On 20 December 2005, the Corporations Amendment Regulations 2005 (No. 5) (the Regulations) came into effect. As previously reported, the amendments deal with refinements in a range of areas, including the following:
Financial services guides (FSGs).
Statements of advice.
Short form product disclosure statements (PDSs).
General advice (including when certain general advice will be excluded from the definition of financial product advice).
Experts’ Reports And FSGs
In this article, we will be specifically looking at the changes to the requirement for experts to provide an FSG and the fact the new regulations provide a welcome surprise.
A brief recap—some experts who provided a report in a PDS needed to hold an Australian financial services (AFS) licence to do this. Whilst perhaps not very common these days, an investigating accountant signing off on forecasts is an example where this situation arose. As a consequence of needing an AFS licence, those experts affected needed to provide an FSG to every retail investor who received the offer document. ASIC relief then exempted the experts from having to do this, provided the expert’s FSG appeared within the report in the PDS.
The Refinement Regulations proposed relaxing these requirements by removing the need for an FSG to be included in the PDS. However, the consultation draft provided that in order for this exemption to apply, the expert’s AFS licence and that of the issuer of the PDS had to cover the same services, and the issuer of the PDS had to accept responsibility for providing the financial service provided by the expert. Accordingly, if different authorisations appeared on the respective licences, even if only minor, then the exemption would not apply and the FSG would still need to be included.
The Regulations enacted on 20 December 2005 go further and state experts providing reports for inclusion in a PDS or short form PDSs are no longer required to provide an FSG with their report, providing the following conditions are complied with:
The issuer of the PDS holds an AFS licence or is an authorised representative of an AFS licensee. There is no requirement for the AFS licence to authorise the provision of advice or any other financial services on the expert’s licence, as was the proposal in the consultation draft.
The expert and the issuer of the PDS enter into an issuer agreement under which the issuer agrees to either—
provide the expert’s FSG to investors, or
inform investors how to obtain a copy of the expert’s FSG.
This amendment will allow product providers to simply include a reference in the PDS or a link to an internet site that contains a copy of the expert’s FSG.
These new provisions provide benefits to licensed product issuers, however, those without an AFS licence will not be able to rely on these provisions. Such product issuers will still be required to include the expert’s FSG in their disclosure document.
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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