Australia: Modifications to Simplified PDS regime

Financial Services Update
Last Updated: 14 January 2012
Article by Pamela McAlister, Eugene Chen and Harry New

Mandatory compliance with the Simplified Product Disclosure Statement (Simplified PDS) regime for simple managed investment schemes and superannuation funds is due to commence on 22 June 2012. So far, a number of product issuers have already opted to issue Simplified PDSs under ASIC's Class Order CO 11/576 (consolidated to CO 11/617) (Transition Class Order) which provides for early adoption of the Simplified PDS regime.

Late last year, Treasury announced a number of technical refinements to the content requirements for Simplified PDSs. ASIC has also provided additional guidance in relation to disclosure about certain matters in Simplified PDSs in a number of updated Regulatory Guides. This Update provides a brief summary of the new regulations, Treasury announcements and ASIC guidance relating to the Simplified PDS regime.

ASIC updates to Regulatory Guides

On 30 November 2011, ASIC updated Regulatory Guide 55 Statements in disclosure documents and PDSs: Consent to quote (RG 55), Regulatory Guide 65 Section 1013DA disclosure guidelines (RG 65) and Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements (RG 97) to reflect changes in its policies as applicable to Simplified PDSs. ASIC notes that the amendments to the regulatory guides do not represent substantive policy changes.

In summary, the key changes to the ASIC Regulatory Guides relating to Simplified PDSs are:

  • amendments to RG 55 clarify that consents to quote required under s712 of the Corporations Act 2001 (Corporations Act) can be incorporated by reference for a Simplified PDS subject to meeting incorporation by reference requirements;
  • amendments to RG 65 clarify that the disclosure of labour standards, environmental, social and ethical considerations under Schedules 10C, 10D and 10E of the Corporations Regulation 2001 (Corporations Regulations) for Simplified PDSs is regulated by the Corporations Regulations and not by sections 1013D and 1013DA of the Corporations Act for standard PDSs. To comply with the Corporations Regulations, product issuers must disclose in a summary form the extent to which those standards are taken into account in the selection, retention or realisation of investments. ASIC also encourage compliance with RG 65 when making disclosures about labour standards, ethical, social and environmental considerations in Simplified PDSs generally (for example, in any incorporation by reference material);
  • amendments to RG 97 to provide additional guidance that under the Simplified PDS regime:
    • fees and cost information for multiple investment options should be provided in accordance with enhanced fee disclosure requirements in Schedule 10 of the Corporations Regulations and must be incorporated by reference;
    • a Simplified PDS must not include additional voluntary information in the boxed consumer advisory warning; and
    • information about certain matters such as cost recovery, rebates or flexible charging structures and contingent costs can be incorporated by reference.

Corporations Legislation Amendment Regulations 2011 (No.2)

On 9 December 2011, Treasury registered Corporations Legislation Amendment Regulations 2001 (No.2) (Amending Regulations) which makes a number of technical amendments to the Simplified PDS regime. The key amendments are:

  • in terms of transitional arrangements, the Amending Regulations implement previous announcements made by Treasury in June 2011 by providing that:
    • product issuers may remain within the existing PDS regime until 22 June 2012;
    • a product issuer who has elected to issue a Simplified PDS before 22 June 2012 may issue a supplementary PDS to update the information in that Simplified PDS, but may only do so up to 22 June 2012. After 22 June 2012, a supplementary PDS will not be permitted;
    • a product issuer can choose to stay within the existing regime (ie issue long form PDSs and supplementary PDSs) until 22 June 2012. However, if the issuer elects to stay with this regime (ie by issuing a new long form or supplementary PDS in the period from 9 December 2011 until 22 June 2012), the issuer must not issue a Simplified PDS for that product before 22 June 2012; and
    • if a product issuer does opt into the Simplified PDS regime, it cannot opt out for that product;
  • risk-only superannuation products are excluded from the regime;
  • combined defined benefit and accumulation superannuation products are included in the regime;
  • the incorporation by reference wording for Simplified PDSs has been changed to account for situations where applications are made electronically. The new wording substitutes "when you acquire the product" for "when you sign the application form"; and
  • for simple managed investment schemes, the information that can be incorporated by reference in the significant benefits section and the taxation section of the Simplified PDS has been expanded to include matters related to the particular scheme and simple managed investment schemes in general; and
  • for new simple managed investment scheme, there is an ability to the disclose the investment details for the least volatile option if there is no balanced option.

Further refinements in relation to multi-fund PDSs, platforms and hedge funds

On 22 December 2011, Treasury announced that it proposes to make the following further refinements to the Simplified PDS regime:

  • the government will be considering modifying content requirements for Simplified PDSs for superannuation platforms and multi-funds;
  • on a interim basis, superannuation platforms and multi-funds will be excluded from the simplified PDSs regime however, issuers of superannuation platforms and multi-funds may elect to prepare simplified PDSs to discharge their disclosure obligations; and
  • for clarity, other complex products such as hedge funds will be excluded from the simplified PDS regime but the government may reconsider its position.

It is not clear the context in which "multi-funds" is referred to in the announcements. When the simplified PDS regime was first introduced, it was clear that a simplified PDS must be produced for each fund rather than more than one fund sharing the same features. It therefore seems that "multi-funds" may be another label for master trusts or wrap type products.

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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