Disclosure of Fees and Charges in Managed Investments: Review of Current Australian Requirements and Proposals for Reform

Australian Securities and Investments Commission, September 2002

U of Melbourne Legal Studies Research Paper Series

253 Pages Posted: 20 Sep 2006

See all articles by Ian Ramsay

Ian Ramsay

Melbourne Law School - University of Melbourne

Abstract

This report was prepared at the request of the Australian Securities and Investments Commission (ASIC) as part of its ongoing commitment to ensure that the objectives of the Financial Services Reform Act 2001 ("FSRA") are achieved. The report focuses upon one aspect of disclosure - disclosure of fees and charges in Product Disclosure Statements ("PDSs") and member or investor periodic statements. As requested by ASIC, the report reviews current Australian disclosure requirements as well as international disclosure requirements, and proposes a number of options for improved disclosure.

Part 2 of the report provides an overview of the FSRA disclosure principles. These principles, as identified by ASIC in Policy Statement 168, are that disclosure should be timely, relevant and complete; promote product understanding; promote comparison of products; highlight important information; and have regard to consumers' needs. Part 2 also provides a description of typical fees and charges that relate to financial products. It also provides statistics on managed funds - both for Australia and internationally. Part 3 of the report identifies problems with disclosure of fees and charges. It is divided into two sections. The first section presents the results of surveys of the adequacy of disclosure of fees and charges in prospectuses. As part of this project, 30 prospectuses relating to various types of superannuation and managed funds were reviewed in order to obtain insight into the adequacy of disclosure of fees and charges.

The second section of Part 3 is a summary of the results of surveys which have been undertaken in the last few years with the objective of testing investors' understanding of fees and charges in prospectuses and other selling documents. These surveys have found that substantial numbers of investors fail to understand the fees that are disclosed in prospectuses.

Part 4 of the report provides an analysis of the law governing disclosure of fees and charges in Australia. It highlights the important changes that have been made under the FSRA and focuses upon the enhanced disclosure requirements for superannuation.

Part 5 of the report provides a detailed review of the regulatory framework for disclosure of fees and charges in managed investments in the United Kingdom, New Zealand, Canada and the USA.

Part 6 of the report identifies options for improved disclosure of fees and charges. It is divided into three sections:

1. options for improved disclosure in PDSs; 2. options for improved disclosure in periodic member statements; and 3. options for implementation and the role of ASIC and industry.

Suggested Citation

Ramsay, Ian, Disclosure of Fees and Charges in Managed Investments: Review of Current Australian Requirements and Proposals for Reform. Australian Securities and Investments Commission, September 2002, U of Melbourne Legal Studies Research Paper Series, Available at SSRN: https://ssrn.com/abstract=931576

Ian Ramsay (Contact Author)

Melbourne Law School - University of Melbourne ( email )

University Square
185 Pelham Street, Carlton
Victoria, Victoria 3010
Australia
+61 3 8344 5332 (Phone)

HOME PAGE: http://law.unimelb.edu.au/about/staff/ian-ramsay

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