Friday 8 June 2007 LAWFUEL – The Law Newswire – The Australian Secur…

Friday 8 June 2007 LAWFUEL – The Law Newswire – The Australian Securities and Investments Commission (ASIC) has reissued its Policy Statement 184 Superannuation: Delivery of product disclosure strategies (PS 184) which deals with how superannuation trustees (trustees) can comply with section 1012IA of the Corporations Act (the Act) and deliver product disclosure information about investment strategies to members. PS 184 was originally issued in August 2006.

ASIC has reissued PS 184 to take into account practical concerns raised by industry about when s1012IA applies and how trustees can comply with the policy with as much flexibility as possible. After extensive and ongoing consultation with industry ASIC considers that the extra compliance option and clarifications in the reissued policy will make it easier for trustees to comply with s1012IA and provide disclosure about accessible financial products included in investment strategies offered to members.

The main refinement to PS 184 allows a trustee to include information about an investment strategy with a specifically identified financial product to be contained in the same Product Disclosure Statement (PDS) for the superannuation product itself.

This means that trustees now have three options for providing disclosure about investment strategies with specifically identified financial products (accessible financial products) to members, by: • preparing the information themselves in an accessible product PDS for one or more accessible financial products (Option 1), or • preparing the information themselves in an integrated PDS that combines information about the superannuation product with information about one or more accessible financial products in the one PDS (Option 2); or • giving a member an accessible product PDS prepared by the issuer of the particular accessible financial product (Option 3). ASIC has also adjusted the transition period to comply with s1012IA. All new trustees will need to comply with the new transition period rules from 1 July 2007.

However, all current trustees will need to comply when they next issue a new complete PDS after 1 July 2007 for the superannuation product or 1 July 2008, whichever is the earlier. The amended transition period will allow trustees to comply with s1012IA and take into account the compliance options offered. The attachment provides more information about the refinements made to our policy. A copy of the reissued PS 184, a concordance of the changes between the original and the reissued [PS 184] and a copy of class order [CO 07/386] is available from the ASIC website at www.asic.gov.au

For further information contact: Michael van Maanen ASIC Media Unit Telephone: 02 9911 2658 Mobile: 0412 500 351 Background The changes to our policy There are three main changes to PS 184: 1. We have added a new disclosure relief option—the integrated PDS option; 2. We have removed the condition requiring the trustee to include information in the superannuation entity’s PDS about any differences between the rights of a person who has acquired an accessible financial product directly as a retail client and the rights of a person where the same product has been acquired for a member through the superannuation fund; and 3.

We have changed the test for determining when additional disclosure information must be given to a member when a trustee is making additional acquisitions of an accessible financial product for that member, although it still depends on a materially adverse change. The integrated PDS option A third disclosure relief option has been added to PS 184 (i.e. the integrated PDS option).

This option has been numbered Option 2, and the previous Option 2 (i.e. the issuer’s accessible product PDS option) is now Option 3. Option 2 is explained in a new section, Section C, of the policy and in a new schedule, Schedule 3, to the policy. In general terms, the integrated PDS option allows a trustee to prepare disclosure information about an accessible financial product and include that information in the same PDS as information about the superannuation product. Under this option, the trustee is responsible for the content of the integrated PDS. Differences between rights: a direct acquisition compared with a regulated acquisition Previously, it was a condition of the relief provided in both Option 1 (i.e. the trustee’s accessible product PDS option) and Option 2 (i.e. the issuer’s accessible product PDS option—now Option 3) that the superannuation entity’s PDS included the information that a person would reasonably require as a retail client to understand differences between the rights of a person who has made an equivalent direct acquisition of an accessible financial product as a retail client and the rights of a person where the same product has been acquired for a member through the superannuation fund. We have omitted this condition.

Instead, as part of compliance with the general PDS requirements, we encourage trustees to consider whether they need to include a brief explanation in their superannuation entity’s PDS of any differences there may be between direct acquisition of accessible financial products and acquisition of accessible financial products through the superannuation fund. Additional disclosure for additional acquisitions We have changed the test for when updated disclosure must be given to members who make additional acquisitions of an accessible financial product on an ongoing basis from ‘defective’ (a concept linked to PDSs) to ‘materially adverse’ (a concept linked more closely with the ongoing disclosure required under s1017B and, therefore, not PDS-dependent).

We made this change to deal with the concern that not all accessible financial products were ‘open’ to new instructions and thus would not necessarily have a current PDS. Updated disclosure for an ‘open’ accessible financial product must be given by providing a copy of the current PDS. Updated disclosure for a ‘closed’ accessible financial product may be given by providing information in a form other than in a PDS or by giving a current PDS (if there is one).

Other amendments We also have made amendments to: • reflect the changed commencement arrangements; • clarify that the exceptions in s1012D may apply to the obligation under s1012IA to give a member a PDS for an accessible financial product; • clarify who may deliver a PDS (ie. that the trustee may arrange for a third party to do so); • clarify the form in which disclosure information may be provided (ie. ‘split’ between electronic and hard copy form) depending on how a member has decided to receive the information; • clarify when a PDS for the superannuation entity must be given; • provide additional guidance on preparing and maintaining product disclosure information about accessible products (eg. what arrangements might be desirable for trustees with product issuers); • clarify that the relief for additional acquisitions set out in Section E of [PS 184] is in addition to the disclosure relief options and that a trustee may rely on the additional acquisitions relief even if the trustee chooses not to adopt any of the disclosure relief options; • clarify the description in Schedule 1 about how s1012IA applies to life insurance products; and • reflect minor and technical changes to language. The concordance sets out in detail where these changes have been made.

Transitional period Section 1012IA will apply to a trustee from the time that the trustee prepares a new complete PDS for the superannuation product (i.e. a superannuation entity PDS or an integrated PDS) where that PDS is required to be dated after 1 July 2007: see [CO 03/1097]. Generally, a PDS is required by s1013G to be dated on the date the PDS was prepared or its preparation was completed. Section 1012IA will not apply to a complete PDS dated on or before 1 July 2007, even if it is given to a person after 1 July 2007.

It will also not apply to a supplementary PDS for a PDS dated on or before 1 July 2007, even if the supplementary PDS is prepared after 1 July 2007 (but before 1 July 2008). Section 1012IA will apply to all trustees no later than 1 July 2008. Section 1012IA applies to a trustee that offers a choice of investment strategies to its members where any of those strategies include specific financial products which we call accessible financial products that will be acquired under the member’s choice of strategy.

The trustee must give a member a product disclosure statement (PDS) about any accessible financial product included in an investment strategy before acquiring the product as part of implementing the strategy. The original PS 184 provided two options for trustees to meet the obligation to provide the relevant information in the PDS for the accessible financial products to the members. We modified some of the relevant disclosure obligations in Part 7.9 to provide two options for providing information about accessible financial products to members. Either the trustee prepares the accessible product PDS or the trustee uses a PDS prepared by the issuer of the

accessible financial product. Both options allow trustees to include less information about accessible financial products in the superannuation entity’s PDS, on the basis that more precise information will be provided in an accessible product PDS. The original PS 184 also dealt with relief from providing a PDS where the member acquired additional financial products of the same kind that the member had already acquired.

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