Corporations and Other Legislation Amendment (Corporate Collective Investment Vehicle Framework) Regulations 2022 (F2022L00469)

Schedule 2   Simple sub-fund products

Corporations Regulations 2001

20   After Schedule 10E

Insert:

Schedule 10F - Form and content of Product Disclosure Statement - simple sub-fund products

(regulation 7.9.11ZE)

1 Length and font size for Product Disclosure Statement for simple sub-fund product

(1) The length of a Product Disclosure Statement for a simple sub-fund product:

(a) to which Subdivision 4.2D of Division 4 of Part 7.9 applies; and

(b) that is referable to a sub-fund of a CCIV;

must not exceed:

(c) if it is printed on A4 pages - 8 pages; or

(d) if it is printed on A5 pages - 16 pages; or

(e) if it is printed on DL pages - 24 pages; or

(f) otherwise - if it is formatted to be printed on A4 pages, 8 A4 pages.

This requirement does not apply to any matter in writing that is applied, adopted or incorporated by the Statement.

(2) The minimum font size for text in the Statement is:

(a) for the name, address, ABN (if applicable), ACN (if applicable) and AFSL (if applicable) of the corporate director of the CCIV - 8 points; and

(b) for the name, address, ABN (if applicable) and ACN (if applicable) of the CCIV - 8 points; and

(c) for the name, ABN (if applicable) and ARFN (if applicable) of the sub-fund of the CCIV - 8 points; and

(d) for all other text - 9 points.

Note 1: The Product Disclosure Statement must be worded and presented in a clear, concise and effective manner - see subsection 1013C(3) of the Act.

Note 2: A person required to a give a Product Disclosure Statement to a vision-impaired person must comply with its obligations under the Disability Discrimination Act 1992.

2 Minimum content of Product Disclosure Statement for simple sub-fund product

(1) The Product Disclosure Statement for the simple sub-fund product must include sections that are numbered and titled as follows:

1. About [name of corporate director]

2. How [name of CCIV and sub-fund] work

3. Benefits of investing in [name of simple sub-fund product]

4. Risks of simple sub-fund products

5. How we invest your money

6. Fees and costs

7. How sub-funds of CCIVs are taxed

8. How to apply.

(2) The Statement must include:

(a) a table of contents that sets out the titles mentioned in subclause (1); and

(b) the telephone number of the corporate director of the CCIV to enable a person who invests in the simple sub-fund product to request a copy of the following under regulation 7.9.11ZH:

(i) a copy of the Statement;

(ii) a copy of a matter in writing that is applied, adopted or incorporated by the Statement.

(3) The Statement must:

(a) advise a person reading the Statement that:

(i) it is a summary of significant information and contains a number of references to important information (each of which forms part of the Statement); and

(ii) persons should consider that information before making a decision about the simple sub-fund product; and

(iii) the information provided in the Statement is general information only and does not take account of the person's personal financial situation or needs; and

(iv) the person should obtain financial advice tailored to the person's personal circumstances; and

(b) display the advice:

(i) at or near the beginning of the document; and

(ii) in a prominent position and style.

(4) The Statement:

(a) may include additional sections after sections 1 to 8; and

(b) may include other information;

to an extent that does not have the effect of contravening subclause 1(1).

(5) The Product Disclosure Statement does not need to indicate that a particular requirement is not applicable to the simple sub-fund product.

Note: The Act, as modified in accordance with Subdivision 4.2D of Division 4 of Part 7.9, requires information to be included in the Product Disclosure Statement only to the extent to which the requirement is applicable to the simple sub-fund product.

3 Contents of section 1 (About [name of corporate director])

(1) Section 1 of the Product Disclosure Statement for the simple sub-fund product must describe, in the form of a summary:

(a) the corporate director of the CCIV and the corporate director's role in operating the CCIV in relation to the sub-fund; and

(b) the investment manager for the sub-fund, if the investment manager for the sub-fund is different from the corporate director of the CCIV.

(2) If there is more than one investment manager for the sub-fund, the Statement may describe a particular manager by applying, adopting or incorporating a matter in writing.

4 Contents of section 2 (How [name of CCIV and sub-fund] work)

(1) Section 2 of the Product Disclosure Statement for the simple sub-fund product must describe, in the form of a summary:

(a) how the CCIV and the sub-fund of the CCIV work; and

(b) the rights and interests that members of the sub-fund of the CCIV acquire.

(2) Section 2 must:

(a) if applicable - describe, in the form of a summary, the minimum investment amounts; and

(b) provide information about the structure of the CCIV and the sub-fund of the CCIV; and

(c) state, in general terms, that the value of securities will vary as the market value of the assets of the sub-fund of the CCIV rise or fall; and

(d) describe, in the form of a summary, how members of the sub-fund can increase or decrease their investment by acquiring securities or disposing of securities; and

(e) state, in general terms, that in some circumstances, such as when there is a freeze on redemptions, members of the sub-fund may not be able to redeem shares or dispose of securities within the usual period upon request; and

(f) describe the frequency of distributions and explain how distributions are calculated.

