Financial Services Reform Act 2001 (122 of 2001)

Schedule 1   Financial Services and Markets

Part 1   Main amendments

Corporations Act 2001

1   Chapter 7 - Part 7.9 - Division 3

Division 3 - Other disclosure obligations of the issuer of a financial product

1017A Obligation to give additional information on request

Obligation to give information

(1) The following people may request the person who is the responsible person for a Product Disclosure Statement for a financial product under Division 2 to provide further information about the product:

(a) a person who:

(i) has been or should have been given, or who has obtained, the Product Disclosure Statement for the financial product; and

(ii) is not a holder of the financial product;

(b) a financial services licensee;

(c) an authorised representative of a financial services licensee;

(e) a person who is not required to hold an Australian financial services licence because the person is covered by:

(i) paragraph 911A(2)(j); or

(ii) an exemption in regulations made for the purposes of paragraph 911A(2)(k); or

(iii) an exemption specified by ASIC for the purposes of paragraph 911A(2)(l).

(2) The responsible person must give the person the information if:

(a) the financial product is offered in this jurisdiction or the Product Disclosure Statement is given or obtained in this jurisdiction; and

(b) the responsible person has previously made the information generally available to the public; and

(c) the information might reasonably influence a person’s decision, as a retail client, whether to acquire a financial product to which the Statement relates; and

(d) it is reasonably practicable for the responsible person to give the person the information; and

(e) the person pays any charge payable under subsection (5).

The responsible person does not need to give information that is contained in the Product Disclosure Statement.

Note 1: Paragraph (b) - This requirement means that the responsible person does not have to disclose material that is confidential because it is:

(a) an internal working document; or

(b) personal information about another person; or

(c) a trade secret or other information that has a commercial value that would be reduced or destroyed by the disclosure; or

(d) material that the responsible person owes another a person a duty not to disclose.

Note 2: Information in a Supplementary Product Disclosure Statement is taken to be contained in the Product Disclosure Statement it supplements (see section 1014D).

(3) The responsible person must take reasonable steps to ensure that, as soon as practicable after receiving the request, and in any event within one month, subsection (2) is complied with.

Manner of giving information

(4) The responsible person may give the person making the request the information:

(a) by making a document containing the information available for inspection by the person:

(i) at a suitable place (having adequate facilities for the person to inspect and photocopy the document); and

(ii) during normal business hours; or

(b) in some other way that is agreed between the responsible person and the person making the request.

Issuer or seller may charge for giving information

(5) The responsible person may require the person making the request to pay a charge for obtaining the information.

(6) The amount of the charge must not exceed the reasonable costs that the responsible person incurs that are reasonably related to giving the information (including any costs incurred in photocopying the document containing the information).

Note: This would include the costs of searching for, obtaining and collating the information.

1017B Ongoing disclosure of material changes and significant events

Responsible person must notify holders

(1) If:

(a) a person (the holder ) acquired a financial product as a retail client; and

(b) either:

(i) the financial product was offered in this jurisdiction; or

(ii) the holder applied for the financial product in this jurisdiction; and

(c) the product is not specified in regulations made for the purposes of this paragraph; and

(d) a Product Disclosure Statement was, or should have been, produced for the product;

the person who is the responsible person for the Product Disclosure Statement for the financial product under Division 2 must, in accordance with subsections (3) to (8), notify the holder of:

(e) any material change to any of the matters specified, or that should have been specified, in the Statement that occurs while the holder holds the product; or

(f) any significant event that affects any of the matters specified, or that should have been specified, in the Statement and that occurs while the holder holds the product.

Note 1: Information in a Supplementary Product Disclosure Statement is taken to be contained in the Product Disclosure Statement it supplements (see section 1014D).

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The responsible person does not need to give the notice if the financial product is a managed investment product that is an ED security.

Note 1: The continuous disclosure provisions in Chapter 6CA (sections 674-677) apply to managed investment products that are ED securities.

