Government will act swiftly on Gunning Inquiry recommendations : Premier

5/09/00
Premier Richard Court says the State Government will act swiftly and comprehensively on the recommendations of the Gunning Committee of Inquiry into the Finance Brokers Supervisory Board.
Mr Court, who today tabled the committee's report in State Parliament, said State Cabinet had, in principle, endorsed all of the recommendations contained in the report.
"The 303 page report is a comprehensive review of the recent history of the finance broking industry in this State and recommends a variety of administrative and legislative changes regarding the regulation of finance brokers," Mr Court said.
The 28 recommendations include:

• a legislative requirement that all licensed finance brokers maintain adequate professional indemnity insurance;

• more stringent conditions on who can carry out business as a finance broker;

• that finance brokers be required to provide all prospective lenders with a copy of a sworn valuation of the property to be offered as security, obtained from an independent valuer, together with written notice as to the lender's right to choose and appoint a valuer of their own choice;

• that finance brokers be required to provide prospective lenders with a statement of the assets and liability of each potential borrower and guarantor to a loan, certified by an independent accountant, and including disclosure of any recent bankruptcies;

• that the maximum penalty for a breach of the Finance Brokers Control Act or Code of Conduct be increased from $1,000 to $20,000; and -

• that the Finance Brokers Supervisory Board and/or the Ministry of Fair Trading finalise a memorandum of understanding with the Australian Securities and Investments Commission (ASIC).

Mr Court said the inquiry had also made a number of recommendations relating to the operations of the Finance Brokers Supervisory Board and the Ministry of Fair Trading.
The Gunning Inquiry found no evidence of improper behaviour by the Minister for Fair Trading, Doug Shave.
"The report is, however, critical of the effectiveness and efficiency of the Finance Brokers Supervisory Board and the support it received from the Ministry of Fair Trading," the Premier said.
"The State Government will ask each board member to comment on the report and why the board should continue as currently constituted. We are committed to ensuring that this body and the Ministry of Fair Trading help provide effective regulation of the finance broking industry in this State."
Mr Court said the Gunning Committee had recommended developing improved complaint handling processes and procedures within the board and the Ministry, ensuring that staff assisting the board were appropriately qualified and trained; that roles and responsibilities were clearly defined to avoid confusion.
The report acknowledges that there has already been significant legislative change with ASIC taking over responsibility for pooled mortgage investments through the Commonwealth's Managed Investments Act.
That Act came into force on 1 July 1998 but there was a transitional period until December 1999.
The report notes that pooled mortgages with less than 20 investors are outside of the scope of the Commonwealth legislation and recommends that they be the subject of ongoing State regulation.
"The State Government will establish a panel to oversee the implementation of the Gunning Committee recommendations," Mr Court said.
The Implementation Panel will be chaired by Mr Jeff Mews, retired partner of Price Waterhouse Coopers and current member of the Salaries and Allowances Tribunal, and includes Mr Mal Wauchope, the Director General of the Ministry of Premier and Cabinet, and Mr Gary Newcombe, a Director in the Ministry of Fair Trading.
Mr Court said the panel would be assisted by a full-time Registrar of the Finance Brokers Supervisory Board (a position recommended by the Gunning Inquiry) and would have access to advice from State Treasury, the Crown Solicitor's Office, the Auditor General and the Valuer General.

"Making the changes recommended by the Gunning Committee is a priority and this panel will ensure that they are made swiftly and properly," the Premier said.
"In addition to the recommendations of the committee, the State Government plans to provide a service to help investors who are involved in unmanaged pooled mortgage investments.
"Through the Public Trustee, investors will be provided with practical assistance in co-ordinating and identifying syndicate members, approaching Government agencies, and arranging initial independent valuations of underlying assets."
Mr Court said the assistance reflected the Government's commitment to addressing the problems that had arisen in the finance broking industry.
"We have pursued the unscrupulous individuals who have acted improperly, we are seeking to recover the maximum return for investors and we need to make the structural changes to prevent these problems from re-occurring," he said.
"The implementation of the recommendations from the Gunning Committee will address the need to strengthen and improve the regulatory framework.
"In the meantime, police investigations into individual brokers will continue, matters will be further played out in the courts and the Government will continue to fund the supervisors for collapsed finance brokers Global Finance and Grubb Finance."
The Gunning Committee of Inquiry into the Finance Brokers Supervisory Board was chaired by Judge Ivan Gunning (retired), Mr Digby Blight and Dr Diana Newman.
During the course of its inquiry, the committee considered 101 written submissions, 218 exhibits and took evidence from 56 witnesses over 41 sitting days.
The committee will now continue its consideration of seven other Ministry of Fair Trading boards and committees.

Media contact: Casey Cahill 9222 9475