ASIC Class Order [CO 04/1430]

Administered by Department of the Treasury

Legislation au F2007B00387 Not in force Legislative Instrument

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Australian Securities and Investments Commission

Corporations Regulations 2001 — Regulations 7.7.11, 7.7.12, 7.7.13A and 7.9.15B — Determination

 

Statements of Advice

 

1. Under subregulations 7.7.11(2), 7.7.12(2) and 7.7.13A(1) of the Corporations Regulations 2001 (the Regulations) the Australian Securities and Investments Commission (ASIC) determines, for the avoidance of doubt, that it is not possible to state in a Statement of Advice (the SOA) information (the numeric SOA information) to be disclosed in accordance with paragraph 947B(2)(d), subparagraph 947B(2)(e)(i), paragraph 947C(2)(e), subparagraph 947C(2)(f)(i) or paragraph 947D(2)(a) of the Corporations Act 2001 (the Act) as an amount in dollars where the amount depends, in whole or in part, on a fact or circumstance that, by the time the preparation of the SOA is completed:

 

(a) is not known to the providing entity; and

 

(b) could not have been found out by the providing entity.

 

2. Under subregulations 7.7.11(3), 7.7.12(3) and 7.7.13A(2) of the Regulations ASIC determines, for the avoidance of doubt, that it is not possible to state in a SOA numeric SOA information as an amount in dollars or to describe the amount as a percentage of one or more specified matters where:

 

(a) the amount depends, in whole or in part, on a fact or circumstance that, by the time the preparation of the SOA is completed:

 

(i) is not known to the providing entity; and

 

(ii) could not have been found out by the providing entity; and

 

(b) the numeric SOA information is not calculated by reference to a percentage of one or more matters.

 

Note: The application of the determinations in paragraphs 1 and 2 may be limited.  They may apply in an unusual case where information about an amount would be reasonably required by a person for the purposes of deciding whether to act on the advice despite the fact that facts and circumstances necessary to work out the amount are not known to the providing entity.  In other circumstances, subsections 947B(3) and 947C(3) of the Act will usually have the effect that the information is not required to be included in the SOA.

 

Product Disclosure Statements

 

3. Under subregulation 7.9.15B(1) of the Regulations ASIC determines, for the avoidance of doubt, that it is not possible to state in a Product Disclosure Statement (the PDS) information (the numeric PDS information) to be disclosed in accordance with paragraphs 1013D(1)(b), (d) or (e) of the Act as an amount in dollars where the amount depends, in whole or in part, on a fact or circumstance that, by the time the preparation of the PDS is completed:

 

(a) is not known to the responsible person; and

 

(b) could not have been found out by the responsible person.

 

4. Under subregulation 7.9.15B(2) of the Regulations, ASIC determines that it is not possible to state in a PDS numeric PDS information as an amount in dollars or as a percentage of one or more specified matters where:

 

(a) the amount depends, in whole or in part, on a fact or circumstance that by the time the preparation of the PDS is completed:

 

(i) is not known to the responsible person; and

 

(ii) could not have been found out by the responsible person; and

 

(b) the numeric PDS information is not calculated by reference to a percentage of one or more matters.

 

Note: The application of the determinations in paragraphs 3 and 4 may be limited.  They may apply in an unusual case where information about an amount would be reasonably required by a person for the purposes of deciding whether to acquire a financial product despite the fact that facts and circumstances necessary to work out the amount are not known to the responsible person.  In other circumstances, subsection 1013C(2) and section 1013F of the Act will usually have the effect that the amount need not be disclosed in the PDS.

 

Limitation of determinations

 

5. The determinations in paragraphs 1- 4 do not apply in relation to:

 

(a) information required to be included in a PDS under paragraph 1013D(1)(d) of the Act in relation to a derivative, foreign exchange contract or a general insurance product or life risk insurance product;

 

(b) information required to be included in a PDS under paragraph 1013D(1)(b) of the Act about interest payable in relation to a deposit product; or

 

(c) information concerning non-monetary benefits and interests required to be included in SOAs and PDSs under paragraph 947B(2)(d), subparagraph 947B(2)(e)(i), paragraph 947C(2)(e), subparagraph 947C(2)(f)(i) and paragraphs 947D(2)(a) and 1013D(1)(b) of the Act.

 

Note: Relief covering these matters is set out in Class Orders [CO 04/1431], [CO 04/1432] and [CO 04/1433].