Note 2: A defendant bears an evidential burden in relation to the matters in this subsection.

(3) The responsible person must notify the holder in one of the following ways:

(a) in writing; or

(b) electronically; or

(c) in a way specified in the regulations.

(4) The notice must give the holder the information that is reasonably necessary for the holder to understand the nature and effect of the change or event.

Time for notifying holders

(5) The time within which the responsible person must give the notice is set out in the following table:

(6) If the change or event is not an increase in fees or charges, the notice may be given more than 3 months after the change or event occurs if:

(a) the responsible person reasonably believes that the event is not adverse to the holder’s interests and accordingly the holder would not be expected to be concerned about the delay in receiving the information; and

(b) the notice is given no later than 12 months after the change or event occurs.

(7) If the change or event might result in an increase in fees or charges, this section applies to the change or event as if it would result in an increase in fees or charges.

(8) In any proceedings against the responsible person for an offence based on subsection (1), it is a defence if the responsible person took reasonable steps to ensure that the other person would be notified of the matters required by subsection (1) in accordance with subsections (3) to (8).

Note: A defendant bears an evidential burden in relation to the matters in subsection (8). See subsection 13.3(3) of theCriminal Code.

(9) In this section:

fees or charges does not include fees or charges payable under a law of the Commonwealth or of a State or Territory.

1017C Information for existing holders of superannuation products and RSA products

Application

(1) This section applies to the responsible person for a Product Disclosure Statement for a financial product if the product is:

(a) a superannuation product; or

(b) an RSA product.

Information for concerned person

(2) Subject to subsection (4), the responsible person must, on request by a concerned person, give the concerned person information that the concerned person reasonably requires for the purposes of:

(a) understanding any benefit entitlements that the concerned person may have, has or used to have under the financial product; or

(b) understanding the main features of:

(i) the relevant sub-plan; or

(ii) the responsible person if there is no relevant sub-plan; or

(c) making an informed judgment about the management and financial condition of:

(i) the responsible person; and

(ii) the relevant sub-plan (if any); or

(d) making an informed judgment about the investment performance of:

(i) the relevant sub-plan; or

(ii) the responsible person if there is no relevant sub-plan; or

(e) understanding the particular investments of:

(i) the relevant sub-plan; and

(ii) the responsible person.

The information must be given in accordance with the other requirements of this section.

Note 1: Subsection (9) defines concerned person .

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Information for employer-sponsor

(3) Subject to subsection (4), the responsible person must, on request by an employer-sponsor, give the employer-sponsor information that the employer-sponsor reasonably requires for the purposes of:

(a) understanding the kinds of benefits to which the employer-sponsor’s employees are entitled or will or may become entitled, and the main features of:

(i) the relevant sub-plan; or

(ii) the responsible person if there is no relevant sub-plan; or

(b) making an informed judgment about the management and financial condition of:

(i) the responsible person; and

(ii) the relevant sub-plan (if any); or

(c) making an informed judgment about the investment performance of:

(i) the relevant sub-plan; or

(ii) the responsible person if there is no relevant sub-plan; or

(d) a matter related to theSuperannuation Guarantee (Administration) Act 1992.

The information must be given in accordance with the other requirements of this section.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Exceptions

(4) This section does not require (and does not, by implication, authorise) the disclosure of:

(a) internal working documents of the responsible person; or

(b) information or documents that would disclose, or tend to disclose:

(i) personal information of another person if, in the circumstances, the disclosure would be unreasonable; or

(ii) trade secrets or other information having a commercial value that would be reduced or destroyed by the disclosure; or

(c) information or documents in relation to which the responsible person owes to another person a duty of non-disclosure.

Note: A defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of theCriminal Code.

Specific requirements

(5) The responsible person must, on request in writing by a concerned person or an employee-sponsor, give the concerned person or the employer-sponsor:

(a) a copy of a prescribed document (to the extent the responsible person has access to the document) specified in the request; or

(b) prescribed information (to the extent to which the responsible person has or has access to the information) specified in the request.

