ASIC CLASS ORDER [CO 05/27]
EXPLANATORY STATEMENT
Prepared by the Australian Securities and Investments Commission
Corporations Act 2001
Paragraph 951B(1)(a) – Exemption
Paragraph 951B(1)(a) of the Corporations Act 2001 (the Act) provides that the Australian Securities and Investments Commission (ASIC) may exempt a person or class of persons from all or specified provisions of Pt 7.7 of the Act.
- Background
Subsections 941A(1) and 941B(1) require a person (the providing entity) who is a financial services licensee or an authorised representative of a financial services licensee to give a Financial Services Guide (FSG) if a financial service is to be provided to a person as a retail client.
The FSG must include the information required by the Corporations Regulations 2001: s942B(4) and 942C(4). Regulations 7.7.04(2) and 7.7.07(2) require an FSG to include certain detailed statements about remuneration, commissions and other benefits. These regulations apply even where the required information is not relevant to the financial services that will be or are likely to be provided to the client receiving the FSG or where the remuneration commissions or other benefits relate solely to services for which an FSG would not be required.
2. Purpose of the class order
Class order [CO 05/27] Financial Services Guides – Tailoring Relief relieves providing entities of unnecessary disclosure requirements. The relief addresses unforseen circumstances and unforseen consequences of compliance with the FSG content requirements. It also facilitates providing entities preparing tailored FSGs aimed at better meeting the information needs of particular client groups. Clients will not need to receive an FSG which contains information which is not relevant to the financial services in which they are interested. This will result in FSGs which are less complicated and, therefore, less likely to confuse or mislead clients.
3. The class order
Class Order [CO 05/27] exempts providing entities from the obligation to include in an FSG the information on remuneration, commissions and other benefits required by regs 7.7.04(2) and 7.7.07(2), where that information:
- does not relate to a financial service that the providing entity reasonably believes will be or is likely to be provided to the client; or
- relates exclusively to financial services which themselves do not require the provision of an FSG because of s941C(2), (3) and (4) or because the financial service would not be provided to the client as a retail client.
4. Consultation
ASIC wrote to select industry and consumer associations and seeking comment on practical difficulties faced by providing entities in complying with s941A and 941B. In particular, the industry associations were asked to consider and comment on the following issues:
- whether the Act allows a licensee to give a tailored FSG and in what circumstances? and
- whether an FSG is required to include information in relation to financial services for which an FSG is not required?
They were also asked to identify practical difficulties faced, the circumstances in which those difficulties arise and the circumstances in which a tailored FSG would be appropriate.
ASIC received responses from one law firm and 3 industry associations. [CO 05/27] takes into account those responses received.