Key changes to RG97

ASIC’s changes to the fees and costs disclosure regime for superannuation products and collective investment products (ie managed investment products and notified foreign passport fund products) in Instrument 2019/1070 and RG 97 largely implement ASIC’s proposals under its earlier consultation.  The changes relate to the presentation of fees and costs in Product Disclosure Statements (PDSs) and periodic statements, and the inclusion and exclusion of certain items in the calculations of fees and costs.  Initially the new fees and costs disclosure requirements apply to a PDS issued on or after 30 September 2020 and a periodic statement for a reporting period commencing on or after 1 July 2021. 

Subsequent to this in July 2020 ASIC released the updated RG97 responding to industry consultation and COVID-19 disruption, and advised that a PDS issued on or after 30 September 2020 could opt into the new regime and it would only become mandatory for documents issued on or after 30 September 2022.  As Equity Trustees was at an advanced stage of our project, we have continued our roll out timetable due to resourcing and timetables already being deployed.

In summary the changes are:

• To further explain why fees and costs must be disclosed.
  
  
• Improve consistency in how fees and cost information is presented in the ‘Fees and costs summary'.
  
  
• In the ‘Additional explanation of fees and costs’, allow issuers to:
  
        - Set out related performance information.
        - Further explanations if the issuer believes the average performance fee figure based on the previous five financial years is not representative
         for the coming period.
  
  
• Clarify treatment about amounts paid by third parties or offset against other amounts.
  
  
• Incorporate ASIC’s Q&As (so the Q&As can be removed from ASIC’s website).
  
  
• Generally improve clarity of disclosure.
  
  
• ‘Fees and costs summary’ as prescribed in Schedule 10 of Corporations Regulations 2001, has been amended through the re-grouping and re-naming of the fees and costs with clear labelling of: 1. Ongoing entity related fees and costs & 2. Member activity related fees and costs.
  
  
• Ongoing fees has been further simplified through segregation into 3 groups: 1. Administration fees such as costs for marketing, custody, etc. 2. Investment fees such as cost of expertise for investments. & 3. Transactions costs such as brokerage costs.
  
  
• A single ‘Cost of product information’ is prescribed to ensure comparable information is available to consumers.  The Cost of product information would include the total cost of investing in that product.
  
  
• Fees and costs disclosure in Periodic Statements has been simplified by re-grouping and re-naming the fees and costs as: 1 .Fees deducted directly from your account, 2. Fees and costs deducted from your investments & 3. Total fees and costs paid by you.
  
  
• The amended RG97 defines the following as “Excluded transaction and operational costs”, 1. Borrowing costs, 2. Property operating costs, 3. Implicit transaction costs or market impact costs such as bid ask spreads.  (All of these costs have been excluded as these have been identified as costs categories that are hard to accurately measure consistently and have limited value for users).
  
  
• In relation to platforms, ASIC states in RG97 that it expects platform operators to include a prominent statement in their ‘Fees and costs summary’ to the effect that fees and costs charged by the platform relate only to accessing the financial products, and do not include fees and costs that may be charged by the issuers of those financial products.

Equity Trustees has commenced the work of updating our Fund Manager PDS documentation to be in line with the reg change outlined above and have been working in conjunction with HIVE Legal to ensure that we comply with the new legislation and can assist our Fund Manager’s with any areas of the new RG97 guidance that is unclear in relation to individual circumstances. 

In a separate phase to this project we shall review the periodic statements and work with the relevant unit registry service providers to ensure compliance with this part of the reg change.  Issuers may ‘opt-in’ early to the new requirements for periodic statements which will commence on 1 July 2021.  Equity Trustees shall be looking at this phase of the project early in 2021 to ensure all periodic statements are also aligned with the RG97 changes.