Australia: Incorporation By Reference - Giving Clients What They Want

Last Updated: 3 September 2007
Article by Richard Batten

A survey conducted in June this year, by Investment Trends Pty Limited, concluded that over 80% of clients would find shorter disclosure documents more appealing.1 Recent amendments to the Corporations Regulations 2001 may give your clients what they want.

On 23 August 2007, the Hon Chris Pearce MP, the Parliamentary Secretary to the Treasurer, announced the Corporations Amendment Regulations 2007 (No.10). Amongst other amendments, the regulations allow for ‘incorporation by reference’ in Statements of Advice (SOA) and Product Disclosure Statements (PDS).

The regulations came into force on 25 August 2007 and address the changes outlined in the Corporate and Financial Services Regulation Review Consultation Paper. The regulations differ slightly from the draft regulations, published on 26 March 2007.

Product Disclosure Statements

Statements and information can be incorporated in a PDS, if the statement or information is in writing and publicly available (other than a short form PDS) and the PDS:

  • refers to the statement or information;
  • identifies the document that contains the statement or information and where it can be located;
  • provides sufficient details to enable the client to decide whether to obtain or read the statement or information; and
  • states that a copy of the statement or information may be obtained on request at no charge.

Under the draft regulations, a PDS could also incorporate statements or information by reference to a website. This alternative is not expressly stated in the regulations. However, the Explanatory Statement does recognise that a PDS may refer to information in a website.

There is however, core information that must be included in the PDS, if certain statements or information are incorporated by reference (this requirement was not in the draft regulations), including:

  • a summary of the purpose and key features of the product;
  • a summary description of the key risks of the product;
  • a statement setting out the name and contact details of the issuer of the product and, if the statement is a sale statement, the seller;
  • the fee disclosure regulation requirements, apart from the additional explanation section;
  • information about the dispute resolution system that covers complaints by holders of the product and how that system may be accessed; and
  • information about any cooling-off regime that applies in respect of acquisitions of the product.

Statements Of Advice

Under the regulations, statements and information can be incorporated in an SOA if the SOA:

  • refers to the statement or information;
  • identifies the document that contains the statement or information;
  • provides sufficient details to enable the client to decide whether to obtain or read the statement or information; and
  • states that a copy of the statement or information may be obtained on request at no charge.

In addition, the person providing the SOA (providing entity) must supply the client with the relevant document, or part of the document, unless it has previously been provided to the client. Where the providing entity is an authorised representative of an Australian Financial Services (AFS) licensee, the requirement will be complied with, where either an authorised representative of the same AFS licensee or the AFS licensee itself provides, or has provided, the relevant document or part of the document to the client (this provision was not in the draft regulations).

In relation to both PDSs and SOAs, where statements or information are incorporated by reference, the document containing those statements or information must be retained by the providing entity for seven years after the date of the PDS (for a PDS, unless it is required to be lodged with ASIC) or the day on which it is provided to a client (for an SOA).

Minter Ellison has always been a proponent of shorter and more effective disclosure and congratulates IFSA for its success in obtaining this significant change to the disclosure requirements.

Industry will need to consider how best to take advantage of the opportunity presented by this reform. We anticipate that there will be increased pressure over time to reduce the length of documents. Of course, it will also be important to ensure that shorter documents do not mean lower standards of disclosure and we can expect this to be a major focus for ASIC and consumer groups in the short to medium term.

Dollar Disclosure Provisions For General Insurance Products

The regulations also prescribe dollar disclosure requirements for PDSs for general insurance products prepared on and from 1 July 2008. If information in the PDS is required to be stated as an amount in dollars and the amount can only be determined after the responsible person assesses the risk of the insured or after the insured has nominated desired levels of insurance cover, then the responsible person may either:

  • state 'an amount in dollars' – however, it is unclear what this means in circumstances where the dollar amount cannot in fact be ascertained; or
  • give the following documents to the insured:

    • a document containing the information as soon as practicable (but not later than five business days after the product is issued) – presumably this will be the policy schedule; and
    • a statement in the PDS that sets out the information, either as a range of amounts in dollars, a percentage of a matter that is mentioned in the statement, or as a description.

Dollar disclosure relief continues to be available for general insurance PDSs prepared before 30 June 2008. Dollar disclosure relief continues to be available for general insurance PDSs prepared before 30 June 2008.2

Actuarial Services Exemption

The regulations also provide an exemption from the requirement to hold an AFS licensee to the provision of certain actuarial services which will replace Class Order 03/1096 due to expire on 31 August 2007.



See the findings outlined in 2007 Superannuation Research: Effective Disclosure, a survey conducted by Investment Trends Pty Limited in June 2007, in relation to clients who had recently switched their superannuation fund or had considered doing so.


Under Regulation 7.9.15A (2) in conjunction with Class Order 05/683, as modified by Class Order 07/123.

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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