 

Interpretation

 

6. In this instrument:

 

deposit product has the meaning given by section 761A of the Act;

 

foreign exchange contract has the meaning given by section 761A of the Act;

 

general insurance product has the meaning given by section 761A of the Act;

 

life risk insurance product has the meaning given by section 761A of the Act;

 

providing entity has the meaning given in section 944A of the Act; and

 

responsible person has the meaning given in section 1013A of the Act.

 

 

Dated this 8th day of December 2004

 

 

 

 

Signed by Brendan Byrne

as a delegate of the Australian Securities and Investments Commission

Overview

The Australian Securities and Investments Commission Corporations Regulations 2001, amended by the Australian Securities and Investments Commission Corporations Regulations 2001 — Regulations 7.7.11, 7.7.12, 7.7.13A and 7.9.15B — Determination Statements of Advice and Product Disclosure Statements 2004, aim to clarify the circumstances under which financial advice providers and responsible persons cannot include certain numeric information in Statements of Advice (SOA) and Product Disclosure Statements (PDS) respectively. The problem these regulations address is the potential for misleading or speculative financial advice where precise numerical information is contingent on unknown future events or circumstances that could not have been reasonably anticipated. Enacted by the Australian Securities and Investments Commission (ASIC) as a delegate, these regulations seek to ensure that financial advice and product disclosures are based on verifiable and known information, thereby maintaining transparency and consumer protection in financial markets. The policy objective is to prevent the provision of incomplete or speculative advice that might mislead consumers about the financial implications of their decisions.

Scope and Application

This legislative instrument, issued under the Corporations Regulations 2001, provides clarifications regarding the disclosure requirements for financial advice and product disclosure statements, ensuring that certain numeric information cannot be stated in Statements of Advice (SOA) or Product Disclosure Statements (PDS) if it depends on facts or circumstances that are not known and could not have been reasonably determined by the providing entity or responsible person. Specifically, it outlines that it is not possible to disclose certain amounts in dollars or as a percentage of specified matters in SOAs or PDSs if these amounts depend on unknown or unknowable facts or circumstances. These clarifications apply to providing entities and responsible persons involved in preparing financial advice and product disclosure statements, which are integral to financial services provided within Australia. The instrument specifies exclusions for certain types of information, such as non-monetary benefits and interests, and particular financial products like derivatives, foreign exchange contracts, general insurance products, life risk insurance products, and deposit products. The jurisdictional reach of this legislation is national, applying throughout Australia as it is issued under the Commonwealth's regulatory framework. The application of these determinations may be subject to limitation, especially in cases where information about an amount would be reasonably required by a person for decision-making purposes, despite the unknown facts or circumstances.

Key Provisions

The Australian Securities and Investments Commission (ASIC) has issued a determination clarifying the requirements for disclosing certain financial information in Statements of Advice (SOA) and Product Disclosure Statements (PDS) under the Corporations Regulations 2001. Specifically, subregulations 7.7.11(2), 7.7.12(2), 7.7.13A(1) and 7.9.15B(1) of the Regulations state that it is not possible to disclose numeric information in a SOA or PDS as an amount in dollars if the amount depends on facts or circumstances that are not known to the providing entity or responsible person, and could not have been found out by them at the time of preparation. This means that financial advisors and responsible persons cannot provide precise dollar amounts if the necessary facts are unknown and unknowable. ASIC's determination imposes specific obligations on financial entities. Financial advisors must ensure that any numeric information included in a SOA is either known or ascertainable at the time of preparation. Similarly, responsible persons must ensure that any numeric information in a PDS is either known or ascertainable. If the information depends on unknown or unknowable facts or circumstances, it cannot be disclosed as a specific dollar amount or percentage unless it falls under the exceptions mentioned in the regulations. Breaching these requirements can lead to significant consequences. While the legislation does not explicitly state penalties, non-compliance with the Corporations Regulations 2001 can result in civil or criminal penalties under the Corporations Act 2001. These penalties can include fines and imprisonment, depending on the severity of the breach and the intent behind it. Additionally, failing to adhere to these provisions can also lead to reputational damage and loss of client trust, further impacting the entity's operations. The determinations in paragraphs 1-4 do not apply to certain types of information, such as interest payable on deposit products, information on derivatives, foreign exchange contracts, general insurance products, life risk insurance products, and non-monetary benefits and interests. These exceptions are detailed in Class Orders [CO 04/1431], [CO 04/1432] and [CO 04/1433], providing specific relief for these matters.

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Corporate Law & Governance
Financial Services Regulation
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