As part of the ongoing refinements to the Financial Services Reform Act, the Investment and Financial Services Association (IFSA) is calling for the shortening of Product Disclosure Statements (PDSs) for all financial products through incorporation by reference.
According to Jason Denisenko of Clayton Utz, incorporation would provide investors with the opportunity to refer to another document if they wanted more detailed information, thus reducing the number of pages in a PDS while still satisfying all the necessary disclosure requirements.
“This would facilitate providing consumers with shorter point of sale documents, but still retain access to all the pertinent information relevant to an investment,” he said.
He said this would address the problem of over cumbersome PDSs that were often not being read by consumers because they are were too long and unnecessarily complicated.
Denisenko said the industry needed a disclosure process that was more flexible and that utilised technological advancements, such as the widespread acceptance of the internet.
One suggestion was that a PDS should provide only the most important and relevant information that a consumer was deemed to want and need, and then refer those wanting further explanation to visit the product issuer’s website.
However, Denisenko acknowledged there were some risks associated with this type of disclosure method.
They were that some investors might not have access to the internet, there could be a chance some of the more important information was left out of the upfront PDS, and it would be difficult to keep track of changes being made to documents that were online.
“The industry needs to be given the opportunity to try this as one solution for dealing with issues that have been raised to date in relation to problems with disclosure documents,” Denisenko said.
“But this is only one solution. We need to rethink the purpose of disclosure documents and whose needs we are trying to satisfy — this is just one piece of the puzzle.”
Denisenko said IFSA had submitted a proposal to Government relating to incorporation by reference and was anticipating a response in the near future.