The document or information must be given in accordance with the other requirements of this section.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(6) Subsection (5) does not apply if the responsible person is the trustee of a self-managed superannuation fund.

Documents may be made available for inspection

(7) It is sufficient compliance with a requirement imposed by this section on the responsible person to give information, or to give a copy of a document, to a person (the client ) if:

(a) a document containing the information; or

(b) a copy of the document;

is made available for inspection by the responsible person:

(c) at a suitable place (having adequate facilities for the person to inspect and photocopy the document); and

(d) during normal business hours;

or as otherwise agreed between the responsible person for the financial product and the client.

Time for compliance

(8) The responsible person must comply with a request to give information, or a copy of a document, as soon as practicable. The responsible person must, in any event, make reasonable efforts to comply with the request within 1 month of receiving the request.

Definitions

(9) In this section:

concerned person means a person who:

(a) is, or was within the preceding 12 months, a member of the responsible person to which the request is made; or

(b) is a beneficiary of the responsible person to which the request is made.

relevant sub-plan , in relation to a superannuation product or an RSA product, has the meaning given by the regulations.

1017D Periodic statements for retail clients for financial products that have an investment component

(1) If:

(a) a person (the holder ) of a financial product acquired the financial product as a retail client (whether or not it was acquired from the issuer); and

(b) the product is:

(i) a managed investment product; or

(ii) a superannuation product; or

(iii) an RSA product; or

(iv) an investment life insurance product; or

(v) a deposit product; or

(vi) specified in regulations made for the purposes of this paragraph; and

(c) either:

(i) the financial product was offered in this jurisdiction; or

(ii) the holder applied for the financial product in this jurisdiction;

the issuer of the product must, in accordance with subsections (2) to (6), give the holder a periodic statement for each reporting period during which the holder holds the product.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) The following provisions apply in relation to reporting periods:

(a) each reporting period lasts for a period, not exceeding 1 year, determined by the issuer;

(b) the first reporting period starts when the holder acquired the product;

(c) each subsequent reporting period starts at the end of the preceding reporting period;

(d) if the holder ceases to hold the product, the period starting at the end of the preceding reporting period and ending when the holder ceases to hold the product is a reporting period.

(3) The periodic statement must be given as soon as practicable after, and in any event within 6 months after, the end of the reporting period to which it relates.

(4) The periodic statement must give the holder the information that the issuer reasonably believes the holder needs to understand his or her investment in the financial product.

(5) The periodic statement must include the following if they are relevant to the financial product:

(a) opening and closing balances for the reporting period;

(b) the termination value of the investment at the end of the reporting period (to the extent to which it is reasonably practicable to calculate that value for the investment or a component of the investment);

(c) a summary of all transactions in relation to the product during the reporting period, indicating the nature and purpose of those transactions;

(d) any increases in contributions in relation to the financial product by the holder or another person during the reporting period;

(e) return on investment during the reporting period (on an individual basis if reasonably practicable to do so and otherwise on a fund basis);

(f) details of any change in circumstances affecting the investment that has not been notified since the previous periodic statement;

(g) details prescribed by regulations made for the purposes of this paragraph.

(6) The periodic statement must be given in one of the following ways:

(a) in writing; or

(b) electronically; or

(c) in a way specified in the regulations.

(7) The periodic statement need not be given if the issuer has already given the holder all the information that would be included in the periodic statement if it were to be given.

Note: A defendant bears an evidential burden in relation to the matters in this subsection.

