Regulatory hurdles to incorporation by reference

The Association of Superannuation Funds of Australia (ASFA) has made clear the regulatory and logistical obstacles standing in the way of delivering shorter financial services documentation and incorporation by reference.

In a submission to the Australian Securities and Investments Commission (ASIC), ASFA has strongly supported incorporation by reference and online disclosure, but has made clear it believes considerable obstacles need to be overcome.

The ASFA submission, released this month, suggests that for incorporation by reference to operate effectively, product issuers must be able to provide different disclosure material to different types of clients, but argues that the regulatory environment pertaining to this is contradictory.

It said on this basis, ASIC should issue a guidance note to the industry confirming what types of information could be excluded from a Product Disclosure Statement and confirm that ‘targeted disclosures’ are permissible under the incorporation by reference provisions.

The ASFA submission has also pointed to industry concerns about unintended consequences flowing from making changes to incorporated documents and suggested that if incorporation by reference and online disclosure is to operate efficiently and effectively, the regulator will need to provide guidance or class order relief.

The submission also points out that there is industry concern that any alteration of a particular incorporated document is viewed by ASIC as creating a new document that requires a unique identifier and requested confirmation as to whether, under the current law, a broad interpretation could be applied if the essential nature of a document did not change.