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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-10-15 Daily Xml
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GLOBAL FINANCIAL CRISIS

The Hon. R.I. LUCAS (14:54): I seek leave to make an explanation before asking the minister representing the Treasurer a question about the financial crisis.

Leave granted.

The Hon. R.I. LUCAS: All members will be aware that the minister has addressed this issue already, in question time, of the global instability and the financial crisis facing not only South Australia but Australia. In recent months, one of the many reasons for some of that global instability and financial crisis has been the practice of hedge funds, other institutions and individuals engaging in the practice of short selling, whereby investors sell a share they do not own in the expectation of buying it later at a lower price, thus making a profit.

As a result of some of those actions, and the instability they were causing in the financial markets, Australian regulators (ASIC and others) banned short selling for a period of time. The federal government, through the federal Treasurer, indicated its support for the ban and opposition to the people involved in the practice.

The Hon. R.P. Wortley: Responsible government.

The Hon. R.I. LUCAS: 'Responsible government', Mr Wortley says. Mr Swan said that this would help protect investors as well as the integrity of our financial market. So, the federal Labor government made quite clear that it opposed those people involved in the practice of short selling.

One of the particular types of short selling that has been banned by Australian regulators, and one of its common examples, is when big hedge funds from overseas and in general borrow shares from institutional super funds and sell large quantities of those shares to drive the price down. They then buy back the shares at a lower price and profit on the difference. The superannuation fund that loans the shares gets paid a fee by the hedge fund for that loan. The obvious issue that has been raised in South Australia is whether or not institutional super funds in South Australia have been involved in the practice of short selling. My questions are:

1. Can the Treasurer give the parliament an assurance that Funds SA, which manages superannuation funds on behalf of public servants in South Australia, has not been involved in any way in the practice of short selling prior to its recent ban by regulators? If it was involved in this practice, what are the details of that involvement, the number of occasions it occurred, the value of the shares in each case and the total fees that might have been earned by Funds SA in any example of short selling?

2. Can the Treasurer give an assurance that no other South Australian government agency, such as WorkCover or the Public Trustee, which also manages (directly or indirectly) funds under its control, was also engaged in the practice of short selling in any way? If it was involved, what are the details of that involvement, in particular the number of occasions it might have been involved, the value of the shares transacted or borrowed in each case and the total fees that might have been earned by WorkCover, the Public Trustee or any other government agency?

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (14:58): I thank the honourable member for his questions. I will refer them to the Treasurer and bring back a reply.

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