ASIC removing barriers to digital financial services disclosure

ASIC has further facilitated electronic financial services disclosure through updated regulatory guidance and waivers which enable electronic delivery as a default and encourage the use of innovative disclosure documents.

ASIC released its further regulatory guidance and waivers on 28 July 2015. These developments largely concern disclosure to retail investors, however ASIC’s stance signals its more general intent to adapt the Australian regulatory framework to embrace new technologies.

ASIC’s press release (15-198MR) notes the statement from ASIC Commissioner John Price that the Commission’s move to make it “easier for businesses to communicate important information to financial services consumers” is in response to “changing consumer preferences, with ever increasing numbers of people transacting digitally. Almost 15 million Australians now have a home internet connection and 68% of those online are using three or more devices to access the internet.” 

While the Corporations Act expressly permits the digital delivery of financial services disclosures, in its consultation last year ASIC noted two principal areas of concern with the previous regulation:

  • for most financial services disclosures, previous ASIC guidance and legal requirements meant that the default method of delivery was a printed disclosure document. This was limiting the various benefits which would otherwise flow from digital delivery, including cost savings and the ability for providers to present more innovative and engaging content; and
  • barriers to more innovative and interactive web-based disclosure were limiting disclosure options. These barriers included technical and regulatory requirements which implied a print version and placed limits on fully electronic product disclosure statements.

ASIC’s new guidance and relief

In order to address the identified areas of concern and facilitate the use of digital disclosures, ASIC has taken various steps in its revised Regulatory Guide 221 and new legislative instruments 15/647 and 15/649. These steps comprise:

  • explaining how electronic delivery methods can be used relying on the existing provisions of the Corporations Act, with clarification around when providers can treat email addresses as having been nominated by clients for these purposes. ASIC has clarified that, for example, if a client has provided their email address as contact information as part of an application the provider could deliver disclosures to that address;
  • relief under legislative instrument 15/647 to enable providers to deliver disclosures in any way agreed by the client (including digital) and as there are no legislative requirements as to the form of the agreement, a provider need only satisfy itself the client has agreed to the method of delivery;
  • relief under legislative instrument 15/647 to enable providers to “publish and notify” i.e. make disclosures available digitally and notify the client of the availability without the need for the client’s agreement to receive disclosures in that manner;
  • further relief under legislative instrument 15/647 to enable super funds to use email addresses provided by a default fund member’s employer. To rely on this relief, the disclosure must be accompanied by a statement that, if requested, the trustee will send the disclosure and other communications to another address nominated by the member; and
  • relief under legislative instrument 15/649 and guidance to facilitate the use of more innovative product disclosure statements, financial services guides and statements of advice.

Under the “publish and notify” method, the provider must notify the client that they intend to make disclosures available digitally and will notify the client when the disclosures are available. The client has at least seven days to opt out of this method.

Each time a provider publishes a disclosure, it must notify the client and provide details about how to access the disclosure.

ASIC’s relief and guidance on facilitating more innovative disclosures permit a provider to give a copy of any current PDS on request (since it could be impractical to provide a copy of an innovative PDS).

This means a provider could provide a copy of a different printed PDS for that financial product instead of the digital PDS where the client had not nominated a digital address. ASIC does not expect that all products will have a PDS that is capable of being printed and posted and recognises that this is a decision for the product provider.

In addition, ASIC has updated its good practice guidance in RG 221 to help ensure that clients continue to receive clear, concise and effective information when disclosures are given electronically and consumer protections are maintained in the digital environment. This includes additional guidance that disclosures should not include features that channel clients away from important information or distract them from key features of the disclosure.

More generally, ASIC has not at this stage identified a need for guidance or relief for other areas of the Corporations Act that relate to digital disclosure. This is because in ASIC’s view the Corporations Act is otherwise generally drafted in a way that is wide enough to accommodate digital methods of delivery and digital formats for disclosures. However, in encouraging providers to explore more innovative forms of disclosure, ASIC has stated that it is open to granting individual relief to facilitate the use of these kinds of disclosure.

Jon Ireland

I constantly strive for technical excellence and commercial outcomes that add real value for my clients.

Jon Ireland Partner

Jon has extensive experience in corporate and financial services law, specialising in complex transactions, funds management and investment distribution. Jon also advises on regulatory issues relating to the use of technology in financial services.

Jon provides advice to leading Australian and international financial services clients on the full range of corporate, commercial and regulatory issues facing these businesses. He has considerable experience advising them on establishing, buying into, selling and restructuring their businesses.

Jon regularly advises on funds management issues including fund structuring, disclosure, investment management and outsourcing arrangements. He has particular expertise in the area of investment distribution and has advised on key projects for platform operators and advice providers.

Recently, Jon has advised on the establishment of a fully digital investment platform, the negotiation of a material outsourcing arrangement for a global investment bank and a scheme modernisation project for a leading Australian fund manager. Jon has also recently advised on the establishment of the Australian operations of a global diversified financial services business, including regulatory and corporate issues related to its expansion.

Jon's clients value his advice on recent law reforms, including around product disclosure statements and the digital provision of financial services. Jon is consulting to the Committee for Sydney and is a regular participant on Financial Services Council working groups.

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Matthew Farnsworth

It's rewarding to partner with clients to find solutions that add value and help them succeed.

Matthew Farnsworth Special Counsel

Matthew has extensive experience in funds management and financial services law. He advises leading Australian and international financial services clients across a wide range of transactional and regulatory matters.

Matthew advises leading Australian and international financial services clients on transactional and regulatory matters.

Clients look to Matthew to assist them to establish, offer and operate retail and wholesale investment funds. He advises on Australian financial services licensing, fund governance, offer documents and fund restructures, including managed investment schemes and other collective investment vehicles (CIVs).

He also advises on outsourcing arrangements, compliance issues and on ongoing regulatory developments in the financial services sector.

Matthew is experienced in the full range of asset classes and has particular experience in the property funds sector, including fund establishment, capital raising and restructures.

He is also experienced in a wide range of transactions in the financial services sector, joint ventures and funds M&A.

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