Australia: Are You Solving The "Short and Simple" PDS Issues? Not a "Tick-a-Box" Project!

The new "short and simple" PDS regime for superannuation products commences on 22 June 2011. This is the first general overhaul of these requirements since 2002, when FSR commenced. Unfortunately for trustees, implementing the new regime will not be so simple. Nor can it be done in a short time. Trustees need to start acting now.

The requirements for Product Disclosure Statements (PDSs) for superannuation products (other than products that are solely an interest in a defined benefits fund or solely a pension product) have changed. These changes are intended to make PDSs for superannuation products "substantially shorter and simpler" than current PDSs.1

Not so short and simple

This "shorter and simpler" tag, coupled with the delayed commencement of the new regime, may have lulled some trustees into thinking that nothing needs to be done now, as whatever has to be done can be done later, by following a "tick-a-box" checklist approach. However, the theoretical and practical complexities of the new regime demand that trustees devote substantial management resources to implementing the new requirements at an early stage.

Project team and project plan

This is a major project for trustees. Product, distribution, marketing, administration, systems, compliance and legal staff will all need to be involved. Establishing a project team is a priority.

The new regime commences in 2 stages. All new PDSs must comply from 22 June 2011 (stage 1). (This has broad reach, as no Supplementary PDSs can be given from 22 June 2011.) All PDSs must comply from 22 June 2012 (stage 2). There may be some products for which a new PDS can wait until stage 2, rather than being dealt with at stage 1. Having a project plan which, among other things, identifies whether products will be dealt with at stage 1 or 2 is essential.

Implementation issues

Some of the numerous implementation issues are:

  • writing an updated PDS due diligence procedure which addresses the new requirements, and which requires that the structure of new PDSs to be "mapped out" and all decisions and steps taken be properly recorded
  • identifying prescribed information to be included in the "actual" PDS of 8 pages maximum
  • identifying prescribed information to be incorporated in the PDS by reference
  • identifying non-prescribed information to be included in the actual PDS or incorporated by reference
  • identifying non-prescribed information to be referred to in the PDS but not incorporated by reference (called "referenced" information)
  • identifying information outside the actual PDS that is to be given to members in hard copy, along with the actual PDS. Information in this category is likely to include information about death benefit nominations and may include information about insurance. There will need to be discussions with the insurer
  • making disclosures under other legislation, such as illiquid investment disclosure under reg 6.34(7) of the Superannuation Industry (Supervision) Regulations 1994 (Cth) and giving a privacy notice under National Privacy Principle 1.3
  • verifying the statements in the actual PDS, the information that is incorporated by reference, and the referenced information
  • creating compliant and functional website pages
  • establishing a program for the regular testing of all website links
  • training call centre and complaints staff
  • communications with advisers, and
  • reviewing due diligence committee charters.

Our PDS checklist

We have prepared a legal checklist of the new requirements. The key strengths of our checklist are:

  • it quotes, rather than merely paraphrases, the actual text of the legal requirements
  • it shows both the new PDS requirements and such of the older PDS requirements as have survived, in a single checklist
  • it includes passages from the Explanatory Statement, where these clarify or expand on the meaning of the text used in the new requirements, and
  • it is self-contained, in the sense that the relevant legal requirements are set out in full.

How we can assist you

We can assist you in these ways:

  • by providing you with our template PDS checklist
  • by providing legal advice to your project team, including advising on specific issues
  • by providing legal sign-off on your new PDSs
  • by reviewing your PDS due diligence procedures and training materials
  • by participating in training and workshop sessions with your staff, and
  • if any major implementation issues are identified – by making submissions on your behalf to Treasury of the ASIC, as appropriate. We can do this on a no-names basis, if this is preferred.

1. Explanatory Statement to SLI 2010 No 135.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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