Fee and Cost Disclosure Requirements – Your Obligations, Changes to Regulatory Guide 97 and ASIC’s Market Findings

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ASIC has published a report showing that many Australian Financial Services (“AFS”) Licensees are not complying with their fee disclosure requirements. If you are an AFS Licensee, you need to ensure that you are providing your retail clients with the correct disclosure documents and at the right time.  We have summarised what those are and some changes that ASIC has made to the requirements in its revised guidance.

Your Obligations

AFS Licensees providing financial product advice to retail clients must provide retail clients with:

  • A Fee Disclosure Statement (“FDS”);
  • Renewal Notice (“RN”) when an arrangement is nearing its end;
  • A Financial Services Guide (“FSG”); and
  • if providing personal advice, a Statement of Advice (“SOA”).

Further, AFS Licensees who issue superannuation and managed investment products must provide retail clients with:

  • A Product Disclosure Statement (“PDS”) to the client acquiring the product; and
  • a yearly periodic statement about the product.

AFS Licensees are also required to comply with conflicted remuneration and other banned remuneration requirements as set out in the Corporations Act 2001 (Cth) (“The Act”).

Updates to RG97

ASIC Regulatory Guide 97 (“RG 97“) has been updated by ASIC in order to provide clearer guidance on fees and cost disclosures for issuers of superannuation and managed investment products. This will assist consumers and their financial advisers compare products and their associated costs to allow the most appropriate product selections.

In order to maintain compliance and avoid ASIC’s intervention powers, issuers of superannuation and managed investment products need to know that:

  • there have been changes to the way values are grouped in order to allow fees and costs that are on-going and those that are based on member-activity to be discerned;
  • ongoing fees and costs are now to be separated into three broad categories: administrative, investment and transaction;
  • a single ‘Cost of Product’ figure must be provided in the PDS; and
  • the way fees and costs are presented in the periodic statement has been simplified.

Further, the changes provide greater clarity on how to calculate various costs.

Sophie Grace is equipped to assist you in complying with your ongoing licence obligations, please contact us directly for further information.

About The Author

Ivana Josic

Ivana is responsible for all Marketing activities for Sophie Grace and assists both the Compliance and Legal teams with a particular focus on Compliance services. Ivana focuses on website development, management and ensures clients receive the latest regulatory updates through Sophie Grace social media channels, the newsletter and website blog page. Ivana also assists the Compliance team with drafting and amending compliance documentation, preparing AFSL and ACL Applications and implementing ongoing compliance solutions.

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