The Rudd Government welcomed new regulations prescribing short and simple product disclosure documents for margin loans, superannuation and simple managed investment schemes that commenced yesterday.
Product disclosure documents will be more accessible for consumers and less costly for business to produce by reducing their length to just a few pages.
Minister Tanner said: "Cutting down product disclosure documents from over one hundred pages to eight pages and making it easier for businesses to use alternative methods such as the internet for disclosing large amounts of detailed product information will also reduce costs for industry."
These reforms were undertaken through a Better Regulation Ministerial Partnership between the Minister for Financial Services, Superannuation and Corporate Law and the Minister for Finance and Deregulation. These Partnerships form a key part of the Rudd Government's better regulation agenda and have proved effective in ensuring a disciplined and coordinated approach to delivering regulatory reform across government.
Minister Tanner said the product disclosure statement reform marks the completion of the Government's second Better Regulation Ministerial Partnership.
"This furthers the Government's ongoing commitment to remove unnecessary or poorly designed regulation to reduce business costs and support Australia's long-term productivity growth."
Minister Bowen said: "Providing short and readable product disclosure documents will make it much more likely that investors will read this information and consequently make better investment decisions."
"These changes complement the Government's Future of Financial Advice reforms that are designed to improve the quality of financial advice that has been provided to Australian investors."
In developing shorter product disclosure documents the Government has consulted extensively through a number of public information sessions, a margin lending industry consultation group and an Advisory Panel of key financial services industry and consumer representatives. Consumer testing sessions were undertaken as part of the project.
The draft regulations were also released for public consultation, following which significant numbers of submissions were received that informed the final regulations.
The regulations and related explanatory material are available on www.comlaw.gov.au
23 June 2010
Attachment
Further Information on Product Disclosure Statements
The regulations prescribe product disclosure statements (PDSs) not exceeding eight pages in length for superannuation funds and simple managed investment schemes. Margin loan PDSs are required to be no longer than four pages.
The regulations prescribe the section headings and contents of the shorter PDSs, to ensure that consumers are provided with the key information they need to make an investment decision. Additional information can also be included provided the prescribed length is not exceeded. The prescribed content covers key information such as product features and benefits, risks, taxation, investment options and fees and costs. For margin loans, certain additional information specific to these products is prescribed, including an explanation of what a margin call is and how investors can manage the risk and consequences of receiving a margin call.
The regulations also provide for other material to be located outside the PDS document itself, with a reference included in the PDS telling readers where they can find this information. This is an important mechanism allowing disclosure documents to be kept short and concise, while providing full information elsewhere for those consumers who want to read it. Importantly, the material referred to in this way is deemed to be part of the PDS and the full range of liability and enforcement provisions of the law apply to it. This ensures that consumers continue to be effectively protected against any defective or misleading information included in disclosure documents and associated material.
The provisions for superannuation and managed investment scheme PDSs provide for a transitional period of 24 months for implementation. After the initial 12 months, businesses will have to comply with the new regime if they amend an existing PDS or offer new products requiring a new PDS. After 24 months, all PDSs will need to comply with the new regime. The margin loan PDS provisions apply from 1 January 2011, coinciding with the date when margin loans come under Commonwealth regulation.
Having fulfilled its key mandates, the Financial Services Working Group will cease operation on 30 June 2010. However, Treasury and ASIC along with industry will continue work on simplifying disclosure documents as part of their ongoing duties. Such work will include making improvements to the Financial Services Guide, which will now be undertaken as part of the Future of Financial Advice reforms announced by Mr Bowen on 26 April 2010 in response to the Parliamentary Joint Committee report on Financial Products and Services. ASIC is also working on a separate project with industry to improve Statements of Advice.