(3) The CCIV:

(a) may provide more detailed information on the acquisition and disposal of securities; and

(b) may provide the information by applying, adopting or incorporating a matter in writing.

5 Contents of section 3 (Benefits of investing in [name of simple sub-fund product])

(1) Section 3 of the Product Disclosure Statement for the simple sub-fund product must, before setting out any other information, describe, in the form of a summary:

(a) the significant features of the simple sub-fund product; and

(b) the significant benefits of the simple sub-fund product.

(2) The CCIV may provide additional information about:

(a) any feature or benefit of the simple sub-fund product; or

(b) other features and benefits of the simple sub-fund product; or

(c) other features and benefits of simple sub-fund products;

by applying, adopting or incorporating a matter in writing.

6 Contents of section 4 (Risks of simple sub-fund products)

(1) Section 4 of the Product Disclosure Statement for the simple sub-fund product must include statements to the following effect:

(a) all investments carry risk;

(b) different strategies may carry different levels of risk, depending on the assets that make up the strategy;

(c) assets with the highest long-term returns may also carry the highest level of short-term risk.

(2) Section 4 must describe, in the form of a summary, the significant risks of the particular simple sub-fund product.

(3) Section 4 must describe the significant risks of simple sub-fund products (to the extent only that the description required by subclause (2) has not already described the risk) by including statements to the following effect:

(a) the value of investments will vary;

(b) the level of returns will vary, and future returns may differ from past returns;

(c) returns are not guaranteed, and members may lose some of their money;

(d) laws affecting CCIVs may change in the future;

(e) the level of risk for each person will vary depending on a range of factors, including:

(i) age; and

(ii) investment time frames; and

(iii) where other parts of the person's wealth are invested; and

(iv) the person's risk tolerance.

(4) The CCIV may provide additional information about significant risks of simple sub-fund products by applying, adopting or incorporating a matter in writing.

7 Contents of section 5 (How we invest your money)

(1) Section 5 of the Product Disclosure Statement for the simple sub-fund product must describe, in the form of a summary, the investment options offered by the CCIV.

(2) Section 5 must state, in the form of a warning, that the person should consider:

(a) the likely investment return; and

(b) the risk; and

(c) the person's investment time frame;

when choosing an option in which to invest.

New simple sub-fund product

(3) If the simple sub-fund product has never previously been offered to investors, and the CCIV does not offer any investment option mentioned in subclauses (4) and (5), section 5 must give the following information for the investment option for the CCIV that the corporate director reasonably believes has the least volatile underlying assets (whether or not section 5 gives that information for any other investment option):

(a) the name of the option and a short description of it, including the type of investors for whom it is intended to be suitable;

(b) a list of the asset classes in which the option invests, setting out the strategic asset allocation of the asset classes in the form of a range or otherwise;

(c) a description of the investment return objective of the option;

(d) the minimum suggested time frame for holding the investment;

(e) a description, in the form of a summary, of the risk level of the option.

Balanced investment option

(4) If the CCIV has a balanced investment option (within the meaning given by clause 101 of Schedule 10), section 5 must give the following information for the balanced investment option (whether or not section 5 gives that information for any other investment option):

(a) the name of the option and a short description of it, including the type of investors for whom it is intended to be suitable;

(b) a list of the asset classes in which the option invests, setting out the strategic asset allocation of the asset classes in the form of a range or otherwise;

(c) a description of the investment return objective of the option;

(d) the minimum suggested time frame for holding the investment;

(e) a description, in the form of a summary, of the risk level of the option.

No balanced investment option

(5) If the CCIV does not have a balanced investment option (within the meaning given by clause 101 of Schedule 10), section 5 must give the following information for the investment option under which the CCIV has the most funds invested(whether or not section 5 gives that information for any other investment option):

(a) the name of the option and a short description of it, including the type of investors for whom it is intended to be suitable;

(b) a list of the asset classes in which the option invests, setting out the strategic asset allocation of the asset classes in the form of a range or otherwise;

(c) a description of the investment return objective of the option;

(d) the minimum suggested time frame for holding the investment;

(e) a description, in the form of a summary, of the risk level of the option.

Additional information

(6) Section 5:

(a) must make provision for each investment option that is not presented in section 5 in accordance with subclause (3), (4) or (5); and

(b) may make provision for the option by applying, adopting or incorporating a matter in a document that:

(i) includes the information mentioned in subclause (3), (4) or (5); and

(ii) presents it in the way mentioned in the subclause.

