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ASIC fee disclosure model is inconsistent, untested and unenforceable.



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J O I N T M E D I A R E L E A S E

Senator Stephen Conroy Deputy Opposition Leader in the Senate Shadow Minister for Financial Services

Senator Nick Sherry Shadow Minister for Retirement Incomes and Savings

ASIC FEE DISCLOSURE MODEL IS INCONSISTENT, UNTESTED and UNENFORCEABLE

ASIC’s good practice model for fee disclosure in product disclosure statements (PDS), will result in inconsistent disclosures by product issuers, is untested by industry and is unenforceable by ASIC.

The model sets out a so-called ‘at a glance table’ for significant fees (‘the table’).

Unfortunately, the table allows product issuers to choose the information that they want to disclose which will result in inconsistent disclosures. This means that investors will be unable to compare ‘like’ products - which seriously impacts on their ability to make informed investment decisions.

The table does not allow investors to compare ‘like with like’ as:

• Product issuers can choose to describe fees in dollar terms or as a percentage; • Product issuers can choose to show fees as gross or net of tax; • Information about commission arrangements are not disclosed in the table;

• There is no requirement to report the “single bottom line” figure; and • The model is principles-based so there is the potential for enormous inconsistencies in information provided by different product issuers.

Other concerns with the table include:

• The table has not been tested by ASIC (ASIC recommends that industry tests it); and • Product issuers are not required to use it - the model itself is optional and unenforceable by ASIC.

Labor believes that ASIC’s ‘at a glance’ table is fundamentally flawed as investors will be unable to compare ‘like’ products and this has a significant impact on their ability to make informed investment decisions.

Senator Campbell and ASIC should go back to the drawing board and come up with a fee disclosure model that allows investors to compare products by requiring dollar disclosure (where possible) and a single bottom line figure. Tuesday, 5 August 2003

Further information: Amber Hawkins 0407 434 523 Rosie Irvine 0414 692 283