On 21 December 2009, the Hon Chris Bowen MP released, for public
comment, draft Corporations Amendment Regulations 2009
(draft Regulations) and an example PDS for
superannuation funds and managed investment schemes. The draft
Regulations and example PDS were the products of a Financial
Services Working Group charged with examining, among other things,
financial services disclosure.
Unlike a superannuation PDS produced under the current regime
which, subject to the prescriptive content requirements, remains
open to tailoring for a particular superannuation fund (or interest
in the fund), the proposed regime aims to produce a 'one size
fits all' short-form superannuation PDS.
While a number of aspects of the current regime will be
retained, including the issuer bearing responsibility for the PDS
and the requirement for content to be up-to-date and 'clear,
concise and effective', much is up for change.
So, What May Be Changing?
As a starting point, the draft Regulations prescribe length,
font size, content and incorporation by reference rules. This is
summarised in the table below:
6 pages (if printed on A4) / 12 pages (if printed
on A5) / 18 pages (if printed on DL)
8 point - for issuer's name, address, ABN/ACN (as
applicable) and AFSL
9 point - all other text
Inclusion of the following sections, which must be numbered and
titled as follows:
About [name of superannuation entity]
How super works
Benefits of super
Risks of investing in super
How we invest your money
Fees and costs
How super is taxed
Insurance in your super
How to open an account
If insurance cover is not offered, section 9 can be
presented as section 8 and references to section 9 in the
Regulations are to be read as references to section 8.
Importantly, the Regulations prescribe the specific
content for each key section, much of which tends to be educational
rather than tailored to the particular product.
The PDS must also:
include a table of contents
state the telephone number of the 'provider' to allow a
person to request a copy of:
a matter in writing that is applied, adopted or incorporated by
advise (at or near the beginning of the PDS and in a prominent
position and style) that:
the PDS is a summary of key information and contains reference
to important information;
the person should consider this information before making a
decision to invest in the product;
the information is general information only and does not take
into account the personal financial situation or needs of a person;
the person should obtain financial advice tailored to the
person's personal circumstances.
According to the Regulations, additional information for each
section (i.e. information which is not prescribed) may be provided
"by applying, adopting or incorporating a matter in
If a PDS "applies, adopts or incorporates a matter":
the matter must be:
clearly distinguishable from other matters that are not
applied, adopted or incorporated;
publicly available in a document other than
the "responsible person" must:
identify the matter by including a precise description of the
matter in the PDS;
ensure the reference to the matter is distinguished from other
identify each version of the matter (by including an
appropriate date) so that a person can identify the relevant
version to the superannuation product at a given time;
state the date on which the version was prepared (in a
prominent position at or near the front of the version); and
ensure that a person relying on a PDS has access to a matter
(or version of a matter) "reasonably easily and reasonably
Other proposed changes include:
abolition of combined PDS/Financial Services Guide (FSG)
cessation of SPDS and multiple part PDS
retention & record keeping - A PDS and matters incorporated
by reference need to be retained for a minimum of 7 years from the
date the PDS was issued. If a matter incorporated by reference is
changed, this needs to be retained for 7 years from the date of
different fees and costs disclosure - significantly, this
includes a simplified version of the current enhanced fee
disclosure requirements, a requirement to include only
'main' fees (thereby excluding 'minor fees' of less
than $10) and a requirement to include a maximum fee level, with a
statement that the member may actually pay less
A number of common issues have emerged from the industry
submissions regarding the proposed Regulations. These include
the greatly reduced capacity to inform consumers under the
proposed structure, notwithstanding the non-reduction of the
disclosure obligations of the product issuer;
the prominence of prescribed 'educational' content in
lieu of specific product information;
the restricted length of the PDS;
the practical and cost implications arising from the cessation
of the SPDS, which is currently used to update information or
liability issues arising from the very restricted disclosure on
key features, especially in relation to fees and insurance;
the rigidness of the draft Regulations, which do not readily
cater for defined benefit and pension interests;
the ability of Trustees to record and retain the correct
versions of matters incorporated by reference; and
the inconsistent use and/or lack of clarity regarding
Where To Now?
Given the closing day for submissions has now passed, it will be
interesting to see how the Government responds to industry feedback
and whether any material changes are made to the draft Regulations
and example PDS.
Much remains uncertain at this point - when the Regulations will
commence, their ultimate form and the applicable transition period
(at minimum, industry appears to anticipate 12 months).
If you are considering replacing your PDS, you might wish to
consider whether the nature of the amendments can be documented in
a Supplementary Product Disclosure Statement. However, if that is
not feasible, by all means proceed with a replacement PDS but bear
in mind that significant changes to the PDS as we know it are
likely to be implemented, one way or another.
Watch this space.
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