Federal poll delays dollar disclosure timeframe

The Federal election has thrown the January 1, 2005, deadline for fund managers and advisers to disclose all fees as dollar amounts into disarray, with the peak regulator holding off releasing its final disclosure policy until after the poll.

The situation is blurred further with the Investments and Financial Services Association (IFSA) making a submission to the Australian Securities and Investments Commission (ASIC) requesting at least six months to incorporate the final policy ruling once it is released.

The changes to disclosure rules require fund managers and advisers to disclose fees in statements of advice and product disclosure and periodic statements in dollar terms by January 1, 2005.

In early August, ASIC indicated it was aiming to finalise its policy on the format for the dollar disclosure of fees by as early as October.

However, a spokesperson for the regulator says this has now been put on ice pending the outcome of the Federal election.

Meanwhile, IFSA says its members will need up to six months to update their systems to incorporate the final definition of what constitutes dollar disclosure, including how they will calculate the Total Expense Ratio (TER) — part of the formula for determining dollar disclosure.

This would push the date of likely compliance back to mid-2005.

“Eight weeks would be the quickest turnaround but the reality is it’s going to be at least six months until we are able to meet the full disclosure obligations,” IFSA deputy chief executive officer John O’Shaughnessy says.

“It would be physically impossible [to meet the January 1 deadline] and obviously you’ve got constraints such as Christmas to consider, so six months is a sensible period for what is quite a significant amount of work,” he adds.

O’Shaughnessy says IFSA members also have issues relating to legacy products and systems that are over 15 years old.

“While we have the ability to enhance these systems, we will probably look for some form of relief. None of these products are open to new business. It’s more about keeping existing customers better informed,” he says.