ASIC Information Sheet 99 (I.S 99) was released on 8 February
2010. I.S 99 explains how the type of Australian Financial Services
Licence (AFSL) authorisation a CRA holds may now determine when
ratings may be disclosed.
I.S 99 follows from
Consultation Paper 117 ASIC released in September 2009, which
called for submissions to consider whether or not to withdraw class
order relief allowing issuers to cite credit ratings in a
disclosure document or Product Disclosure Statement (PDS) without
the consent of the CRA.
In accordance with s716(2) and 1013K of the Corporations Act, an
issuer can only cite a rating in a retail prospectus or PDS if the
CRA has provided consent to its use. I.S 99 explains that the form
and context of a citation must be specifically consented to by the
CRA and that all previous broader relief is withdrawn.
Accordingly, as Standard & Poor's (Australia) Pty
Limited, Moody's Investors Service Pty Limited and Fitch
Australia Pty Limited each hold an AFSL with wholesale
authorisation only, they are precluded from consenting to
issuers using their ratings in:
"any manner that could reasonably be regarded as being
intended to influence a retail client in making a decision in
relation to a particular product or class of financial
The practical effect is that, given s716(2) and 1013K, issuers
will have to remove ratings from their disclosure documents and
Although there is arguably uncertaintly in respect of mere
'brand marketing' and prior general consent, the intention
in I.S 99 is reasonably clear; going forward, as required by law
and, in any event, by 30 April 2010 all issuers should have
reviewed and amended their documents (including PDSs) in accordance
with the requisite consent requirements.
What this means for general insurers
If you refer to a credit rating in your PDSs, time is limited to
remove such references or to lobby your CRA to obtain retail
authorisation and consent to disclosure in the specific context of
your PDSs. If CRA's are unable to obtain a retail
authorisation, one might query the benefit of receiving a rating if
it is unable to be disclosed.
PDSs in respect of products already issued should not require
amendment (i.e. no supplementary PDS required) as the decision
whether to acquire the financial product has already been made.
Recent proposed changes in the Corporations Amendment
Regulations 2010 (see gadens lawyers January 2010
here) could, if passed, also be addressed in conjunction with
the removal of credit rating references required by 30
This part will cover the legal position in relation to promotional materials and misleading and deceptive conduct.
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