(7) The CCIV:

(a) must provide information about how a member of the sub-fund of the CCIV may switch the member's investments; and

(b) must provide information about:

(i) whether the CCIV's investment options may be changed; and

(ii) if so, how the options may be changed; and

(c) must describe, in the form of a summary, the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention or realisation of investments relating to the CCIV; and

(d) may provide the information in paragraphs (a) to (c), and any additional information about investment options, by applying, adopting or incorporating a matter in writing.

8 Contents of section 6 (Fees and costs)

(1) For each investment option of the CCIV that is presented in section 5 in detail in accordance with subclause 7(3), section 6 of the Product Disclosure Statement must state:

(a) the cost of acquiring the option; and

(b) the fees and costs that are charged in relation to the option.

Note: The statement will be made using the template set out in subclause (3).

(2) Before setting out any other substantive material, section 6 must:

(a) set out the Consumer Advisory Warning in clause 221 of Schedule 10; and

(b) give a concise example in the form set out in the Consumer Advisory Warning in clause 221 of Schedule 10.

(3) Section 6 must set out the fees and costs for each investment option that is presented in section 5 in detail in accordance with subclause 7(3), using the following template:

[If there are other service fees, such as advisor service fees or special request fees, include a cross-reference to the document that contains the information mentioned in paragraph (10)(a).].

(4) The template is to be completed in accordance with Division 3 of Part 2 of Schedule 10 (including definitions applicable to that Division), except that:

(a) clauses 203, 205, 206 and 207 and subclause 208(2) do not apply; and

(b) the reference in clause 204 to clauses 205 and 206 does not apply; and

(c) the example in subclause 208(1) is to be treated as stating:

"(for example, by using an asterisk with a footnote stating 'The amount of this fee can be negotiated.')".

(5) Section 6 must set out the information about fee changes set out in paragraph 209(k) of Schedule 10.

(6) Section 6 must:

(a) state that the information in the template can be used to compare costs between different simple sub-fund products; and

(b) state concisely, and in general terms, that fees and costs can be paid directly from the person's account or deducted from investment returns.

(7) Section 6 must give a worked example as follows:

(a) if the CCIV does not have a balanced investment option (within the meaning given by clause 101 of Schedule 10), section 6 must give a worked example for the default investment option;

(b) if the CCIV does not have a default option, and does not have a balanced investment option, section 6 must give a worked example for the investment option under which the CCIV has the most funds invested;

in accordance with Divisions 5 and 6 of Part 2 of Schedule 10 (including definitions applicable to those Divisions), except that clauses 211 and 220 do not apply.

(8) Section 6:

(a) must refer to the calculator (if any) provided by ASIC on a website operated by or on behalf of ASIC; and

(b) may also refer to the calculator (if any) provided by the CCIV on its website; and

(c) must state that each calculator referred to can be used to calculate the effect of fees and costs on account balances.

(9) If additional fees may be payable to a financial advisor, section 6 must:

(a) state, in the form of a warning, that additional fees may be paid to a financial advisor if a financial advisor is consulted; and

(b) refer to the Statement of Advice in which details of the fees are set out.

(10) The CCIV:

(a) must provide the fees and costs of each of the investment options in accordance with Schedule 10, and may do so by applying, adopting or incorporating a matter in writing; and

(b) may provide more detailed information about fees and costs by applying, adopting or incorporating a matter in writing.

9 Contents of section 7 (How sub-funds of CCIVs are taxed)

(1) Section 7 of the Product Disclosure Statement for the simple sub-fund product must state, in the form of a warning, that:

(a) investing in a simple sub-fund product is likely to have tax consequences; and

(b) persons are strongly advised to seek professional tax advice.

(2) Section 7 must also include statements to the following effect:

(a) CCIVs and sub-funds do not pay tax on behalf of members;

(b) members of the sub-fund are assessed for tax on any income and capital gains generated by the sub-fund.

(3) The CCIV may provide additional information about:

(a) taxation matters relating to the sub-fund of the CCIV; or

(b) taxation matters relating to sub-funds of CCIVs;

by applying, adopting or incorporating a matter in writing.

Note: For taxation matters relating to sub-funds of CCIVs, see Subdivision 195-C of the Income Tax Assessment Act 1997.

10 Contents of section 8 (How to apply)

(1) Section 8 of the Product Disclosure Statement for the simple sub-fund product must:

(a) describe, in the form of a summary, how to invest in the simple sub-fund product; and

(b) explain the cooling-off period that applies to the simple sub-fund product; and

(c) explain how to make a complaint (by means that include the provision of relevant contact details).

(2) The CCIV:

(a) may provide more detailed information about cooling-off periods, complaints and dispute resolution; and

(b) may provide that information by applying, adopting or incorporating a matter in writing.