ASIC has issued its policy on how superannuation trustees (trustees) can deliver product disclosure information about investment strategies to members.

Policy Statement 184 Superannuation: Delivery of product disclosure strategies [PS 184] is relevant to each trustee that:

• allows members to instruct the trustee to follow a particular investment strategy, and
• offers at least some investment strategies to members that result in the members’ money being invested into a specific accessible financial product (e.g. a named managed investment scheme).

Typically these kinds of trustees operate superannuation master trusts.

The policy deals with product disclosure about investment strategy choice within a superannuation fund, it does not deal with product disclosure about choice of superannuation fund.

‘The policy builds on the options under the law for trustees on giving information about particular financial products that form part of an investment strategy. The relief also reflects the intent of the law that members are provided with adequate information on which to base their decision to choose an investment strategy from the available strategies’, said ASIC’s Director of Policy and Research Mr Mark Adams.

The policy allows a trustee to deliver the required information about investment strategies with specific accessible financial products in two ways, by either:

• preparing the information themselves in a product disclosure statement (PDS) for a particular accessible financial product (under the law, without relief, the trustee is not permitted to prepare this PDS as it is not the product issuer), or
• giving a member a PDS prepared by the issuer of the particular accessible financial product (as provided for in the law without relief).

We have also given relief to limit the amount of information about particular financial products that must be included in the PDS for the superannuation entity prepared by the trustee. This relief applies whatever way the trustee chooses to give members a PDS about a particular accessible financial product.

The relief relates to both the s1012IA disclosure obligation and to the general disclosure obligations in s1013D and s1013E of the Corporations Act.

‘The superannuation industry has an extended deadline until 30 June 2007 to comply with their s1012IA obligation under Class Order [CO 03/1097] Deferral of s1012IA. This deferred commencement will allow trustees to plan to comply with the law as affected by our final policy. Our policy will commence on 1 July 2007’, Mr Adams said.

‘Our final policy takes into account comments received on our earlier relief proposals in the policy proposal paper, entitled Superannuation: Delivery of product disclosure and investment choice issued in November 2004. In particular, we have made some changes in our proposals to more closely fit with sound existing industry practices. ASIC thanks all those who provided feedback and made submissions on the proposals’, he said.

The following background provides more information about our policy.

Background

The new requirement

The Financial Services Reform Act 2001 (FSR Act) introduced a new requirement to the Corporations Act 2001 (the Act) for providers of certain types of custodial arrangements. In general terms, if a member of a superannuation fund can instruct the trustee to acquire a particular financial product (an accessible financial product) for their benefit or the benefit of a person they nominate, the trustee must provide the member with a product disclosure statement (PDS) for that financial product before it is acquired: see s1012IA.

Before the FSR Act, similar requirements applied to investor directed portfolio services (IDPS) (e.g. wrap accounts) and IDPS-like registered managed investment schemes (e.g. master trusts): see Policy Statement 148 Investor directed portfolio services [[PS 148]]. However, these requirements did not apply to the superannuation industry, although there were, and continue to be, specific disclosure requirements under the Superannuation Industry (Supervision) Act 1993 and regulations about the investment strategies that members of a superannuation entity can select. The s1012IA requirements apply to superannuation entities from 1 July 2007: see ASIC Class Order [CO 03/1097] and [IR 06/22] issued on 23 June 2006. The delayed commencement will give trustees of superannuation entities time to review their current practices and decide how they want to deliver the product disclosure information required under s1012IA (by complying with our relief or s1012IA without modification).

Since the commencement of the FSR Act, the s1012IA requirements have applied to IDPS and IDPS-like registered managed investment schemes. Our policy in [PS 148] has been adjusted to accommodate the application of s1012IA: see Class Order [CO 02/296]IDPS-like services provided through a registered managed investment scheme.

How does the new requirement apply to superannuation entities?

To meet its obligations under s1012IA (without relief), a trustee of a superannuation entity must:

1. work out which investment strategies a member can choose from that involve the acquisition of accessible financial products (i.e. strategies to which s1012IA applies)
2. provide the member with a PDS for an accessible financial product before the member selects an investment strategy that includes the acquisition of that product (or that kind of product), if a PDS would have been required for the member to acquire the product directly (see s1012IA together with reg 7.9.14A). This PDS needs to be prepared by the issuer of the accessible financial product, and
3. provide a further PDS each time an acquisition is made in accordance with the member’s investment strategy selection, except where a further PDS would not have been required for the additional acquisition if the member acquired the product directly (e.g. s1012D).

Our policy

Our policy offers two ways by which the trustee can deliver information about available investment strategies. The two ways contained in the policy statement are:

1. to permit the trustee of a superannuation fund to prepare the information in a PDS about an accessible financial product that is given to members instead of using the product issuer’s PDS (the trustee’s accessible product PDS option) (see Section B of [PS 184]), and
2. to continue to allow the trustee (as set out in the current law) to give to members the PDS about an accessible financial product that is prepared by the issuer of the accessible financial product (the issuer’s accessible product PDS option) (see Section C of [PS 184]).

Whatever way a trustee chooses to give a PDS about an accessible financial product we have also granted relief to limit the information about accessible financial products that must also be given in the superannuation fund’s PDS.

Note: Without relief, information about accessible financial products must be provided in full both:

1. in a PDS for the product itself (e.g. the underlying product issuer’s PDS), and
2. as part of the information about the available investment strategies in the superannuation entity’s PDS,

resulting in substantial overlap between the information provided in the product-specific PDS and in the superannuation entity’s PDS.

We also provide relief to limit the obligation to repeatedly provide the same information for additional contributions to an investment strategy that the member has previously selected (see Section D of [PS 184]).

Schedule 1 gives examples of when s1012IA will and will not apply.

Schedule 2 explains how to decide which relief option to use.

Schedule 3 explains how the related disclosure provisions in the Superannuation Industry (Supervision) Act 1993 applies.

What disclosures are trustees providing in the meantime?

Currently, trustees are complying with general product disclosure obligations in s1013D and 1013E of the Act. Typically, trustees are complying in two ways that are substantially similar to the options contemplated under our final policy on s1012IA of the Act. ASIC’s policy will provide greater certainty for trustees as they adjust their current practices to comply with the intent of s1012IA. Based on our consultation with industry we expect these adjustments to be minor.

End of release

Download:

• Policy Statement 184 Superannuation: Delivery of product disclosure for investment strategies
• Class Order [CO 06/636] Superannuation: Delivery of product disclosure for investment strategies
• Class Order [CO 03/1097] Deferral of s1012IA