Financial Products requiring a Product Disclosure Statement – what does this mean?

A PDS is defective if it:

• contains a misleading or deceptive statement; or
• omits content that is required to be contained in that PDS.

Product issuers should ensure:

• they have reasonable grounds for all statements made in the PDS;
• the PDS complies with the principles and guidelines contained in ASIC Regulatory Guide 234 regarding marketing and promotional material;
• the PDS is relevant for the target market for the financial product, considering the range of people in that target market;
• they review PDS regularly to check that statements are still accurate or relevant and have not become outdated or defective.

ASIC Regulatory Guide 168 contains six (6) “Good Disclosure Principles” that product issuers should adhere to when preparing and giving a PDS:

• Disclosure should be timely – Licensees should ensure their distribution processes maximise the time a client has to read a PDS before making an application.
• Disclosure should be relevant and complete – The PDS should contain all the information that is required by law and relevant to the class of clients the PDS is directed at. The information must also be consistent with other documents provided to a client (e.g. client agreements).
• Disclosure should promote product understanding – Information in a PDS must be set out in a clear, concise and effective manner. Product issuers should avoid confusing statements, jargon, and extraneous information that would distract clients from key information in the disclosure.
• Disclosure should promote product comparison – Product issuers must provide information that might reasonably be expected to have a material influence on the client’s decision whether to acquire the product. This includes presenting information in a way that helps a client to understand and compare different options available.
• Disclosure should highlight important information – Information should be formatted appropriately to draw a client’s attention to specific points. Product issuers may consider including a summary section at the front of the PDS to prominently highlight certain key information.
• Disclosure should have regard to clients’ needs – Content in a PDS should be tailored to the specific characteristics of the target market, in a manner that they are able to understand. Product issuers should also apply any client feedback received to improve the quality of disclosure in the PDS.