BILLS - Treasury Laws Amendment (2018 Measures No. 2) Bill 2019 - Consideration in Detail

Mr STEPHEN JONES (Whitlam) (18:26): by leave—I move opposition amendments (1) to (8), as circulated in my name, together:

(1) Schedule 1, item 2, page 4 (lines 16 to 21), omit subsection 926B(3), substitute:

FinTech sandbox exemption

(3) A FinTech sandbox exemption may apply unconditionally or subject to specified conditions.

(3A) A FinTech sandbox exemption does not apply in relation to a person and a financial service unless:

(a) the person has lodged a notification in relation to the service with ASIC that complies with subsection (3B); and

(b) the 30-day period starting on the day the notification was so lodged has ended without ASIC giving the provider written notice of a decision under subsection (3C) relating to the notification.

(3B) For the purposes of paragraph (3A) (a), the person must lodge a notification with ASIC that includes the following:

(a) a description of each financial service (including of any related kind of financial product) for which the person is proposing to use the exemption;

(b) a justification of why exempting each of those financial services will result, or be likely to result, in a benefit to the public that will outweigh the detriment to the public that will result, or be likely to result, from exempting that service;

(c) any other information required by regulations made for the purposes of this paragraph.

(3C) ASIC may, after considering the notification referred to in paragraph (3A) (a), decide it is not satisfied of one or more of the following:

(a) that the financial service:

   (i) is new; or

   (ii) is a new adaptation, or new improvement, of another financial service;

(b) that exempting the financial service will result, or be likely to result, in a benefit to the public that will outweigh the detriment to the public that will result, or be likely to result, from exempting that service;

(c) that any other condition prescribed by regulations made for the purposes of this paragraph is met.

(2) Schedule 1, item 2, page 4 (line 22), omit "an exemption", substitute "a FinTech sandbox exemption".

(3) Schedule 1, item 2, page 4 (line 26), omit "An exemption described in subsection (3)", substitute "A FinTech sandbox exemption".

(4) Schedule 1, item 2, page 4 (after line 28), at the end of section 926B, add:

(6) In this section:

FinTech sandbox exemption means an exemption that:

(a) is made for the for purposes of paragraph (1) (a); and

(b) exempts a person or class of persons from subsection 911A(1) to enable testing of particular financial services.

(5) Schedule 1, item 5, page 5 (lines 10 to 14), omit subsection 110(2), substitute:

FinTech sandbox exemption

(2) A FinTech sandbox exemption may apply unconditionally or subject to specified conditions.

(2A) A FinTech sandbox exemption does not apply in relation to a person and a credit activity unless:

(a) the person has lodged a notification in relation to the activity with ASIC that complies with subsection (2B); and

(b) the 30-day period starting on the day the notification was so lodged has ended without ASIC giving the provider written notice of a decision under subsection (2C) relating to the notification.

(2B) For the purposes of paragraph (2A) (a), the person must lodge a notification with ASIC that includes the following:

(a) a description of each credit activity (including of any related kind of credit activity) for which the person is proposing to use the exemption;

(b) a justification of why exempting each of those credit activities will result, or be likely to result, in a benefit to the public that will outweigh the detriment to the public that will result, or be likely to result, from exempting that activity;

(c) any other information required by regulations made for the purposes of this paragraph.

(2C) ASIC may, after considering the notification referred to in paragraph (2A) (a), decide it is not satisfied of one or more of the following:

(a) that the credit activity:

   (i) is new; or

   (ii) is a new adaptation, or new improvement, of another credit activity;

(b) that exempting the credit activity will result, or be likely to result, in a benefit to the public that will outweigh the detriment to the public that will result, or be likely to result, from exempting that activity;

(c) that any other condition prescribed by regulations made for the purposes of this paragraph is met.

(6) Schedule 1, item 5, page 5 (line 15), omit "an exemption", substitute "a FinTech sandbox exemption".

(7) Schedule 1, item 5, page 5 (line 19), omit "An exemption described in subsection (2)", substitute "A FinTech sandbox exemption".

(8) Schedule 1, item 5, page 5 (after line 21), at the end of section 110, add:

(5) In this section:

FinTech sandbox exemption means an exemption that:

(a) is made for the for purposes of paragraph 1(a); and

(b) exempts a person or class of persons from subsection 29(1) to enable testing of particular credit activities.

 

Labor's amendments apply to schedule 1 of the bill. Our amendments introduce a requirement for companies accessing the fintech sandbox exemption created under this bill to submit a notice outlining the details of their service or product and giving a justification as to why such an exemption is likely to benefit the public. Under Labor's amendments, ASIC will have the power to remove a company's access to a fintech sandbox exemption or, probably more correctly, not consider a company's access to the exemption provided by this bill if they decide that they're not satisfied that the new service or product is innovative or likely to provide a benefit to the public. This is necessary and a relevant test for the bill.

The substantive bill authorises ASIC to provide wide-ranging exemptions to financial services laws—laws that have been established by this place for the express purpose of protecting customers or consumers. Such exemptions should only be granted if such an exemption is likely to provide significant benefit to the public. The regulator is being asked to make a judgement either that there is minimal risk and/or that the countervailing public interest is so great that it warrants waiving the provisions that apply to every other licensee in the market. We do not want to see regulatory relief provided through the mechanisms of this bill for products that are not innovative and have no prospect of providing substantial benefits for the customers. We do not have to turn our mind too hard to think of sorts of innovations that could occur within the fintech space, in the financial services space, which might be very innovative but may not be in the public interest. They aren't the sorts of innovations that I think parliament has in mind when it's authorising the regulator to create exemptions to the general law.

The imposition of the test that we're proposing has been supported by consumer groups such as Choice, the Financial Rights Legal Centre and the Consumer Action Law Centre. Such a test is a characteristic of similar fintech sandboxes in other jurisdictions around the world, as the member for Chifley pointed out in his contribution to the second reading debate. They appear in similar legislation in the United Kingdom and in Singapore, as two examples.

The government themselves admit the necessity of such a test. The disagreement is over where it should lie. They have included a near-identical provision in their draft regulations, which have been circulated with the bill. So the question simply comes down to this: should the guidance to the regulator that is contemplated by our amendment be provided for within the substantive legislation, or should it be provided in the subsidiary legislation—that is, the regulations? It is our position that this guidance and these principles should exist within the substantive legislation. They should be in the minds of both houses of parliament, as we pass these provisions for an exemption through both houses, and they should provide guidance to the regulator that stands for good. It is not, if I can put it this way, a disagreement between the government and the opposition as to the substance. It is, if you like, a philosophical but very practical disagreement about whether the guidance to the regulator should exist within the substantive bill. We argue that it should.

Labor's amendment is not controversial. The amendment proposes setting a simple and basic bar, which any proposed fintech service provider worthy of an exemption should clear. Genuine innovation is in the public interest. Our amendment gives ASIC the reasonable flexibility that it needs, that we agree with the government it should have, while providing some limitations as well. We commend the amendment to the House.

The SPEAKER: The question is that the amendments moved by the member for Whitlam be agreed to.