The Australian Securities and Investments Commission (ASIC) today provided information on upcoming ASIC work in the area of disclosure, following the publication of the revised dollar disclosure regulations.
‘Consumers need clear disclosure of fees, costs and benefits to make informed decisions about financial products. Domestic and international research has consistently shown that disclosure in dollars is the most effective approach’, ASIC Executive Director of Financial Services Regulation, Mr Ian Johnston said.
The dollar disclosure regulations (known as ‘batch 8’) were made yesterday and are available from http://scaleplus.law.gov.au. The regulations commence on gazettal and provide for a six-month transition period.
Licensees (and their representatives) and product issuers will be obliged to disclose various fees, benefits, costs and interests as amounts in dollars in the following documents from 1 January 2005:
- Statements of Advice (SOAs);
- Product Disclosure Statements (PDSs); and
- periodic statements.
The regulations provide that these matters need not be disclosed as amounts in dollars where ASIC makes a determination that, for a compelling reason, dollar disclosure is:
- not possible;
- unreasonably burdensome (including for a specified period of time); or
- contrary to client interests.
See the attachment to this information release for more on ‘dollar disclosure determinations’.
ASIC plans to release a policy proposal paper during July or August canvassing how it will approach the dollar disclosure obligations, together with how it proposes to use its power to make dollar disclosure determinations. The paper is likely to discuss:
- how it will administer the dollar disclosure provisions;
- how applications for ASIC determinations will be assessed by ASIC; and
- in what situations ASIC might consider issuing dollar disclosure determinations on a class basis.
ASIC notes that the Government announced a fees and charges disclosure package, including a single-figure fee measure, on 16 June 2004 (see the Parliamentary Secretary to the Treasurer’s Media Release Simple disclosure of superannuation fees and charges).
ASIC will take into account any implications this new package of proposed regulations may have for the implementation of the dollar disclosure obligations when developing its policy on the dollar disclosure obligations. This will include considering the effect of the Government mandating the use of ASIC’s revised fee disclosure template (issued on 16 June 2004; see ASIC Media Release 04-192, ASIC releases revised fee disclosure model).
More detail on the current and new disclosure regime is set out in the attachment to this information release.
‘ASIC expects licensees and product issuers to already be planning how they will comply with the dollar disclosure obligations. The six-month transition period exists for licensees and product issuers to make any necessary adjustments to their systems, processes and documents so that they can comply with the dollar disclosure obligations’, Mr Johnston said.
End of release
Attachment to Information Release 04-27
The table below summarises the requirements and when they will apply.
Statements of Advice (SOAs)
|
Current position |
1 July – 31 December 2004 |
From 1 January 2005 |
|---|---|---|
|
SOAs must contain information about remuneration, benefits, interests and relationships (s947B–947D). More detailed requirements are set out in regs 7.7.11 and 7.7.12. |
The requirements regarding disclosure of remuneration, benefits, interests and relationships in SOAs will be unchanged in the period from 1 July 2004 to 31 December 2004.* |
As under the current law, from 1 January 2005 SOAs must contain information about remuneration, benefits, interests and relationships (s947B–947D). For SOAs prepared on or after 1 January 2005, this information must be stated as amounts in dollars unless the regulations provide otherwise. |
Product Disclosure Statements (PDSs)
|
Current position |
1 July – 31 December 2004 |
From 1 January 2005 |
|---|---|---|
|
Product Disclosure Statements (PDSs) must contain information about fees, costs and benefits (s1013D). |
The requirements regarding disclosure of remuneration, benefits, interests and relationships in PDSs will be unchanged in the period from 1 July 2004 to 31 December 2004.* |
PDSs must contain information about fees, costs and benefits (s1013D). For PDSs prepared on or after 1 January 2005, this information must be stated as amounts in dollars unless the regulations provide otherwise. |
Periodic statements
|
Periodic statements must contain information about the client’s balance, transactions, returns, fees and costs (s1017D). More detailed requirements are set out in the regulations for:
|
The requirements regarding periodic statements will be largely unchanged during the period 1 July 2004 to 31 December 2004. Regulations were made in November 2003 (Corporations Amendment Regulations 2003 (No 8)) revising the disclosure requirements for periodic statements. While many of the amendments to the periodic statement requirements were disallowed in the Senate on 24 March 2004, amended versions of regs 7.9.19 and 7.9.20 will apply to periodic statements covering periods ending or prepared on or after 1 July 2004. |
Periodic statements must contain information about the client’s balance, transactions, returns, fees and costs (s1017D). For periodic statements covering periods ending or prepared on or after 1 January 2005, this information must be stated as amounts in dollars unless the regulations provide otherwise. Other dollar-disclosure-related amendments to regs 7.9.19, 7.9.20 and 7.9.75 (including new regs 7.9.19A, 7.9.19B, 7.9.20A and 7.9.20B) also commence on 1 January 2005. |
* Regulations were made in November 2003 (Corporations Amendment Regulations 2003 (No 8)) revising the disclosure requirements for SOAs and PDSs. However, the amendments to the SOA and PDS requirements were disallowed in the Senate on 24 March 2004. (While the disallowance motion has since been rescinded to facilitate the making of the replacement dollar disclosure regulations that were announced today, this does not result in the disallowed regulations being reinstated.)
Dollar disclosure determinations
The ‘batch 8’ regulations cover SOAs, PDSs and periodic statements. From 1 January 2005, the regulations provide that remuneration, benefits, interests and relationships may be disclosed as percentages rather than dollar amounts if ASIC determines that, for compelling reasons, disclosure in dollar amounts is not possible, unreasonably burdensome (including for a specified period of time) or contrary to consumers’ interests.
Similarly, disclosure by way of a description is permitted if an ASIC determination is made that, for compelling reasons, disclosure in dollars or by way of percentages of a specified matter is not possible, unreasonably burdensome (including for a specified period of time) or contrary to consumers’ interests.
Where a determination is made, the regulations also require that worked dollar examples be provided to clients.