Leaner, More Flexible Disclosure John Myatt | Partner | January 2006
The Corporations (Amendment) Regulations (2005), which commenced on 20 December 20051, amends the Corporations Act and Regulations. It is designed to provide greater simplicity and flexibility in relation to the circumstances in which Financial Services Guides (“FSGs”) and Product Disclosure Statements (“PDSs”) are given. The amendments offer some relief in relation to the type of and extent of information level that must be contained in them. The amending regulations are some 70 pages in length and are divided into 11 amending schedules. Brief highlights of the amendments include:
Shorter FSGs Schedule 1 of the amending Regulations permits some reduction in the information regarding advisor remuneration that the FSG need contain. It also allows providers the option of only giving the information that is relevant to the client, rather than information about all the services that it is licensed to provide.
Fewer Occasions Where FSG’s Must Be Provided The provisions of section 941C of the Corporations Act 2001 (‘the Act”) which detail when an FSG is not required have been expanded by the addition of further sub-sections 1A and 7 A which deal with situations where the provider has previously provided a client with an FSG in accordance with the Act and where it is also the issuer of a recommended product and provides the client with a PDS. Schedule 7 of the amending Regulations also exempt secondary service providers from the requirement to provide an FSG in some circumstances if their intermediary provides the FSG or indicates to the client how to obtain an FSG.
Reduced Frequency of Statements of Advice The amending Regulations reduce the instances in which a Statement of Advice is required including (by amending section 946B of the Act) situations in which a client is given “further advice”.
Introduction of “Short-Form” PDSs Schedule 3 of the amending Regulations sets out a range of amendments to the Act which define a “Short Form PDS” and outline what it must contain (sections 1017 H and 1017I). The provisions do not apply to general insurance products.
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A Short - Form PDS is essentially a summary of the longer Product Disclosure Statement and must contain certain key aspects of the disclosures made in the full document, which are itemised in the new Section 1017 I. The full PDS must still be provided on request. The title “Short Form Product Disclosure Statement” must be used on or near the front cover of the document (section 1017J).
PDSs Not Required For Basic Deposit Products A new sub-section 1012D (7A) of the Act has been introduced under which, provided certain conditions are met, PDS requirements are removed for basic deposit products and other financial products such as facilities for making non-cash payments or traveler’s cheques (see Schedule 4 of the amending Regulations).
Reduction in the Length of Oral Disclosures The amending Regulations make some alterations to the requirements when providing oral disclosure in connection with product sales.
Other Amendments The amending Regulations include alterations to the definitions of retail client and wholesale client and to the definition of a professional investor, as well as providing certain exceptions from the Act for persons providing advice who are not in the jurisdiction. The amending Regulations also make other miscellaneous and clarifying amendments.
Endnotes The text of Corporations Act appearing on AustLI has not yet been updated with the amendments introduced by the new Regulations. The full text of the Corporations (Amendment) Regulations 2005 (No.5) containing its implementation Schedule can be found on www.fli.gov.au at http://www.frli.gov.au/ComLaw/Legislation/ LegislativeInstrument1.nsf/0/CE31E9FCF75EAC43CA2570DC00074892/$file/0511324A-051206EV.pdf 1
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For more information please contact: John Myatt Partner T: 02 8257 5740 john.myatt@turkslegal.com.au
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