Monday 17 July 2006 LAWFUEL – Law News Network -The Australian Secur…

Monday 17 July 2006 LAWFUEL – Law News Network -The Australian Securities and Investments Commission (ASIC) has released new information for superannuation trustees to ensure they meet their legal obligations to members regarding the reporting of material changes and significant events. An extension of ASIC’s review of disclosure practices following the introduction of choice legislation last July, QFS 163 I am a superannuation trustee. Do I need to notify members about member transfers without consent? is aimed at improving the clarity and timeliness of significant event reporting. ‘Any decision that fundamentally affects a member’s investment, including a decision to transfer a member’s benefits without their consent, is a material change or significant event that must be disclosed to that member,’ said ASIC’s Executive Director of Compliance, Ms Jennifer O’Donnell. ‘It is imperative members are advised of these decisions clearly, early, and in a manner which will come to their attention (eg. a personally addressed letter). Delayed or obscure notices significantly affect a member’s ability to make an informed decision about whether to exercise their right to exit the fund.’ Ms O’Donnell also warned communicating potential changes via product disclosure statements (PDSs) is insufficient. ‘The ongoing obligation to disclose material changes and significant events is an additional requirement to the PDS disclosure obligations. This is to ensure that members have clear information at the time that a decision affects them,’ she said. Ms O’Donnell said trustees should also be aware that it may be necessary to provide members with comparative information that helps them understand the nature and effect of the decision. For example, where fees change (including fee rebates), or insurance cover or cost is affected, the trustee needs to explain the differences. Trustees should also take care not to drip-feed information about particular changes or individual events without explaining the consequences of the changes or events as a whole. Currently, member benefits can be transferred without their consent in a number of ways including into a successor fund, eligible rollover fund, or another category within the same fund. Different terms may be used to describe different categories within a fund such as plans, divisions, or sections. A common source of member transfers is when a person changes jobs and decides to stay with their former employer’s default fund. Unless their new employer is also an employer sponsor of the fund, the member is likely to be transferred into the personal division of the fund which may have quite different fees to their old division. For further information contact: Jennifer O’Donnell Executive Director, Compliance Telephone: 02 9911 2123 Mobile: 0411 549 257 Emma Forehan ASIC Media Unit Telephone: 03 9280 3354 Mobile: 0409 702 310

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