ASIC has issued a further updated guide for product issuers to help them comply with the Corporations Amendment Regulations 2005 (No. 1) (the enhanced fee disclosure regulations).

The revised Enhanced fee disclosure regulations: Questions and Answers – an ASIC Guide answers commonly asked questions about compliance with the regulations. It also incorporates some questions and answers released during 2005.

‘ASIC has updated the guide with answers to additional questions to further assist product issuers to comply with the enhanced fee disclosure regulations. The updated guide incorporates answers to questions specifically relevant to some types of managed investment schemes that are typically offered to consumers’, said ASIC’s Director of Policy and Research, Mr Mark Adams.

ASIC will continue to update this guide from time to time in response to new commonly asked questions or based on our regulatory experience. For example, we are aware that further guidance may be needed on:

• disclosure of downstream management costs or performance fees; and
• how to apply exclusions to the definition of management costs such as operational or transactional costs, and costs that an investor would incur if they invested directly in the asset.

Background

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

• a standardised fee template (with accompanying explanation);
• an example of annual fees and costs for a balanced or similar fund; and
• a boxed consumer advisory warning.

The regulations applied to PDSs for superannuation products from1 July 2005 and for other financial products, including managed investment products, from 1 July 2006. The regulations also mandate certain transactional disclosures in periodic statements of product issuers of superannuation products (from 1 July 2006) and of managed investment products (from 1 July 2007).

On 26 March 2007, Treasury released for comment draft Corporations Amendment Regulations that proposed extending the enhanced fee disclosure regime to investment life insurance policies. A date for the commencement of the regulations is yet to be announced.

This updated guide amends and deletes some questions in Section A. The new questions answered in this update of the guide relevant to all issuers are as follows:

• A11 What is meant by "components" in clause 204(6) of Part 2 of Schedule 10?;
• A12 Where fees or costs are reduced, waived or a rebate is offered, what figure should be included in the calculation of managements costs?
• A13 Can contingent fees or costs be excluded from the calculation of management costs?

The new questions answered in this update of the guide relevant to issuers of managed investment products are as follows:

• D1 How should issuers of managed investment products comply with the example of annual fees and costs?
• D2 How should fees and costs information be disclosed for a stapled security?
• D3 How should contributory mortgage issuers disclose transaction-specific fee information?
• D4 How should start-up and initial one-off fees or costs be disclosed?

Download the updated Enhanced fee disclosure regulations: Questions and Answers – an ASIC Guide.

Earlier related Information Releases

IR 05-19: ASIC provides answers on some fees and costs questions

IR 05-28: ASIC compliance guidance on the FSR refinement proposals and fees template requirements

IR 05-54: Further answers on some fees and costs questions

IR 06-07: ASIC issues fees and costs disclosure guide

IR 06-23: ASIC issues updated fees and costs disclosure guide

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