ASIC CLASS ORDER [CO 05/1254]

EXPLANATORY STATEMENT

Prepared by the Australian Securities and Investments Commission

Corporations Act 2001

Paragraph 1020F(1)(c) – Declaration

The Australian Securities and Investments Commission (ASIC) makes Class Order [C0 05/1254] Transitional relief for certain superannuation periodic statements under paragraph 1020F(1)(c) of the Corporations Act 2001 (the Act). Paragraph 1020F(1)(c) provides that ASIC may declare that the Part 7.9 of the Act applies in relation to a person or financial product, or class of persons ofr financial products, as if specified provisions were omitted , modified or varied as specified in the declaration.

1. Background

Division 3 of Part 7.9 imposes sets out disclosure requirements in relation to financial products that include, in section 1017D, the requirement to provide periodic statements to holders of financial products with an investment component., This obligation applies to including (amongst other things) superannuation products.

Amendments to the Corporations Regulations 2001 by the Corporations Regulations Amendment 2005 (No. 1) have imposeddetail requirements in relation to the disclosure of fees and costs in periodic statements for superannuation products and managed investment products.  These include requirements in Corporations Regulation 7.9.60B for details of transactions to be included in a periodic statement and in Corporations Regulation 7.9.75(1) for disclosure in relation to costs of common fund expenses attributable to an individual investor.

For superannuation products, these two reporting obligations commence in relation to periodic statements apply for reporting periods that commence on or after 1 July 2005 (see Corporations Regulation 7.9.60B(1)(b)(ii)) and, in relation to periodic statements that are exit statements, commence for statements that are issued on or after 1 July 2006. (see This is set out in Corporations Regulations 7.9.60B(1)(b)(ii) and Corporations Regulation at item 1 of the table in 7.9.75(1A), table item 1) (commencement provisions).

However, the operation of these commencement provisions can produce anomalous results for periodic reporting obligations as between different members of the same superannuation fund, or sub-plan within a superannuation fund, that hold the same type of financial product over the same period.

In particular, this concerns a superannuation fund or a sub-plan can occur where for the fund or sub-plan as a whole the trustee has adopted a general reporting period that is not aligned with a 'standard' financial year.  In this case the fund will have ongoing members whose reporting period commenced before 1 July 2005 but also have new members whose first reporting period under paragraph 1017D(2)(b) of the Act commenced on or after 1 July 2005.  In this circumstance, the commencement provisions require the trustee of the fund to provide a periodic statement that includes disclosure of transaction details and common fund expenses to those members of the fund or sub-plan who joined on or after 1 July 2005, but does not require these to be included in periodic statements to other members of the same fund or sub-plan over the same period.

2. Purpose of the class order

The purpose of [CO 05/1254] is to provide relief for those superannuation fund trustees with non-standard reporting periods that 'straddle' 1 July 2005 from the requirement to provide a periodic statement that contains transaction details and common fund disclosure. It will only apply in relation to a first reporting period in respect of a new member joining the fund or sub-plan on or after 1 July 2005 and during that non-standard reporting period.

The relief instrument will relieve these fund trustees from the obligation develop the administrative requirementcapacity to provide periodic statements which containing the new content requirements for only a subset of members of a fund or sub-plan (new joining members) when this is not required for other members of the same fund in relation to the same period.  The relief will also permit those trustees to prepare their fund's administration and compliance systems to provide complying periodic statements on a more efficient 'whole of fund' basis.

3. The class order

[CO 05/1254] declares that Part 7.9 of the Act (including the Corporations Regulations made under that Part) applies in relation to issuers of superannuation products as if:

(a) Corporations Regulation 7.9.60B(1) had effect that a periodic statement (that is not an exit statement) is not required to comply with the requirement to include transaction details where the statement is in relation to a first reporting period under paragraph 1017D(2)(b) of the Act that is less than 1 year long and ends on or before 30 June 2006; and

(b) Corporations Regulation 7.9.75(1A) had effect that a periodic statement (that is not an exit statement) need not comply with the requirement to include common fund disclosure where the statement is in relation to a first reporting period under paragraph 1017D(2)(b) of the Act that is less than 1 year long and ends on or before 30 June 2006.

4. Consultation

In preparing [CO 05/1254], ASIC receivedconsidered specific requests for relief. an application for relief.  Consultation at a general level also took place with the Association of Superannuation Funds of Australia.  No further consultations took place because [CO 05/1254] is of a minor and machinery nature.