Australia: Digital disclosure: revised Regulatory Guide 221

Last Updated: 30 August 2015
Article by Maggie Pascoe

Most Read Contributor in Australia, September 2017

In a welcome move, ASIC released revised Regulatory Guide 221, Facilitating digital financial services disclosure (RG 221) on 28 July 2015, following a consultation process through Consultation Paper 224 - Faciliating electronic financial services disclosure. RG 221 contains guidance to further facilitate disclosure through digital channels, and aims to encourage innovative communication of information about financial products and services.

In his media release of 28 July 2015, ASIC Commissioner John Price, said:

"The changes mean product disclosure statements (PDS) and other financial services disclosure documents will be delivered to consumers digitally as the default option, unless the consumer opts out. This will reduce the costs of printing and mailing for businesses while preserving choice for those consumers who wish to receive paper."

The package of measures comprises the following documents:

  • RG 221 (which sets out ASIC's view that in most cases, providers do not need relief to use their clients'/members' electronic addresses for delivery of disclosures, as it will be clear from the context that the information was provided for this purpose)
  • ASIC Corporations (Facilitating Electronic Delivery of Financial Services Disclosure) Instrument 2015 (15-647) (Principal Instrument) which:
    • creates a new method of digital delivery enabling financial services providers to publish disclosure digitally and notify the client that it is available
    • enables trustees of employer-sponsored superannuation funds to meet their disclosure obligation to give a product disclosure statement (PDS) and ongoing disclosures to default fund members by using an email address provided by the member's employer
  • ASIC Corporations (Removing Barriers to Electronic Disclosure) Instrument 2015 (15-649) which provides relief from some of the requirements applying to hardcopy disclosure documents, to facilitate the use of digital media for PDSs, financial services guides (FSGs) and statements of advice (SOAs).

There are also two instruments (ASIC Corporations Instruments 2015/681 and 684) which repeal five existing class orders, the most notable being class order 10/1219 (the class order which facilitates the delivery of PDSs, FSGs and SOAs electronically, with members' prior consent).

Click here for a link ASIC's media release, RG 221 and the new ASIC Corporations Instruments which deliver the package of measures.

In this article we examine the measures put forward in these documents and explore the issues that may impair or impede take up in this area.

The position prior to the changes

Previously, while most disclosures could be delivered digitally using a variety of delivery methods, this generally required specific consent from members. The opposite applied for disclosures sent to a postal address.

Regulated disclosure documents such as FSGs, PDSs and SOAs could be "given" if they were sent to an electronic address "nominated" by the member, or made available in a way agreed to by the member. Following the changes, it is now possible, provided certain steps are taken, to simply notify members that relevant disclosure documents are available without the need to attach or provide a copy of those documents.

Publish and notify

The concept

Section 761A of the Corporations Act has been amended by the Principal Instrument by inserting a definition of "nominated electronic means". Nominated electronic means is one where documents, information, statements or notifications can simply be made available by the provider to another person, provided certain conditions are satisfied (see below under the heading "The detail").

Providers may make disclosures relating to the following disclosure obligations by notifying members that the document is available for viewing and downloading at an electronic address (which could be a hyperlink within an email, or the website address of the fund):

  • regulated documents- FSGs, PDSs and SOAs
  • additional information on request
  • CGS depository interest statements
  • ongoing disclosure and periodic statements.

The corresponding provisions of the Corporations Act dealing with each of these disclosure obligations have been amended to expressly include this delivery mechanism as a way of satisfying providers' disclosure obligations.

The detail

The ability for providers to be able to tap into the "publish and notify" mechanism is not automatic and (in the absence of the parties having otherwise agreed that the relevant communication or communications of that type could be made available to the member by electronic means), is dependent upon the provider:

  • having first given the member (or potential member) a notice (which may be in printed or electronic form) advising members in that notice that the provider may use electronic means to make:
    • the relevant communication
    • relevant communications of that type
    • available to the members in the future by electronic means, unless the member elects (by a method reasonably specified in the notice) not to receive relevant communications of that type
  • the member has not opted out of receipt of such notifications.

Having given the member a notice of its delivery intentions in the future, the provider is required to wait 7 days, following which, the provider is free to notify the member that the relevant disclosure is available by electronic means, unless the provider has secured agreement from the member that it can publish and notify immediately. The notification does not need to attach the relevant disclosure document, or contain a hyperlink to the disclosure document, but is required to contain sufficient detail to enable the member to access the document (ie by providing instructions about where the member can locate the disclosure document on the relevant section of the fund's website).

Once given, the notice of intention does not need to be issued again. Members are however free to elect at any time to opt out of the notification regime, but there is no requirement for providers to continually remind members of this right. Whether providers choose to do this, is another matter.

