Josh Frydenberg’s attempts to cripple the proxy advisers who advise superannuation funds on how to vote on issues including executive pay have been described as a “cluster fiasco” after the Senate killed off the regulations introduced by the treasurer.
The regulations were introduced in December and had been in force for just three days when the Senate disallowed them on Thursday.
The move was another blow for the government on a messy day in parliament where it also shelved its contentious religious discrimination bills.
The superannuation regulations required proxy advisers to hand reports to the companies they had researched on the same day as they went to paying clients. They also prohibited clients from owning proxy advisers.
Critics said the rules robbed proxy advisers of their intellectual property and would have cost retirement savers money by forcing industry super funds, which have been a frequent target of the Morrison government, to set up their own research teams rather than use the services of the Australian Council of Superannuation Investors, where many are shareholders.
The disallowance motion, which was proposed by independent Rex Patrick and Greens senator Nick McKim and was supported by Labor, One Nation and Jacqui Lambie, formed part of a day of defeat for Frydenberg on financial services that also included the prudential regulator rejecting the government’s efforts to ban super funds paying fines from members’ funds.
The regulations were introduced after Frydenberg failed to get similar legislation through – a process Labor frontbencher Andrew Leigh told parliament was an “underhanded attempt to undermine the proxy advisers”.
Dean Paatsch, a co-founder of proxy adviser business Ownership Matters who has embarrassed the Morrison government through his work on jobkeeper payments, said the entire process had been a “cluster fiasco”.
“It was profoundly disappointing that the government indulged crony capitalists and the major business lobbies at the expense of respect for property rights, the freedom to contract and the right to confidential advice”.
Patrick said the regulations were “bad law, crafted to please Josh Frydenberg’s big business mates and political donors, and the senate rightly rejected it”.
“This has got to be a world record start-up then shut down of a regulatory regime. It lasted three days. It was one big thought bubble from the treasurer that just wasted taxpayers’ money and the parliament’s time.”
Leigh told parliament the defeat of the regulations, which included fines of up to $11m and jail terms of up to five years for operating without a licence, was “a victory for shareholder capitalism, for transparency, and for small business in Australia”.
He told parliament it was also a “defeat for Arnold Bloch Leibler, the firm that pays the treasurer’s pro bono legal bills and has campaigned against the transparency that proxy advisers bring.”
ABL partner Jeremy Leibler declined to comment.
Acsi welcomed the senate’s decision to put the regulations to the sword.
“The regulations were rushed through without parliamentary scrutiny and with no justification, rationale or harm identified,” a spokesperson said.
The Australian Institute of Company Directors, whose members regularly face scrutiny by proxy advisers over their pay and performance, said it was disappointed that the senate disallowed the regulation.
Frydenberg said that “the Labor party has sided with the Greens again to roll back reforms designed to improve the accountability and transparency of the proxy advice and superannuation sectors”.
Meanwhile, the Australian Prudential Regulation Authority pushed back against efforts by Liberal backbenchers Andrew Bragg and Jason Falinski to stop industry super funds from paying fines out of members’ funds.
A general ban on the practice was introduced in legislation passed in 2020 as part of the Morrison government’s response to the banking royal commission, but last year the courts said it was permissible for industry funds to levy members to build up a war chest to pay fines levied against trustees because their trustees have no reserves of their own.
The backbenchers had promised to explore all possible methods of stopping funds using members’ money to pay fines, with Falinski calling the court decisions “a direct attack on parliament’s role in setting law in this nation”.
However on Thursday Margaret Cole, an Apra executive board member told the House of Representatives economics committee that it was vital super funds be allowed to build up reserves.
“To be clear as to the significance of this issue, without the ability to build and maintain a risk reserve an otherwise well run and well performing trustee could be rendered insolvent by a minor operational administrative error, such as submitting data one day late, resulting in a maximum penalty of $11,100,” she said.
She said this “would be likely to be severely detrimental to members as it would probably impose material costs and create significant operational risks” and urged parliamentarians to move on from the issue.
