In its latest consultation paper (Consultation Paper 224: Facilitating electronic financial services disclosure) (CP 224), ASIC is seeking feedback from financial services industry participants in relation to its approach to electronic delivery of financial services disclosure. A draft of the proposed updated ASIC Regulatory Guide 221: Facilitating electronic financial services disclosure (RG 221) has also been released for comment.
CP 224 and draft RG 221 seek to encourage and facilitate electronic disclosure by removing the barriers in the current regulatory framework, including providing class order relief to make the regulatory regime technology neutral. ASIC also provides guidance as to how general principles of good disclosure would be applied in the electronic disclosure environment.
The proposal, if implemented, will enable financial service providers to deliver disclosures, such as financial service guides, statements of advice and product disclosure statements (PDSs) electronically as a default.
Options for facilitating electronic disclosure
Legislative provisions and the current ASIC guidance are some of the factors which have prevented the widespread use of electronic methods to deliver financial services disclosures to consumers. ASIC notes that moving towards electronic disclosure would reduce costs for providers and enable them to better align with consumer preferences. In an effort to reflect industry and consumer demand, ASIC is considering ways to facilitate more electronic disclosure, while preserving choice for both consumers and providers.
Currently, a provider must obtain a consumer’s express consent to receiving disclosure electronically in order to provide financial services disclosures electronically to the consumer. For reasons ranging from consumer inertia and the requirements of the Corporations Act relating to disclosure documents, the default method for providing disclosure to consumers remains the delivery of printed documents personally to the consumer or via post to a mailing address.
The options being considered by ASIC would alter this and facilitate electronic disclosure as the default method of financial services disclosure. The consultation paper presents the following options:
- Option 1 - Give providers an additional option to publish disclosures electronically and then notify the client that the disclosure is available;
- Option 2 - If a financial services provider has an email address for a client, they do not need consent to use that address to deliver disclosures electronically;
- Option 3 - Facilitate the use of more innovative PDSs;
- Option 4 - A combination of Options 1–3; and
- Option 5 - Make no changes, thereby maintaining the status quo.
Depending on feedback received, ASIC indicates that it is intending to implement Options 1 – 3 to further facilitate electronic disclosure. The effect of this would mean that the default method of delivery can shift from printed form to electronic.
ASIC is seeking specific feedback on how these options should be implemented, including:
- whether there are additional barriers which ASIC needs to address to facilitate the options;
- whether exceptions to electronic disclosure should be recognised depending on the type of disclosure document and the context in which consumers have provided their emails;
- issues associated with frequency of consumers changing email addresses; and
- the costs and savings to providers of electronic delivery of disclosures.
Another aspect of the proposal involves facilitating interactive PDSs, including PDSs which incorporate multi-media features such as video, audio and interactive menus.
ASIC clarifies that, in its view, Part 7.9 of the Corporations Act does not prevent the electronic PDS to differ from a printed or printable versions which can be provided to consumers upon request. Ancillary relief from the Corporations Act would also be provided so that more innovative PDSs will still meet the requirements of the Corporations Act.
The good disclosure principles in PDSs would apply equally to electronic PDSs. The draft updated RG 221 provides additional guidance in the form of examples and new good disclosure principles for electronic disclosures.
These initiatives to accommodate electronic PDSs are intended to reduce costs for providers. However, consideration should be given to ensure that providers are not effectively required to prepare both an electronic PDS and a printed or printable PDS.
Similar relief to facilitate electronic disclosure of material required under the credit regime is also being proposed.
ASIC’s proposal represents a welcome step to addressing the barriers relating to more prevalent use of electronic disclosures and more innovative forms of disclosure. Obtaining express consent from clients does not reflect current norms of communication and ASIC appears to recognise this and is bringing regulation in line with this.
Comments on the proposal are due by 16 January 2015. ASIC intends to release updated regulatory guidance and class order in March 2015.