Overview

The Australian Securities and Investments Commission (ASIC) Class Order [CO 11/617] was introduced in 2011 under the Corporations Act 2001 to address the need for more flexibility and time for financial product issuers to transition to a new shorter Product Disclosure Statement (PDS) regime. This regime was established to streamline the disclosure process for superannuation products and simple managed investment schemes, requiring a maximum of eight pages for the PDS with specific headings and content. The class order was enacted to provide an additional method for issuers to opt into the new regime, namely by notifying ASIC in writing or electronically. This was in response to consultations with industry bodies such as the Financial Services Council and the Association of Superannuation Funds of Australia, and it aimed to give issuers more time to implement the necessary changes, with an option to transition from 22 June 2011 if ready. The order serves as a temporary measure until the relevant legislative amendments or similar regulatory changes are made, or until 22 June 2012.

Scope and Application

ASIC Class Order [CO 11/617] applies to financial product issuers under the Corporations Act 2001, specifically those who provide superannuation products and simple managed investment schemes. This class order modifies the transitional arrangements set forth in the earlier ASIC Class Order [CO 11/576], providing an additional method for issuers to transition to the new shorter Product Disclosure Statement (PDS) regime. This regime mandates that PDSs for these products be no longer than eight pages and adhere to specific headings and content requirements. The class order is applicable on a national level within Australia and remains in effect until either 22 June 2012 or the commencement of any legislative amendments that render the class order redundant, whichever occurs first. Issuers can remain under the old regime until 22 June 2012, continue to issue supplementary PDSs until that date, and may choose to opt into the new regime from 22 June 2011 if they are prepared. This class order provides flexibility by allowing issuers to notify ASIC of their decision to opt in via a written or electronic statement.

Key Provisions

The main operative sections of ASIC Class Order [CO 11/617] are those that allow a Product Disclosure Statement (PDS) issuer to opt into the new shorter PDS regime. Specifically, Section 1 amends the principal class order [CO 11/576] to provide an additional means for PDS issuers to transition to the new regime. This is achieved by allowing issuers to give written or electronic notification to ASIC, as stated in Section 2 of the Explanatory Statement. This amendment provides flexibility to issuers who are not yet ready to transition by 22 June 2012 but are well advanced in their preparations. The obligations imposed on PDS issuers by this Class Order include the requirement to notify ASIC of their intention to opt into the new shorter PDS regime by 22 June 2012. This notification can be made in writing or electronically, as outlined in Section 1. Furthermore, the PDS for the product must contain a statement indicating that it is prepared in accordance with the shorter PDS regime, as specified in Section 3 of the principal class order. This ensures transparency and compliance with the new regulatory requirements. Failure to comply with the provisions of the Class Order may result in civil or criminal consequences. Specifically, if a PDS issuer does not properly notify ASIC of their intention to opt into the new regime, they may be in breach of the Class Order. This breach could potentially lead to enforcement actions by ASIC, which might include fines or other penalties as outlined in the Corporations Act 2001. The maximum penalties for contravening provisions of the Act can be significant, depending on the nature and severity of the breach. For instance, individuals could face fines of up to $210,000 and/or imprisonment for up to five years, while corporations could be fined up to $1.05 million. Additionally, under the Class Order, any non-compliance with the transitional arrangements could lead to ASIC taking corrective measures. This might include requiring the issuer to revert to the old PDS regime or to correct the non-compliant PDS. Such actions aim to ensure that all PDSs meet the required standards and that issuers do not unfairly advantage themselves by non-compliance. The penalties for non-compliance are intended to deter issuers from bypassing the requirements set out in the Class Order and the associated regulations.