ASIC has announced new class order relief which simplifies certain disclosure requirements for issuers of deposit products.
Detailed in Class Order [CO 06/476] Variation of Class Orders [CO 05/681] and [CO 05/683] Dollar disclosure: further transitional relief, the relief grants:
- permanent unconditional relief to issuers of deposit products from the requirement to include termination values in periodic statements;
- permanent conditional relief to issuers of deposit products from the requirement to disclose interest rates in Product Disclosure Statements (PDSs); and
- extension of transitional relief to issuers of deposit products from the dollar disclosure requirements from 1 July 2006 to 31 March 2007.
ASIC Director of Policy and Research, Mr Mark Adams, said ‘the relief recognises that deposit products are relatively simple and understood and will mean issuers will not need to implement major system changes where adequate disclosure practices already exist. Consumers will, however, still receive important information in their periodic statements, such as the closing balance of their deposit product, and interest rates will be disclosed to the consumer before the acquisition of the deposit product.’
‘ASIC notes that strict compliance with all aspects of the disclosure regime of the Corporations Act does not make sense for all deposit products. Therefore, we have decided to simplify some disclosure requirements for issuers of deposit products,’ said Mr Adams.
‘We expect that issuers of deposit products will continue to provide adequate disclosure of information about termination values and interest rates (e.g. how to obtain them, how they are calculated) in their offer documents for deposit products (whether or not a PDS is required). Further, we expect issuers of deposit products will provide more precise information about interest rates and termination values when requested,’ he added.
For further background information refer to:
- Class Order [CO 05/681] Transitional relief for deposit product providers – PDSs and periodic statements;
- Class Order [CO 05/683] Dollar disclosure: further transitional relief
- Information Release [IR 05-35] Transitional relief for deposit product (and related non-cash payment facility) issuers and general insurers.
End of release
Background – Transitional relief granted until 30 June 2006
On 24 June 2005, ASIC announced that it would grant transitional relief for issuers of deposit products until 30 June 2006 from the requirement to disclose termination values in periodic statements provided:
- the issuer made the investor aware that they could obtain details of the termination value by giving notice in writing, or putting up notices at the issuer’s branches and on their internet website; and
- the investor could obtain the relevant termination value on request from the issuer in a simple way and at no charge.
ASIC also granted transitional relief at the same time for issuers of deposit products until 30 June 2006 from the requirement to disclose interest rates in PDSs provided:
- the PDS clearly and prominently stated how any person could find out the interest rate of the relevant deposit product; and
- the issuer had in place arrangements so that a person could obtain details of the interest rate in a simple way, which involved little inconvenience to the person and was free of charge.
Issuers of deposit products (and related non-cash payment facilities) and general insurance products were given transitional relief from the dollar disclosure requirements until 1 July 2006: see [CO 05/683] and IR 05-35 Transitional relief for deposit product (and related non-cash payment facility) issuers and general insurers.
Our relief announced today
1. Termination values in periodic statements for deposit products [CO 06/476]
The law requires that the termination value of a financial product, such as a deposit product, be included in a periodic statement if it is relevant to the financial product and to the extent to which it is reasonably practicable to calculate its value. A termination value is the amount that will be paid to the consumer if they closed their account at that time. A periodic statement is a document provided to the holder of a deposit product detailing information about the status of their deposit. A periodic statement must be provided during each reporting period (typically at least on an annual basis).
ASIC’s relief in Class Order [CO 06/476] exempts the issuer of a deposit product from disclosing a termination value in a periodic statement for a deposit product.
The relief is not subject to any conditions, but ASIC expects that issuers of deposit products will provide adequate disclosure in their offer documentation for deposit products (whether or not a PDS is required), including details about termination values for such products. This disclosure should include information about whether there are any restrictions on termination and if any early termination costs may apply.
2. Interest rates in PDSs for deposit products [CO 06/476]
Details of interest rates that may be paid on a deposit product are required to be disclosed in a PDS under s1013D of the Act.
Class Order [CO 06/476] exempts the issuer of a deposit product from disclosing the interest rate of a deposit product in a PDS where:
- the PDS clearly and prominently states how any person may find out the interest rate of the relevant deposit product; and
- the issuer has in place means by which a person may obtain details of the interest rate that are simple, involve little inconvenience to the person and are free of any charge imposed by the issuer or its associates.
ASIC understands that it is current industry practice to provide potential applicants for a deposit product with interest rate information before the making of the deposit. The precise interest rate is not contained in the offer documents as the rate changes frequently.
3. General transitional relief for dollar disclosure [CO 06/476]
In June 2005, ASIC granted transitional relief for issuers of deposit products from the dollar disclosure requirements because the Federal Government was reviewing product disclosure statement (PDS) requirements for basic deposit products and general insurance products as part of the Refinements to Financial Services Regulation Proposals Paper (May 2005). In December 2005, the Government excluded basic deposit products from the PDS regime, leaving non-basic deposit products subject to the dollar disclosure requirements.
In general, "non-basic deposit products" are term deposits that must be held for at least two years and do not offer "at call" termination in less that seven days.
As the Government did not exclude non-basic deposit products from the PDS regime, the current transitional relief from the dollar disclosure regime for non-basic deposit products was due to expire on 30 June 2006. While ASIC expects issuers of non-basic deposit products to comply with the dollar disclosure regime as soon as practicable, it has granted a short extension of the transitional relief (until 31 March 2007) to allow an orderly transition to the new regime. Over the coming weeks, ASIC will confirm any outstanding practical issues regarding the transition with industry stakeholders.