It is not surprising that this transition period has been extended to 30 September 2017, due to the difficulties that industry is having in interpreting how the updated requirements in RG 97 should apply. By way of background, ASIC amended the rules for disclosing fees and costs when it amended the enhanced fee disclosure regulations (by issuing ASIC Instrument 2015/876 and amended ASIC Class Order [CO 14/1252]) and released updated Regulatory Guide 97 – Disclosing fees and costs in product disclosure statements (PDSs) and periodic statements (RG 97) in November 2015. The new requirements apply to trustees of superannuation funds and responsible entities of managed funds and other managed investment schemes (Issuers) in respect of the way in which they disclose fees and costs. The revised RG 97 followed ASIC’S review of fee and cost disclosure practices in Report 398 Fee and cost disclosure: Superannuation and managed investment products (refer: 14-158MR), in which ASIC identified inconsistencies in industry practice and under-disclosure of fees and costs.

The extension to the transition period will give industry a little longer to grapple with the changes and work out the best practice to address them. The way in which ASIC is managing the extension will also mean that ASIC will receive advanced notice of the different views from industry participants as to how they consider the changes are to apply

Strict Procedures to Apply for the Extension to 30 September 2017

If you wish to take advantage of the extension, please note there are strict procedures for ensuring that you can take advantage of the extension as follows:

Issuers that wish to take advantage of the extension to 30 September 2017 must:

  • a. By 31 January 2017, notify ASIC in writing that they intend to take advantage of the extension in relation to a PDS to the fee and cost disclosure team.
  • b. By 1 March 2017, provide ASIC with information about the fees and costs that would be required to be included in the PDS had they complied with the updated fees and costs disclosure requirements. ASIC has confirmed that although such information may be published by it, it would not be published in a manner that would identify the issuer of a relevant product.

Issuers that do not want to take advantage of this extension will have to comply with the updated requirements by 1 February 2017. Any Issuer that has already adopted the updated requirements will not be required to provide ASIC this information.

ASIC’s Approach to the Extension − What Issuers Need to Know

ASIC has reiterated that it will be taking a facilitative approach for those Issuers who opt in to comply before 1 October 2017 (as published previously in “Questions and answers − fees and costs disclosure − superannuation and managed investment products”) until that date.

ASIC has also made it expressly clear that this is a final extension and no further extensions will be provided.

To affect the extension, ASIC will be:

  • Amending ASIC Class Order 14/1252 Technical modifications to Schedule 10 of the Corporations Regulations [CO 14/1252].
  • Providing instructions and the forms which Issuers must provide ASIC with and the fees and costs information which is required if the Issuer is seeking to take advantage of the extension. 

ASIC Will Assess the Information Provided in the Transition Period by Issuers

ASIC has disclosed that it intends to use this information to assess whether Issuers are taking reasonable steps towards compliance and to identify whether the disclosures indicate any likely noncompliance. Furthermore, ASIC has confirmed that it will not take enforcement action based on errors in the information provided unless it is identified that the Issuer is intentionally providing information that is not complying or has failed to take reasonable care or is not taking reasonable steps.

ASIC has also stated that it will continue with an extensive engagement with industry during the extended transition period to assist industry in the implementation of the new requirements.

Extension Does Not Apply to Certain Requirements

The extension of transition does not apply to all aspects of the updated fees and costs requirements under RG 97. Issuers should note that the extension of transition does not provide an exemption from:

The requirements that apply under the Corporations Regulations, unamended by CO 14/1252.

The requirement for Issuers not to make misleading or deceptive statements about their products.

The requirement for Issuers to comply in respect of periodic statements.

Background Information

Some of the key changes of the revised fees and costs disclosure relate to the description of “indirect costs” (including as to how defined for management costs paid to an investment manager as distinct to an RE and, separately, as to how the costs of derivative products are now indirect costs) and the amended definition of “investment fee” (which carves out certain indirect costs having regards to the definition of “interposed vehicle”) and the resulting challenge of integrating indirect costs (as now defined) and indirect cost ratios into the existing fee and cost frameworks.