1017DA Trustees of superannuation entities - regulations may specify additional obligations to provide information

(1) The regulations may:

(a) require the trustee of a superannuation entity to do all or any of the following:

(i) provide information to the holder of a superannuation product (being an interest in that entity) with information relating to the management, financial condition and investment performance of the entity and/or of any relevant sub-plan (within the meaning of section 1017C);

(ii) provide information to the holder or former holder of a superannuation product (being an interest in that entity), or to any other person to whom benefits under the product are payable, with information relating to his or her benefit entitlements;

(iii) provide information to the holder of a superannuation product (being an interest in the entity) with information about arrangements for dealing with inquiries and/or complaints relating to the product; or

(b) require an RSA provider to do either or both of the following:

(i) provide information to the holder or former holder of an RSA product provided by the RSA provider, or to any other person to whom benefits under the product are payable, with information relating to his or her benefit entitlements;

(ii) provide information to the holder of an RSA product provided by the RSA provider with information about arrangements for dealing with inquiries and/or complaints relating to the product.

(2) Without limiting subsection (1), regulations made for the purposes of that subsection may deal with all or any of the following:

(a) what information is to be provided;

(b) when information is to be provided;

(c) how information is to be provided.

(3) The trustee of a superannuation entity, or an RSA provider, must provide information in accordance with any applicable requirements of regulations made for the purposes of subsection (1).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) In this section:

RSA provider has the same meaning as in theRetirement Savings Accounts Act 1997.

superannuation entity has the same meaning as in the Superannuation Industry (Supervision) Act 1993.

1017E Dealing with money received for financial product before the product is issued

(1) This section applies to money paid to:

(a) an issuer (the product provider ) of financial products; or

(b) a seller (the product provider ) of financial products in relation to which the seller has prepared a Product Disclosure Statement;

if:

(c) the money is paid to acquire, or acquire an increased interest in, one or more of those financial products from the product provider (whether or not the acquisition would be by a person as a retail client); and

(d) the product provider does not, for whatever reason, issue or transfer the product or products, or the increased interest, immediately after receiving the money; and

(e) either:

(i) the financial product or increased interestwas offered in this jurisdiction; or

(ii) the application for the financial product or increased interestwas made in this jurisdiction; or

(iii) the money was received in this jurisdiction.

(2) The product provider must ensure that the money is paid into an account that satisfies these requirements:

(a) the account is:

(i) with an Australian ADI; or

(ii) of a kind prescribed by regulations made for the purposes of this paragraph;

and is designated as an account for the purposes of this section of this Act; and

(b) the only money paid into the account is:

(i) money to which this section applies; or

(ii) interest on the amount from time to time standing to the credit of the account; and

(c) if regulations made for the purposes of this paragraph impose additional requirements - the requirements so imposed by the regulations.

The money must be paid into the account on the day it is received by the product provider, or on the next business day.

Note: See section 1021O for related offences.

(2A) Subject to subsections (2B) and (2C), the money is taken to be held in trust by the product provider for the benefit of the person who paid the money.

(2B) Subsection (2A) does not apply to money that the product provider and the person who paid the money agree in writing is not held in trust by the product provider for the benefit of the person.

(2C) The regulations may:

(a) provide that subsection (2A) does not apply in relation to money in specified circumstances; and

(b) provide for matters relating to the taking of money to be held in trust (including, for example, terms on which the money is taken to be held in trust and circumstances in which it is no longer taken to be held in trust).

(3) The money must only be taken out of the account if:

(a) it is taken out for the purpose of return to the person by whom it was paid; or

(b) the product is issued or transferred to, or in accordance with the instructions of, that person; or

(c) it is taken out for a purpose specified by regulations made for the purposes of this paragraph; or

(d) it is taken out in a situation specified by regulations made for the purposes of this paragraph.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(4) The product provider must:

(a) return the money; or

(b) issue or transfer the product to, or in accordance with the instructions of, the person who paid the money; or

(c) if the money is taken out:

(i) for a purpose specified by regulations made for the purposes of paragraph (3)(c); or

(ii) in a situation specified by regulations made for the purposes of paragraph (3)(d);

do any action required, by regulations made for the purposes of this paragraph, after taking out that money;

either:

(d) before the end of one month starting on the day on which the money was received; or

(e) if it is not reasonably practicable to do so before the end of that month - by the end of such longer period as is reasonable in the circumstances.

