ASIC updates Regulatory Guide 97: Disclosing fees & costs in PDSs & Periodic Statements

This article was provided to IMAP from ASIC

In November 2019, ASIC released the updated Regulatory Guide 97: Disclosing fees and costs in PDSs and Periodic Statements (RG 97). The updated guidance provides greater clarity on how superannuation and managed investment product issuers and platform operators should disclose fees and costs.

The update follows an external review of RG 97 commissioned by ASIC, including public consultation and consumer testing of the proposed changes. The modifications to legislative obligations described in RG 97 are made in ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070.

According to ASIC, the updated RG 97 will support the industry in the development of more transparent and useable fees and costs information.

While disclosure on its own is not sufficient to address potential harm to consumers, ASIC believes consistent and comparable disclosure helps consumers and financial advisers to better understand the fees and costs involved in financial products, compare products more easily, and make more informed assessments about whether a product is suitable for the consumer. 

The requirements for managed discretionary account (MDA) providers has not changed. Information about fees and costs in relation to MDA services must comply with Part 2 of Schedule 10 to the Corporations Regulations, as if the client were being offered a managed investment product.

MDA providers will notice a change in the presentation of fees and costs for managed investment schemes and superannuation funds.

Presentation of fees and costs

The updated RG 97 requires the following changes to the presentation of fees and costs disclosure in product disclosure statements (PDS) and periodic statements:

• regrouping of values in the renamed fees and costs summary to more clearly show fees and costs that are ongoing and those that are based on member activity;
  
  
• simplification of ongoing fees and costs into three groups: Administrative, Investment and Transaction;
  
  
• inclusion of a single ‘Cost of Product’ figure in a PDS; and
  
  
• simplification of how fees and costs are presented in periodic statements.

The guidance and associated legislative instrument have been drafted to make the regime more practical for the industry, and to promote compliance by issuers with their legal obligations.

The guidance has separate sections dealing with superannuation and managed investment products.

Modification of the legislation has been done by way of a legislative instrument that includes a consolidated version of Schedule 10 of the Corporations Regulations 2001.

The updated RG 97 clarifies the cost categories that need to be counted in the disclosed amounts.

Product issuers no longer need to include some categories that are hard to accurately measure consistently and have limited value for users in the fees and costs summary (i.e. property operating costs, borrowing costs, implicit market costs);

Costs met from reserves for superannuation are required to be included in the calculation of fees and costs disclosed in a PDS; and

Fees and costs in PDSs are required to be disclosed gross of any tax benefit being passed on to the member.

The new disclosure requirements in updated RG 97 will apply to all PDSs dated on or after 30 September 2020 with no early opt-in available.

Periodic and exit statements with reporting periods commencing from 1 July 2021 must comply with the new requirements.

However, where a fund is ready, an early opt-in is available for reporting periods commencing from 1 July 2020.

1. Update your existing system builds to ensure that you will be able to meet the new requirements for fees and costs disclosure in PDSs and periodic statements.
   
   
2. Review your calculation methodologies, due diligence processes and governance arrangements for collecting and compiling fees and costs information.
   
   
3. Consider your arrangements with service providers, people offering investment opportunities and interposed vehicles, and how the data is necessary for your products.

ASIC is holding industry roundtables and updating the Moneysmart website to assist the industry and consumer engagement with the updated requirements.

ASIC is also making minor technical refinements to the legislative instrument to confirm its policy positions after issues were raised by the industry.

For further information, click here.

ASIC will continue to monitor fees and costs disclosure by superannuation and managed investment scheme providers. We will consider taking action where we find misconduct.

ASIC is also commencing work on fees and costs disclosure in relation to platforms. We will engage with the industry throughout this process and publicly consult on any proposals for amendment to the fees and costs regime.

Questions about the new requirements can be sent to feeandcostdisclosure@asic.gov.au