Superannuation disclosure
On 16 September 2002, the Federal Opposition successfully moved a motion in the Senate to disallow FSR regulations relating to the disclosure of fees and charges for superannuation and related financial products.
- Background
- Initial response to the Notice of Disallowance
- Effect of the Notice of Disallowance on superannuation disclosure
- Hawking of financial products
Last updated 11 March 2003.
Background
The process leading up to the disallowance officially started on 18 June 2002 when Senator Stephen Conroy (Deputy Opposition Leader in the Senate and Shadow Minister for Finance, Small Business and Financial Services) gave notice in the Senate that he would move a motion that FSR regulations relating to additional disclosure requirements for superannuation product disclosure statements (PDS) and anti-hawking be disallowed.1
The Opposition's objections to these regulations2 were that:
- the additional disclosure requirements for PDSs for superannuation products and retirement savings accounts (which principally related to fees and charges) should also apply to other financial products so that consumers could meaningfully compare different financial products; and
- the prescribed hours (generally between 8am and 9pm) during which unsolicited contact could be made for the purpose of offering some types of financial products were too broad and, in effect, diluted the effectiveness of the hawking prohibition introduced under the FSR regime.
Initial response to the Notice of Disallowance
Not surprisingly, the Government was critical of the Opposition's actions in issuing the Notice of Disallowance, particularly in relation to the disclosure regulations. There was concern that as the regulations had already been in force for some time, the Notice of Disallowance would cause confusion and significant inconvenience for industry participants; many had already issued PDSs under the disclosure regulations and others were in the process of preparing to opt in to the new product disclosure regime. However, despite this criticism, the Government seemed unprepared at that time to negotiate with the Opposition parties to try to achieve a workable alternative to provide certainty for the industry.
There was a mixed reaction from industry bodies. While some had previously also been critical of the regulations, particularly the disclosure regulations3, others, such as the Investment and Financial Services Association, supported the superannuation disclosure regulations.
Effect of the Notice of Disallowance on superannuation disclosure
As a result of the Opposition's successful disallowance of the superannuation disclosure regulations, those regulations ceased to have any effect from 16 September 2002 and there is now no separate prescribed disclosure model for superannuation and related financial products. The Notice of Disallowance meant that schedule 10B of the Corporations Regulations 2001 (Cth), which had set out the relevant disclosure requirements, was no longer in force. Superannuation product disclosure, along with other financial products, is now regulated by the provisions of Part 7.9 of the Corporations Act 2001 (Cth), which require "clear, concise and effective" disclosure.
The Government has indicated it proposes to leave this new disclosure regime in place until the end of the FSR transition period (11 March 2004) so that industry participants can transition to FSR with certainty and so that participants and consumers can be confident that the rules will remain the same for the transition period. It remains to be seen whether the Opposition will pressure the Government to re-draft the regulations before transition ends but this now seems unlikely.
Hawking of financial products
The Government agreed that the permitted hawking times should exclude Sundays and other main public holidays. As a result, the Notice was amended so that the proposed disallowance of this regulation was not included in the motion moved by the Opposition. The Government undertook to amend the Corporations Regulations as soon as possible to deal with these matters and the necessary amending regulations have now been made4.
- The disallowance motion related to:
- regulations 7.9.10 and 7.9.11 of the Corporations Amendment Regulations 2001 (No.4) as contained in Statutory Rules 2001 No 319;
- regulations 7.9.10, 7.9.11(1), 7.9.11(1)(a), 7.9.11(1)(b) and 7.9.11(2) of the Corporations Amendment Regulations 2002 (No.2) as contained in Statutory Rules 2002 No 16;
- regulation 7.8.22 of the Corporations Amendment Regulations 2002 (No.3) as contained in Statutory Rules 2002 No 41.
- These reasons were set out in a media statement released by Senator Conroy and Senator Nick Sherry (the Shadow Minister for Retirement Incomes and Savings) issued on 18 June.
- The Association of Superannuation Funds of Australia and the Australian Consumers Association had publicly expressed concerns about the regulations.
- On 6 November 2002, the Corporations Amendment Regulations 2002 (No 8) (released in draft on 24 September 2002), which prohibit hawking of some financial products on Sundays, received Royal Assent. On 11 March 2003, the Corporations Amendment Regulations 2003 (No 1) (released in draft on 13 December 2002), which extend the hawking ban on some financial products to all national public holidays, received Royal Assent. (For further information, refer to our Breaking News items for 24 September 2002, 6 November 2002, 13 December 2002 and 11 March 2003.)