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(5) The product provider may, for the purposes of this section, maintain a single account or 2 or more accounts.

(6) Nothing in this section, or in regulations made for the purposes of this section, makes the body (not being the product provider) that the account is with under paragraph (2)(a) subject to any liability merely because of a failure by the product provider to comply with any of the provisions of this section or those regulations.

1017F Confirming transactions

Transactions to which this section applies

(1) This section applies in relation to a transaction involving a financial product if:

(a) a person (the holder ) acquired the product as a retail client; and

(b) the transaction is:

(i) the transaction by which the holder acquired the product; or

(ii) a transaction that occurs while the holder holds the product, including a transaction by which the holder disposes of all or part of the product (and see also subsection (3)); and

(c) the transaction is not one that does not require confirmation because of subsection (4); and

(d) the holder has not, in accordance with regulations made for the purposes of paragraph (9)(d), waived their right to be provided with confirmation of the transaction; and

(e) either:

(i) the financial product was offered to, or acquired by, the holder in this jurisdiction; or

(ii) the transaction takes place in this jurisdiction.

Note: This section extends to financial products that are securities (see section 1010A).

Obligation to confirm transactions

(2) The person (the responsible person ) specified in column 3 of an item in the following table must provide the holder with confirmation of the transaction specified in column 2 of the same item. The confirmation must be provided in accordance with subsections (5) to (8).

Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).

Examples of transactions that are covered by subparagraph (1)(b)(ii)

(3) Without limiting the generality of subparagraph (1)(b)(ii), the transactions that are covered by that subparagraph include:

(a) varying the terms of the financial product while the holder holds the product (unless subsection (4) provides that the variation does not require confirmation); and

(b) the redemption or surrender of the financial product from or by the holder.

Transactions that do not require confirmation

(4) The following transactions do not require confirmation:

(a) a transaction consisting solely of an additional contribution towards the financial product in either of the following circumstances:

(i) the timing and amount, or method of calculating the amount, of the additional contribution was agreed on when the product was acquired by the holder;

(ii) the additional contribution is an amount that is payable under the terms of the product because of an increase in an external factor, such as a person’s salary, an inflation index or a rate of a tax or levy;

(b) if the financial product is a security - a transaction consisting solely of a variation of the rights attaching to the security;

(c) if the financial product is a deposit product - any of the following transactions:

(i) a withdrawal from the deposit product pursuant to a cheque drawn on the account;

(ii) a deposit to, or withdrawal from, the deposit product under a direct credit arrangement or a direct debit arrangement;

(iii) crediting interest to the deposit product;

(iv) debiting the deposit product for fees or charges in respect of the product or transactions involving the product;

(v) debiting the deposit product for charges or duties on deposits into, or withdrawals from, the product that are payable under a law of the Commonwealth or of a State or Territory;

(vi) a transaction of a kind specified in regulations made for the purposes of this subparagraph;

(d) a variation of the terms of all financial products in the class to which the financial product belongs;

(e) a transaction of a kind specified in regulations made for the purposes of this paragraph.

Note 1: Because of subparagraph (a)(i), confirmation is not required, e.g., for regular monthly contributions to a superannuation fund.

Note 2: A defendant bears an evidential burden in relation to the matters in this subsection.

Confirmation may be provided on a transaction-by-transaction basis or by means of a standing facility

(5) Confirmation of a transaction must be provided:

(a) by confirming the transaction in accordance with subsections (6) to (8), to the holder as soon as is reasonably practicable after the transaction occurs; or

(b) subject to subsection (5A), by providing the holder with access to a facility through which they can, for themselves, get a confirmation of the transaction in accordance with subsections (6) to (8) as soon as is reasonably practicable after the transaction occurs.

An arrangement under which the holder may request or require another person to provide a confirmation does not count as a facility that satisfies paragraph (b).

