• It is in writing and is publicly available (other than in the PDS or a short-form PDS) and the PDS:

• Specifically refers to the statement/information;
• Provides adequate particulars so that investors or prospective investors (“investors”) can identify the document (or the relevant portion) that contains the statement/information and can locate it; and
• Notifies the investor that they may obtain a copy of the statement/information on request at no charge (where requested, the copy must be provided as soon as practicable).

Nonetheless, some essential information set out hereunder must be directly included in the PDS (i.e. cannot be incorporated by reference):

• A summary of the purpose, significant features and risks of the product;
• The name and contact details of the product issuer and seller (if it is a sale statement);
• The enhanced fee disclosure requirements and the Consumer Advisory Warning in Part 2 of Schedule 10 of the Corporations Regulations (however some portions of the supplementary explanation of fees and costs in Division 4 are not deemed to be essential);
• Information about the dispute resolution procedures for complaints and how it may be accessed by investors; and
• Information about any cooling-off regime that applies to the acquisitions of the financial product.

Where statements/information are incorporated by reference in a PDS, the auxiliary statements or information are not required to be lodged with ASIC unless the PDS is required to be lodged. However, the supplementary documents must be retained for seven years from the date of the PDS. (If the PDS is required to be lodged with ASIC, the relevant document must also be lodged with ASIC.)

Statement of Advice

A statement or information can be incorporated by reference in a SOA in equivalent situations to a PDS.

However, the product issuer of the SOA, must supply investors with the document (or relevant portion), unless it has previously been given to the investor.  Where the providing entity is an authorised representative of an Australian Financial Services (AFS) licensee, the entity is not obligated to provide the auxiliary document, providing another authorised representative of the AFS licensee or the licensee has already done so.

SOA must also be retained for seven years and the document (or portion thereof) referred to in the SOA must also be retained for seven years after the date of the SOA.

Dollar disclosure provisions for general insurance products

The complications experienced by the insurance industry as a result of the dollar disclosure requirements were recognised by the regulations that permit general insurers providing a PDS prepared on or after 1 July 2008 for a general insurance product, to only comply with the modified dollar disclosure requirements. Resultantly:

• If information must be stated in dollars and the precise amount can only be established after the responsible person assesses the risk of the insured or after the insured has elected the level of insurance cover, then the responsible person is permitted to provide a document containing the information as soon as practicable (providing it is not provided later than five business days after the general insurance product is issued) and;
• A statement in the PDS is included that sets out the information by providing it as a range of amounts in dollars, a percentage of a matter mentioned in the statement, or a description.

The transitional period for complying with these new requirements ends on 30 June 2008. (The current class order relief continues to be available during the transitional period). *

* IR 07-11 ASIC Extends Disclosure Relief for General Insurance Products: CO 05/638: CO056383.

Licensing relief for actuaries

Some actuaries have previously raised concerns that the existing categories of exemption from licensing did not necessarily apply to all aspects of their ordinary business.  They will be pleased that the amendment clarifies that actuaries who ordinarily provide financial product advice to wholesale clients in the normal course of their business, are not required to hold an AFS licence.

Unresolved Issues

The previous Federal Government had requested feedback on a number of proposals that were included in draft regulations but which were not included in the new regulations nor were they resolved before the election. These are outlined below:

Financial Services Guides (FSG)

• Where a client categorically rejects a product or financial services advice there would be no requirement to give the client an SOA or Financial Services Guides (FSG).

• Pursuant to some restrictions, an FSG could be standardised to reflect industry criterion of AFS Licensees, banking-owned licensees and individuals that are sub-authorised by authorised representatives.

Superannuation

• Providing a Superannuation trustee administers one fund with assets of $10 million and administers more than one fund, the net value of the funds could be aggregated for the purpose of treating the trustee as a wholesale client in relation to financial services advice regarding a superannuation product.  

• Employers operating businesses other than small businesses could be considered wholesale clients when provided with financial services relating to superannuation products.

Other Products

• Oral financial services disclosure requirements associated with financial products described in a PDS, FSGs or SOAs could be reduced for financial products with a cooling-off period.

• Secondary financial service providers could be relieved from obligations held to retail clients in prescribed circumstances where intermediaries would be obligated to accept responsibility for the financial services provided.

• A provider of sickness and accident insurance or a provider of life risk insurance could address an investor as wholesale where cover is part of a package with workers’ compensation insurance being offered.

• Foreign financial services providers who act as trustee of an Australian financial product where all investors of the product are wholesale, may no longer have to obtain an AFS Licence if the Australian product issuer holds an AFS licence.