Clamp down: Murray Darling Basin states back mandatory water broker code

A mandatory code would force water brokers to disclose when they are charging multiple fees or commissions on a single trade.

Make it mandatory: Murray Darling Basin states have backed creating a mandatory code for water brokers.

Murray Darling Basin states have given in-principle support to establishing a mandatory code of conduct for water brokers and the need to terminate tagged water trades.

Victorian, NSW, Queensland and South Australian governments have been consulted on developing the code by an expert panel, which Federal Water Minister Keith Pitt appointed last year in response to the recommendations of the Australian Competition and Consumer Commission’s inquiry into MDB water markets

Panel chairman Daryl Quinlivan reported there was strong support for the code, given “regulatory safeguards that apply to intermediaries in other markets (e.g. real estate agents, stock brokers and stock and station agents) do not apply to water market intermediaries (brokers).”

He also found “a voluntary code introduced by the Australian Water Brokers Association has not been broadly adopted by the industry and is generally viewed by stakeholders as ineffective”.

The code would be enshrined under new Commonwealth legislation, which Mr Quinlivan said would demand brokers disclose to clients when they are receiving multiple fees or commissions on a single trade, have an interest in the trade, keep clients funds in statutory trust accounts and hold professional indemnity insurance.

He reported “the Basin states responded positively to the ACCC inquiry” and “supported the Commission’s analysis and its proposed reforms generally”, including the need to amend the basin plan to terminate grandfathered tagged water entitlement that enabled their owners to order water for delivery from one zone to another, at times when all other trade was restricted.

However Mr Quinlivan said there was less enthusiasm from the states on adopting the ACCC’s recommendation to establish an independent Basin-wide Water Markets Agency, to ensure markets operate fairly and with integrity.

The ACCC recommended the agency oversee new Basin-wide legislation to “address harmful conduct and practices” and improve market transparency, surveillance and pursue enforcement action.

But Mr Quinlivan’s report found “early feedback to this (agency) process has highlighted the already congested governance of the Murray–Darling Basin, a desire for less agencies operating in a simplified governance structure where it is clear who is responsible for what functions, and concerns about additional overhead costs on a small industry”.

He said new legislation should focus instead on establishing a mandatory code for brokers and prohibiting insider trading and market manipulation.

Mr Quinlivan will deliver his final report in June.