When confirmation may be provided by means of a standing facility

(5A) Confirmation may only be provided by means of a facility as mentioned in paragraph (5)(b) if:

(a) the holder concerned has agreed that confirmation of transactions involving the product may be provided by means of the facility; or

(b) the holder concerned:

(i) has, in accordance with the applicable requirements (if any) in regulations made for the purposes of this subparagraph, been informed, by or on behalf of the responsible person, about the facility and its availability to the holder as a means of obtaining confirmation of transactions involving the product; and

(ii) has not advised the responsible person that the holder does not agree to use the facility as a means of obtaining such confirmations.

Means of confirmation

(6) The confirmation of the transaction:

(a) must be:

(i) in writing; or

(ii) electronic; or

(iii) in some other form applicable under regulations made for the purposes of this paragraph; and

(b) may be provided:

(i) in a case to which paragraph (5)(a) applies - directly by the responsible person or through another person (such as a financial services licensee); or

(ii) in a case to which paragraph (5)(b) applies - through a facility provided directly by the responsible person, or provided on behalf of the responsible person by someone else.

Content of confirmation

(7) The confirmation of the transaction must give the holder the information that the responsible person reasonably believes the holder needs (having regard to the information the holder has received before the transaction) to understand the nature of the transaction.

(8) Without limiting subsection (7), the confirmation of the transaction must:

(a) identify the issuer and the holder; and

(b) if required to be given by a person other than the issuer - identify that person; and

(c) give details of the transaction, including:

(i) the date of the transaction; and

(ii) a description of the transaction; and

(iii) subject to regulations made for the purposes of this subparagraph - any amount paid or payable by the holder in relation to the transaction; and

(iv) subject to any regulations made for the purposes of this subparagraph - any taxes and stamp duties payable in relation to the transaction; and

(d) give any other details prescribed by regulations made for the purposes of this paragraph.

Regulations may provide for modification or waiver of confirmation obligation

(9) The regulations may do all or any of the following:

(a) modify subsection (2) to change the person required to provide confirmation of a transaction;

(b) modify subsections (5) and (6) to expand on or change the way in which confirmation of a transaction must be provided in particular circumstances;

(c) modify subsections (7) and (8) to expand on or change the information that must be included in the confirmation of a transaction in particular circumstances;

(d) specify the circumstances in which a person may waive the right to be provided with confirmation of a transaction, and specify how such a waiver may be made.

1017G Certain product issuers and regulated persons must meet appropriate dispute resolution requirements

(1) If:

(a) particular financial products are, or have been, available for acquisition (whether by issue or sale) by a person or persons as retail clients; and

(b) the issue or sale of those products is not covered by an Australian financial services licence;

both the issuer, and any regulated person obliged under subsection 1012C(5), (6) or (8) to give a retail client a Product Disclosure Statement for one or more of those financial products, must each have a dispute resolution system complying with subsection (2).

Note 1: If the issue of particular financial products is covered by an Australian financial services licence, the requirement to have a dispute resolution system relating to the issue of the products is imposed by paragraph 912A(1)(g).

Note 2: Failure to comply with this subsection is an offence (see subsection 1311(1)).

(2) To comply with this subsection, a dispute resolution system must consist of:

(a) an internal dispute resolution procedure that:

(i) complies with standards, and requirements, made or approved by ASIC in accordance with regulations made for the purposes of this subparagraph; and

(ii) covers complaints, against the person required to have the system, made by retail clients in relation to financial services provided in relation to any of those products; and

(b) membership of one or more external dispute resolution schemes that:

(i) is, or are, approved by ASIC in accordance with regulations made for the purposes of this subparagraph; and

(ii) covers, or together cover, complaints (other than complaints that may be dealt with by the Superannuation Complaints Tribunal established by section 6 of theSuperannuation (Resolution of Complaints) Act 1993), against the person required to have the system, made by retail clients in relation to financial services provided in relation to any of those products.

(3) Regulations made for the purposes of subparagraph (2)(a)(i) or (2)(b)(i) may also deal with the variation or revocation of:

(a) standards or requirements made by ASIC; or

(b) approvals given by ASIC.