023^[86], the committee requested the minister's detailed advice as to:

• why it is considered necessary and appropriate to provide a broad power to exempt schemes or classes of schemes from proposed sections 1023U and 828R in delegated legislation;

• whether the bill can be amended to provide that instruments made under proposed section 1023U and 828R are time-limited; and

• whether the bill can be amended to include at least high-level guidance on the face of the primary legislation as to the circumstances in which an exemption may be granted, and general guidance in relation to the conditions which may apply to an exemption.

Assistant Treasurer and Minister for Financial Services' response^[87]

2.115 The Assistant Treasurer and Minister for Financial Services (the Assistant Treasurer) advised that the exemptions power in proposed section 1023U is to address circumstances where the anti-avoidance legislation adversely captures products not intended to fall under the general prohibition. The Assistant Treasurer advised that, to ensure the prohibition does not stifle innovation or market participation through over regulation, it is appropriate that ASIC be able to respond in a timely manner to provide certainty to credit product providers.

2.116 The Assistant Treasurer further advised that it is not appropriate to have an overarching time-limit on instruments made under proposed section 1023U as the length of operation for such instruments needs to occur on a case-by-case basis to ensure each instrument operates as long as strictly necessary and ASIC can vary, revoke or set the length of such instruments depending on evolving market conditions.

2.117 In relation to the provision of high-level guidance on the face of the primary legislation, the Assistant Treasurer advised that the explanatory memorandum provides high-level and specific guidance, and it would not be appropriate to include guidance within the primary law as financial markets change quickly and, as a result, new products may emerge that the guidance may not foresee.

2.118 Similarly, in relation to section 828R, the Assistant Treasurer advised that the exemptions are needed to ensure it does not draw in entities that should not be subject to the CS service rules. Further, the bill does not prescribe mandatory or discretionary criteria or considerations when making an exemption because these are not foreseeable at the time, and sunsetting is not considered appropriate as ASIC is in the best position to determine the appropriate length of any exemption based on the circumstances that necessitate the exemption.

Committee comment

2.119 The committee thanks the Assistant Treasurer for this response.

2.120 However, it is unclear to the committee how ASIC's power to create exemptions from the general prohibition, along with flexibility to determine the conditions and length of time the exemption is in place and to change this in response to market conditions, provides certainty to credit product providers. The committee reiterates that some amendments to the bill could assist with appropriately limiting ASIC's broad discretionary power. For example, the bill could provide that an exemption is no longer in force if the circumstances under which it was originally granted no longer exist, and the inclusion of a time limit to exemptions which would require that it be reconsidered whether the exemption remains appropriate more regularly.

2.121 The committee considers that the Assistant Treasurer's response has not satisfactorily addressed the committee's concerns, and that the desire for both flexibility and certainty has led to a move away from adequate parliamentary oversight of law making, and instead relies on significant matters being provided for in delegated legislation. The committee further considers that ASIC's power to make exemptions from the primary law, in the context of numerous other powers to make exemptions from the operation of the Corporations Act 2001, makes it difficult from a clarity of law perspective to access and understand the law.

2.122 The committee draws this matter to the attention of senators and leaves to the Senate as a whole the appropriateness of providing for delegated legislation to make exemptions to primary legislation, with limited guidance as to when an exemption may be granted and the conditions attached to it.

Availability of merits review^[88]

2.123 Item 9 of Schedule 3 to the bill seeks to insert proposed subsection 1317C(gcd) which has the effect of excluding merits review for a decision by ASIC to make CS services rules under proposed section 828A or give a direction under subsection 828G(1). Proposed section 828A provides that ASIC may, by legislative instrument, make rules that deal with matters including, but not limited to, the activities, conduct or governance of persons in relation to CS services and the specification of persons who are required to comply with requirements imposed by the rule. Proposed subsection 828G(1) provides ASIC with the power to give directions to persons not complying with obligations to comply with CS services rules.

2.124 In Scrutiny Digest 9 of 2023, the committee requested the minister's detailed advice as to why it is necessary and appropriate not to provide that independent merits review will be available in relation to a decision by ASIC to:

• make clearing and settlement services rules under section 828A; and

• provide directions to a person under subsection 828G(1).

Assistant Treasurer and Minister for Financial Services' response^[89]

2.125 The Assistant Treasurer advised that proposed section 828A allows ASIC to make CS services rules, and as this is subordinate legislation it is not considered appropriate or necessary for merits review to be available for legislative action. The Assistant Treasurer noted that this is in line with Commonwealth legislation and the Administrative Review Council's guidance document, What decisions should be subject to merits review?.

2.126 The Assistant Treasurer further advised directions under proposed subsection 828G(1) would not affect the interests of a person or place any burden on a person that the person would not otherwise experience if they were complying with their obligations under the CS services rules. Further, as the decision to issue a direction is law enforcement in nature, in line with the Administrative Review Council's guidance document, What decisions should be subject to merits review?, it should not be made subject to merits review.

Committee comment

2.127 The committee thanks the Assistant Treasurer for this response.

2.128 The committee requests that an addendum to the explanatory memorandum containing the key information provided by the Assistant Treasurer be tabled in the Parliament as soon as practicable, noting the importance of these explanatory materials as a point of access to understanding the law and, if needed, as extrinsic material to assist with interpretation (see section 15AB of the Acts Interpretation Act 1901).

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^[84] This entry can be cited as: Senate Standing Committee for the Scrutiny of Bills, Treasury Laws Amendment (2023 Measures No. 3) Bill 2023, Scrutiny Digest 10 of 2023; [2023] AUSStaCSBSD 158.

[85] Schedule 1, item 1, proposed section 1023U; Schedule 3, item 8, proposed section 828R. The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(ii) and (v).

[86] Senate Scrutiny of Bills Committee, Scrutiny Digest 9 of 2023 (9 August 2023) pp. 30–34.

[87] The minister responded to the committee's comments in a letter dated 23 August 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 10 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest.

[88] Schedule 3, item 9, proposed subsection 1317C(gcd). The committee draws senators’ attention to this provision pursuant to Senate standing order 24(1)(a)(iii).

[89] The minister responded to the committee's comments in a letter dated 23 August 2023. A copy of the letter is available on the committee's website: see correspondence relating to Scrutiny Digest 10 of 2023 available at: www.aph.gov.au/senate_scrutiny_digest.