Practical considerations

Allow sufficient overlap time the first time around

If providers effectively notify members of the availability of a document at the same time they notify members for the first time of their intention to use electronic delivery means in the future, and the member makes an election to opt out of the notification option within 7 days, then any disclosure material notified to the member will need to be sent to members in their chosen notification method for providers to have met their disclosure obligation.

Providers wishing to avail themselves of this mechanism must therefore plan for its introduction appropriately, and allow sufficient time between notification of their intention to default to electronic delivery methods, and actually implementing electronic delivery methods.

Is it right for you and for your membership?

The "publish and notify" disclosure mechanism isn't mandated, and simply opens up alternative delivery channel possibilities. Whether providers choose to adopt this way of satisfying disclosure obligations will depend on a number of factors; not the least of which may be the potential cost savings to the fund (and therefore members), system availability and capability, the demographic profile and perceived communication preferences of a fund's membership base, and how "opt out" requests will be managed on an ongoing basis.

That first notification

ASIC has an expectation that in notifying members of a provider's future intentions, the initial notification will need to be delivered in a way (or via a medium) that members are either used to receiving or have agreed to. Additionally, the "opt out" notification process must be "reasonably specified" in the notice, which means it must be easy for members to opt out, and ideally should provide a number of ways to do so (ie via email, via phone, via post).

If providers are intending to embrace electronic notification methods to satisfy all available disclosure obligations, thought will need to be given to designing an effective means for members being able to opt out of receipt of some but not all notifications (some members may be happy to receive notifications about the availability of most disclosures, but may want to continue to receive periodic statements via post).

Existing and new members

A PDS could be the means by which new members are notified of a provider's intention to utilise the "publish and notify" delivery mechanism, however, co-ordinating this for existing members will prove the challenge.

Systems, process and onus of proof

Providers will need to ensure they have a process to record (and update) members' diverse delivery needs, and properly issue any disclosure material the subject of an opt-out notice. The onus will always be on the provider to demonstrate they have discharged their disclosure obligations, which would include being able to demonstrate a reasonable process and approach at all times.

Spam, privacy and other considerations

Being able to avail oneself of electronic means of effecting disclosure may not necessarily mean that this is so in all cases.

Providers wanting to communicate with members on topics others than mandated disclosure material (ie any marketing or new product information) will still need to ensure that any such disclosures align with their Privacy policies, and sit comfortably within the Spam Act 2003 (Cth). Providers also need to consider whether any industry codes (eg. the ePayments Code) otherwise restrict how they may deliver disclosure.

Security issues

Where the disclosure contains personal financial information, such as in a periodic statement, providers will need to ensure that the document being accessed is adequately secured, such as by password protection.

Employer-sponsored funds

Trustees of a standard employer-sponsored fund may send disclosures to an electronic address provided by the member's employer, provided all of the following are satisfied:

  • the employer provided the electronic address to the trustee as part of providing contact details for the member in relation to membership of the superannuation fund
  • the trustee gives the member a reasonable opportunity to request an alternative method of receiving the relevant disclosure document
  • the member has not requested an alternative delivery address
  • the trustee has no reasonable grounds to believe that the address is not a current address, and has no reason to form that view within 14 days of sending the notice.

The provisions only apply with respect to default members rather than choice members.

Where a trustee has reason to believe that the electronic address provided by the employer is not current (eg. because the address is the member's work email address and the trustee is on notice that the member has ceased employment with the employer), it must within 14 days give the disclosure document to the member (in a manner consistent with the existing disclosure options-eg. by sending it to the member's last known address).

Unlike the "publish and notify" approach, trustees electing to adopt this option are required to send the relevant disclosure document to the nominated email address, rather than notify the member via electronic means that the disclosure document is available.

Each time something is sent to the nominated email address, members must be reminded about the option to have this disclosure document sent to an alternative address (either electronic or postal).

Whether the employer is actually permitted to provide the electronic address to the trustee will be a question of fact, in relation to which trustee will need to be satisfied.

Amendments to facilitate the use of electronic PDSs, FSGs and SOAs

ASIC Corporations (Removing Barriers to Electronic Disclosure) Instrument 2015/649 provides relief from three current requirements of the Corporations Act and Regulations that relate to the page length of shorter PDSs, the provision of copies of electronic PDSs on request, and the placement of titles on electronic forms of disclosure documents.

The instrument relieves providers of the need to:

  • maintain the mandated page length in a shorter PDS since this is not likely to apply to an innovative (eg interactive) PDS that is not able to be printed
  • give a hardcopy of the innovative PDS to a person on request (by allowing any current copy of the PDS in use for the product to be given- that is, a copy of the innovative PDS (which would be hard to reproduce in softcopy) need not be given)
  • ensure that the title of disclosure documents (eg. "Product Disclosure Statement", "Financial Services Guide" or "Statement of Advice") appears at or near the beginning of the document (by allowing it to appear in such places as the top of a webpage, be displayed upon the launch of a digital application or be spoken at the beginning of a video).

This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.

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