RG 97: Extension to PDS fee and cost disclosures announced

ASIC has extended the transition period for trustees and responsible entities to comply with Australian PDS fee and cost disclosure requirements.

We look at the fee and cost disclosures required under RG 97 and the revised implementation timetable.

What is RG 97?

In November 2015 ASIC issued a guide for superannuation product and retail managed investment product issuers on how to disclose fees and costs in Product Disclosure Statements (PDSs) and periodic statements.

Known as RG 97, the guide added 45 pages to the existing policy with the main change relating to indirect costs.

On 29 November 2016 ASIC extended the transition period for PDS fee and cost disclosures.

What changes are required under RG 97?

Under Regulatory Guideline 97, issuers must meet certain requirements for disclosing fees and costs in PDSs and periodic statements.

PDSs need to include:

1. A standardised fees and costs template.
2. Certain additional explanations of fees and costs.
3. An example of annual fees and costs.
4. A boxed consumer advisory warning.

Issuers must also:

1. Describe certain transactions in periodic statements.
2. Disclose indirect costs and, in the case of a superannuation product, other fees.
3. Disclose total fees and costs.
4. Provide certain additional information.

A modified version of the enhanced fee disclosure regulations applies to the shorter PDS regime.

What about indirect costs?

Indirect costs has been redefined to mean any amount that the issuer knows, reasonably ought to know, or may reasonably estimate will directly or indirectly reduce the return on the product.

This means issuers must now ‘look through’ investment structures and ensure any indirect costs are quantified or reasonably estimated and disclosed as a component of management costs.

When do the changes need to be made?

ASIC has extended the transition period for trustees and responsible entities to comply with its PDS fee and cost disclosure requirements.

The transition period will now end by 30 September 2017 for issuers that notify ASIC in writing by 31 January 2017 that they intend to take advantage of this extension in relation to a PDS. Issuers opting for this approach must provide ASIC with information about the fees and costs that would be required to be included in a PDS had they complied with the updated fees and costs disclosure requirements by 1 March 2017.

Issuers that do not want to take of advantage of this extension must comply with the PDS requirements by the original deadline of 1 February 2017.

Any issuer that has already adopted the updated PDS requirements is not required to provide ASIC this information.

The extension does not apply to periodic statements. Issuers must still comply with those requirements by 1 January 2018, with ASIC encouraging early adoption.

Actions

Trustees and responsible entities need to work towards their own implementation timetables.

Speak with your compliance officer if you have any questions regarding RG 97.

To learn more about the actions FundBPO is taking, please contact us.

Further reading:

• ASIC extends the transition period for superannuation trustees and responsible entities to comply with updated fee and cost disclosure requirements
• ASIC: RG 97 Disclosing fees and costs in PDSs and periodic statements

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This article is not intended to be financial advice and is of a general nature only that does not take into account your individual objectives, financial situation or needs. While all efforts have been made to ensure the information contained in this article is accurate, errors may occur.