The Australian Securities & Investments Commission (ASIC) has finally released the class order to relieve superannuation platforms and multi-funds from having to comply with the shorter PDS regime. The relief, contained in Class Order 12/749 (Class Order), makes good on the commitment from Minister Shorten in December 2011 that superannuation platforms and multi-funds would not have to issue shorter PDSs, which become mandatory for most other superannuation products and simple managed investment schemes from this Friday 22 June 2012. The Class Order also covers hedge funds and ‘fund of hedge’ funds, which are considered to be complex products and therefore not suitable for a shorter PDS.
The Class Order is intended to apply until Treasury amends the Corporations Regulations 2001 (Cth) (Corporation Regulations) to provide a more permanent exemption from the shorter PDS regime for superannuation platforms and multi-fund PDS issuers. It currently expires on 22 June 2013.
ASIC has also published Shorter PDSs: Complying with requirements for superannuation products and simple managed investment schemes (INFO 155) to provide concise guidance for industry on technical issues related to implementation of the new shorter PDS regime, as well as updating Shorter PDS regime: Superannuation, managed investment schemes and margin lending (INFO 133) to reflect the amendments to the transition period implemented by the Corporations Legislation Amendment Regulations 2011 (No.2) (Cth).
The class order relief operates for superannuation products by modifying Regulation 7.9.11K of the Corporations Regulations so that the shorter PDS regime does not apply to ‘a superannuation product that relates to a superannuation entity in which:
- two or more investment strategies are available from which a member, or a class of members, may choose in accordance with subsection 52(4) of the Superannuation Industry (Supervision) Act 1993; and
- each of the investment strategies enables a regulated acquisition (within the meaning of section 1012IA of the Act) of a financial product to be made.’
As expected, the relief therefore applies where the trustee offers member investment choice and the member is able to direct the trustee to acquire particular financial products from the fund’s investment menu, which attracts the disclosure requirements in section 1012IA of the Corporations Act 2001 (Cth) (Corporations Act). The Explanatory Statement suggests that the relief does not apply to superannuation products with a default option (such as a corporate plan within a superannuation platform) or a superannuation product with ‘pre-mixed strategies’. This is not readily apparent from the wording of the class order itself. In our view, application of the class order relief will depend on whether the default option and pre-mixed strategies are capable of being ‘regulated acquisitions’. The Explanatory Statement also notes that a temporary facility, such as a cash account, would not preclude a superannuation platform from relying on the relief, but again this is not readily apparent from the class order itself.
The Class Order confirms that trustees of superannuation platforms can elect to prepare and offer a shorter PDS for the platform if they wish. In addition, during this interim period, a trustee of a superannuation platform who has already prepared a shorter PDS can also elect to opt out of the shorter PDS regime.
Managed investment relief
The relief for managed investment schemes exempts a multi-fund PDS from the shorter PDS regime. It also specifically exempts hedge funds and ‘fund of hedge fund’ schemes from issuing a shorter PDS.
The multi-fund PDS relief operates by inserting a new provision in Regulation 7.9.11S which states that a PDS for a simple managed investment scheme does not have to be prepared in accordance with the shorter PDS regime if, in effect:
- it is prepared in accordance with the general PDS requirements in Part 7.9 of the Corporations Act; and
- it is included in a document with a PDS for other managed investment products that are prepared in accordance with the general PDS requirements.
The Class Order therefore characterises a multi-fund PDS as a standard omnibus PDS for managed investment schemes within the one document. It should be noted that a multi-fund PDS cannot be prepared if one of the products in the omnibus standard PDS is not a managed investment scheme.
Unlike the relief for superannuation platforms, the Class Order does not specifically state that managed fund issuers can move in and out of the shorter PDS regime. This is because, unless the issuer prepares an omnibus ‘standard’ PDS for multiple managed investment schemes, the shorter PDS regime continues to apply to simple managed investment schemes. In other words, the relief does not allow a shorter PDS covering multiple simple managed investment schemes.
The exception is for hedge funds and fund of hedge funds, which are excluded from the shorter PDS regime altogether, unless the issuer has already prepared a shorter PDS. For hedge fund and fund of hedge fund issuers who have already issued a shorter PDS, the exclusion will apply from 1 February 2013, allowing time for them to move back to the general PDS regime.