New transitional arrangements for simplified product disclosure statements

On 8 June 2011, Treasury announced new transitional arrangements and other refinements to the simplified PDS regime.To implement the recently announced transitional arrangements, ASIC yesterday released Class Order 11/756 which has the effect of allowing issuers of simple managed investment schemes and superannuation products to:

On 8 June 2011, Assistant Treasurer Bill Shorten announced new transitional arrangements for the simplified product disclosure statement (PDS) regime applying to superannuation products and simple managed investment schemes (contained in Subdivision 4.2B and 4.2C of Division 4 of Part 7.9 of the Corporations Regulations 2001 (Regulations) and Schedules 10D and 10E of the Regulations).Treasury’s press release can be found here.

Changes announced to the simplified PDS regime

The simplified PDS regime is intended to provide prescriptive disclosure requirements in relation to certain types of financial products and thereby simplifying disclosure. The regime was originally scheduled to commence on 22 June 2011.

Under the recently announced transitional arrangements, issuers of superannuation products and simple managed investment schemes may:

• choose to remain within the old PDS regime until 22 June 2012
• continue to issue supplementary PDSs under the old PDS regime until 22 June 2012 and
• opt into the new regime from 22 June 2011 if they are ready to do so.

On and after 22 June 2012, all PDSs for superannuation products and simple managed investment schemes will be regulated under the simplified PDS regime.

Although Treasury’s announcements on the new transitional arrangements do not explicitly refer to replacement PDSs, the view of many industry participants is that, based on the wording of the Assistant Treasurer’s press release, replacement PDSs for superannuation products and simple managed investment schemes can continue to be issued until 22 June 2012.

Additionally, Treasury has announced that amending regulations implementing the new transitional arrangements will also:

• clarify that pure risk products are excluded from the simplified PDS regime (irrespective of whether or not they are provided through a superannuation product)
• clarify that combined benefit and accumulation products will be included in the simplified PDS regime and  allow for situations where applications are electronically lodged.

At this stage, Treasury has decided not to amend the regulations to allow multi-fund simplified PDSs (primarily of relevance for responsible entities of simple managed investment schemes) or platform simplified PDSs.

As draft amending regulations on the new transitional arrangements and other amendments are yet to be released, specific details on the implementation of these arrangements are still unclear.

ASIC Class Order 11/576

In order to give effect to the new transitional arrangements before the release of amending regulations, the Australian Securities and Investments Commission (ASIC) has released Class Order 11/576 (CO 11/576) to provide relief on an interim basis.

Under CO 11/576, issuers of superannuation products and simple managed investment schemes may:

• continue to use their existing PDSs or issue replacement or supplementary PDSs under the existing regime until 22 June 2012 or
• elect to issue simplified PDSs for their products. If simplified PDSs are used, the PDS must include a statement that the document had been prepared in accordance with Subdivision 4.2B or Subdivision 4.2C (whichever is relevant) of Division 4 of Part 7.9 of the Regulations.

The imposition of a requirement for this additional statement is not helpful for issuers who have already prepared a simplified PDS based on the old transitional arrangements (which allowed issuers to opt in from 22 June 2011 without any such statement being included). Unfortunately, ASIC’s Class Order has the effect of removing the old transitional arrangements, so issuers wanting to opt in from 22 June 2011 may now need to re-print their documents.

Readers should also note that CO 11/756 only covers the new transitional arrangements and does not implement other announcements made by Treasury. Relief granted by ASIC under CO 11/756 will cease to apply once new amending regulations are released by Treasury or by 22 June 2012, whichever is earlier. ASIC’s announcement and links to CO 11/756 and the explanatory memorandum can be found here.