The Australian Securities and Investments Commission (ASIC) today issued answers to some regularly asked questions about the Corporations Amendment Regulations 2005 (No.1) (the enhanced fee disclosure regulations) that were made on 10 March 2005.

The enhanced fee disclosure regulations include measures on the disclosure of transactions and fees and costs in product disclosure documents. These provisions require product disclosure statements (PDSs) for certain investment linked financial products to include:

• a standardised fees and costs template;
• an example of annual fees and costs for a balanced or similar fund; and
• a boxed consumer advisory warning.

The regulations also mandate certain transactional disclosures in periodic statements of product issuers.

The enhanced fee disclosure regulations should not be confused with the dollar disclosure provisions for PDSs, statements of advice and periodic statements that take effect from 1 July 2005. For more information on the dollar disclosure provisions, see ASIC Information Release [IR 04-67] of 15 December 2004 ASIC issues dollar disclosure policy.

In the attachment to this release, ASIC provides answers to the following questions:

1. When do the new fees and costs template and related requirements apply to PDSs for superannuation products?
2. When do the new fees and costs template and related requirements apply to PDSs for managed investment products?
3. Does the new fees and costs template and related requirements apply to PDSs for investment life insurance policies?
4. What is the status of ASIC’s preferred model of good practice for

We have not, as yet, answered any questions on periodic statements as these provisions do not apply for some issuers until after 1 July 2006, at the earliest.

‘ASIC has developed these answers to assist product issuers comply with the enhanced fee disclosure regulations. We expect the answers will be of no surprise to most product issuers however we are aware of some industry uncertainty and have worked to provide further clarity on the area’, ASIC’s Director of Regulatory Policy, Mr Mark Adams said.

End of release

Attachment to [IR 05-19]: Answers to some questions on the enhanced fee disclosure regulations

1. When do the new fees and costs template and related requirements apply to PDSs for superannuation products?

PDSs for superannuation products provided to retail clients on or after 1 July 2005 must comply with the new enhanced fee disclosure regulations. This means that issuers will need to either replace their current PDS or supplement their current PDS before 1 July 2005.

However, the regulations do not apply to the following superannuation products:

• Self-managed superannuation funds;
• Superannuation products that have no investment component (also known as risk-only superannuation products);
• Annuities (except market linked annuities including both investment linked and investment account annuities); and
• Life insurance policies offered through a superannuation fund.

2. When do the new fees and costs template and related requirements apply to PDSs for managed investment products?

PDSs for managed investment products provided to retail clients on or after 1 July 2006 must comply with the new enhanced fee disclosure regulations. As a matter of good practice, issuers are encouraged to start complying with the enhanced fee disclosure regulations as soon as possible. This early compliance message is consistent with the industry consensus build around the earlier ASIC model for fee disclosure issued in June 2004 (see ASIC Media Release [04-192] ASIC releases revised fee disclosure model).

3. Does the new fees and costs template and related requirements apply to PDSs for investment life insurance policies?

In the explanatory statement to the enhanced fee disclosure regulations, the Australian Government has indicated that it will examine how to appropriately extend the new enhanced fee disclosure regulations to include investment life insurance policies by 1 July 2006. The statement notes this is consistent with the intent surrounding the issue of ASIC’s model for fee disclosure issued in June 2004. ASIC therefore also encourages as a matter of good practice, providers of investment life insurance policies (as commonly understood) to start complying with the new fees and costs template and related requirements with any necessary adaptation as soon as possible.

4. What is the status of ASIC’s preferred model of good practice for fee disclosure?

ASIC’s model for fee disclosure issued in June 2004 (see ASIC Media Release [04-192] ASIC releases revised fee disclosure model) is superseded by the fees and costs template and related requirements in the enhanced fee disclosure regulations.

Editor's note:

See also Information release 05-54, released 26 September 2005