Preparing for revised fees and costs information in periodic statements

December 2020
Disclosure & Marketing
Fees & Costs
Regulated Disclosure Documents

We are already seeing some early adopters of the new fees and costs disclosure requirements under ASIC Corporations (Disclosure of Fees and Costs) Instrument 2019/1070 (ASIC Instrument) in product disclosure statements (PDS). An election to comply with the new PDS requirements has been possible since 30 September 2020, in the lead up to the new requirements becoming compulsory for all PDS given on or after 30 September 2022.  

There seems to be less focus on the impact of the new requirements on member statements including exit statements (periodic statements).  The adoption of the new fees and costs disclosure requirements for periodic statements is less straightforward.

It has been possible to adopt the new fees and costs disclosure requirements for exit statements since (essentially) 1 July 2020 based on the period (exit reporting period) covered by the exit statement.  For exit reporting periods commencing on or after 1 July 2020, or ending on or after 1 July 2020, the new requirements can be adhered to if an appropriate election is made.

It will not be possible to adopt the new fees and costs disclosure requirements for annual member statements or other periodic member statements (eg half yearly statements) until a reporting period commencing on or after 1 July 2020 expires.  This means that for funds with a reporting period that coincides with the financial year, the earliest that an election can be made is for member statements covering the period 1 July 2020 to 30 June 2021.  Statements for the period 1 July 2021 to 30 June 2022 must adhere to the new fees and costs disclosure requirements.

For super funds considering the early adoption of the new fees and costs disclosure requirements, the ASIC Instrument does not appear to preclude the timing of elections to differ for PDS and periodic statements, however it is less clear whether the timing of an election can differ for regular member statements and exit statements. However, determining whether to elect to adopt the requirements early and, if so, which disclosure documents (and financial products) the election should apply to is not a decision that should be made by reference to the ASIC Instrument only.  Like any trustee decision, regard should be had to other general obligations under superannuation and corporation laws including, for example, the obligation under the Corporations Act for an Australian Financial Services Licensee to provide financial services efficiently, honestly and fairly given the increasing focus on this obligation in ASIC actions, and under proposed law reforms.

The ASIC Instrument appears to envisage (at the latest) superannuation product PDS will present fees and costs in accordance with the new requirements in September 2022 before or around the time that member statements covering the (usual) 2020/2021 are issued, thereby creating an important ‘baseline’ (via the PDS and, possibly, via communications to existing members about the new approach to fees and costs disclosure although this may not be necessarily required) for the calculations and concepts that underpin the new fees and costs disclosures in the statements.  Such an approach arguably promotes the provision of clear, concise and effective disclosure (an objective which forms part of the legislative obligations applicable to PDS, and a principle that forms part of ASIC’s good disclosure principles for other disclosure documents).

In addition, some significant changes to fees and costs disclosures in periodic statements should be taken into account when deciding the timing and extent of any elections.  In particular, the requirement that for the reporting period covered by the statement (including the exit reporting period covered by an exit statement) to include buy/sell costs, and excess costs paid out of reserves, that have been incurred by an individual member during the period (in dollar terms).  The calculation of these amounts will presumably depend on the development of processes and systems that can produce accurate figures (including reasonable estimates where actual figures cannot be known, for example, in the context of exit statements).

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