After reviewing fee disclosure practices, ASIC has tightened disclosure requirements for superannuation and managed investment scheme products under new Class Order [CO 14/1252].

Briefly, the Class Order has clarified the disclosure obligations under Schedule 10 of the Corporations Regulations (Cth) to ensure consistency with the Stronger Super reforms introduced in July 2013. ASIC has revised the definitions of indirect costs and switching fees, and has inserted a new definition of “interposed vehicles”, which are a mechanism often used by investment funds to invest in other funds. The Class Order also requires that all managed investment scheme and superannuation products include a consumer advisory warning at the front of all Product Disclosure Statements.

The Class Order will apply to all PDSs for superannuation and managed investment products from 1 January 2016.


Superannuation funds and managed investment schemes have often allowed clients investment opportunities in other funds, allowing for greater access to a broader asset pool. These “interposed vehicles” often have costs associated with them, and after reviewing the current fee disclosure obligations, ASIC found them insufficient to capture the complexity of this class of financial product. The reforms define an interposed vehicle as an investment option other than a MySuper product in a body, trust or partnership, other than:

  • a body, trust or partnership that does not predominantly carry on an investment business and is either included in an official list in a foreign financial market or is the ultimate investment of the fund; or
  • an entity that is subject to a custodial arrangement and the PDS allows holders of the product to give directions, instructions or requests for particular products to be acquired.

ASIC’s reforms allow the regulator to “look through” the second investment scheme and require the fund offering interposed vehicle products to provide in their PDS a reflection of the costs incurred by the second entity that would reduce the return or income from the product.


The Class Order inserts a new Clause 101A into the Corporations Regulations, expanding the definition of indirect costs. These costs are now defined as any amount not charged as a fee that the trustee of the entity “knows, ought to reasonably know or may reasonably estimate” would reduce the return on the product or options or reduce the value of income attributable to the product. This is an extremely broad definition that captures most non-fee costs associated with superannuation funds or managed investment schemes. Indirect costs also include the indirect costs of interposed vehicles, as well as the buy-sell spread on derivatives. The Class Order also modifies Clause 102 of Schedule 10 to include indirect costs within the definition of management costs.


The definition of switching fee has been amended to ensure consistency with s 29V(5) of the Superannuation Industry (Supervision) Act 1993 (Cth) for MySuper products. For other superannuation or managed investment scheme products, the fee includes the amount paid or the cost recovered from a client for transferring a member’s interest from one product to another.


The Class Order introduces a standard form consumer advisory warning in Clause 221 of Schedule 10 of the Corporations Regulations. This warning describes the potential cost to clients of higher levels of product fees, and encourages clients to negotiate lower fees where possible. The standard form warning also provides clients with a link to the MoneySmart website. This warning must be placed at the beginning of the fees section for all PDSs relating to superannuation or managed investment products, beginning in 2016. They must also be included in all periodic statements issued after 1 January 2017.


The amendments are proposed for inclusion in ASIC Regulatory Guide 97 Disclosing fees and costs in PDSs and periodic statements. ASIC’s draft RG 97 can be found here. ASIC invites submissions on the proposed revisions to RG 97 by 27 February 2015. If you have any questions regarding the Class Order or the proposed amendments to RG 97, please contact a member of our team listed in this publication.