1. RG97 – MANAGING DRAFTING COMPLEXITIES
Nathan Hodge
Partner, King & Wood Mallesons

2. RG97 – Managing Drafting Complexities
Product Disclosure Statement challenges
Updating the PDS – when?
Significant event notices
Changes to periodic statements

3. Product Disclosure Statement challenges
Statutory fees and costs table
Second fees and costs table
Additional Explanation of Fees and Costs

4. Statutory fees and costs table
Minor changes to consumer advisory warning
No changes to format of table or text of table
Changes to fee definitions
Indirect cost election
Other challenges:
not using the prescribed wording

5. Second fees and costs table (1)
Commonly shows per investment option:
investment fees and performance fees
ICR
buy/sell spread
ASIC says must now disclose total transaction costs, and encourages:
amount recovered from buy/sell spread
balance which reduces returns

6. Second fees and costs table (2)
Challenges:
must show single ICR amount
ICR disclosure vs transaction costs disclosure ie. bid/ask spread
fees vs costs
forward looking vs backward looking
performance fees vs balance of investment fee / ICR

7. Additional Explanation of Fees and Costs
Detailed changes to statutory fee example
buy/sell spread example in note
Detailed changes to “Defined fees”
should you follow the exact wording?
No changes to content requirements. But . .
performance fee vs performance-related fee
transaction cost disclosure, and bid/ask spreads
buy/sell spreads vs no buy/sell spreads
indirect costs

8. Updating the PDS – when? (1)
PDS must be up-to-date at all times, subject to Class Order 03/237
What is material?
PDS must not be materially misleading or deceptive
Fees must be disclosed prospectively, costs retrospectively

9. Updating the PDS – when? (2)
ASIC expects annual review of fees and costs
Look at fees and costs for Year (ie before PDS issued) and Year 1 (ie 12 months after PDS issued)
costs for Year 0 materially greater than PDS, roll over PDS and if not, PDS Update
costs for Year 1 materially greater than PDS, roll over PDS and if not, no PDS Update
Changes to performance fees

10. Significant event notices
Notify of material or significant changes to the PDS, but note timing concession for cost increases
SEN at time of rolling PDS to comply with indirect costs rules
increase in amount vs moving an amount
SEN - ongoing
Drafting a SEN
piecemeal vs full table

11. Changes to periodic statements
Same rules for annual statements and exit statements
New rules to disclose “other fees”
disclosure of buy/sell spread costs
Actual indirect costs vs estimated
disclose for the reporting period
note use of estimates in “indirect cost” definition