Short-Form PDSs – What Trustees need to know about going short
The Corporation Amendment Regulations 2010 (No. 5) (the Amendments) amend the Corporations Regulations 2001 to provide for substantially shorter and simpler product disclosure statements (PDSs) for managed investment schemes, margin loans and superannuation products.
The Amendments prescribe the section headings and contents to be included in superannuation product PDSs and also prescribe a maximum length for these PDSs.
When will Trustees be required to provide a short-form PDS?
The Amendments commenced on 22 June 2010, with an initial transition period of 12 months from that date until 22 June 2011.
From 22 June 2011 the short-form PDS regime will apply where:
- a new product is offered which requires a PDS; or
- an existing PDS requires amendment (in which case a new PDS will be required, instead of a supplementary PDS).
From 22 June 2012 all PDSs must be in the form of a short-form PDS.
Are there any exceptions?
The short-form PDS regime will not apply for interests that are solely in a defined benefits fund and pension products. These exceptions are quite narrow and mean that combined accumulation/pension products and combined accumulation/defined benefit products (as well as pure risk products) will still be caught by the regime. However, there is provision for an application to be made to ASIC for relief from requirements, on a case-by-case basis or on a product-wide basis, where appropriate.
Under the short-form PDS regime, the length of a PDS (not including any matter in writing that is applied, adopted or incorporated by the PDS) must not exceed:
- if it is printed on A4 pages — 8 pages;
- if it is printed on A5 pages — 16 pages; or
- if it is printed on DL pages — 24 pages.
The minimum font size for text in the PDS is:
- for the name, address, ABN (if applicable), ACN (if applicable) and AFSL (if applicable) of the person issuing the PDS — 8 points; and
- for all other text — 9 points.
Prescribed PDS Content
The PDS must include sections which must be numbered and headed as follows:
- About [name of superannuation product]
- How super works
- Benefits of investing with [name of superannuation product]
- Risks of super
- How we invest your money
- Fees and costs
- How super is taxed
- Insurance in your super
- How to open an account.
(Note if the superannuation product does not offer insurance cover, then section 9 may be presented as section 8.)
The purpose of prescribed headings is to promote comparability between superannuation products.
The PDS must also include a prominent warning at or near the beginning of the document, advising consumers that:
- the PDS is a summary of significant information and contains a number of references to important information (each of which forms part of the PDS);
- the consumer should consider that information before making a final decision to invest in the product;
- the information provided is general information only and does not take account of the consumer’s personal financial situation or needs; and
- the person should obtain financial advice tailored to their own personal circumstances.
The PDS may include additional sections after sections 1 to 9 and may include other information, however in practice this may be difficult to achieve given the prescribed maximum length of the short-form PDS.
Incorporation of information in the PDS
Material may be incorporated into the PDS by reference. If a PDS incorporates a matter, the matter must be:
- in writing;
- clearly distinguishable from any other matters that are not to be incorporated;
- publicly available (unless the superannuation product is issued to a standard employer-sponsored member).
Incorporated material must be identified by a concise description of what is contained in the material and must be easily and quickly accessible to a person relying on the PDS. It must also be consistent with the PDS in terms of its headings and content, for comparability and ease of reading.
Prescribed and prominent warnings must be included in the PDS at each place where a matter has been incorporated, to the effect that:
- the reader should read the additional material before making a final decision to invest in the product (readers must also be directed to the location of that information); and
- the information may change between the time of reading the PDS and when the reader signs an application form for the product.
Each incorporated document must also include a statement confirming that it forms part of the relevant PDS and identifying the PDS by name, date and version.
Other points to note
- A combined FSG and short-form PDS is not permitted for superannuation products from 22 June 2011.
- A supplementary PDS is not permitted from 22 June 2011 for superannuation products to which the short-form PDS regime applies.
- A person required to a give a short form PDS to a vision-impaired person must comply with its obligations under the Disability Discrimination Act 1992.
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.
Superannuation & Financial Services
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