Darren McShane (Photo: Steven Pam)
Darren McShane reviewed RG97 for ASIC (Photo: Steven Pam)

ASIC’s controversial fee disclosure regime will be implemented in 2020, a year later than expected, but the corporate watchdog said it expects the sector to be on its best behaviour.

The superannuation sector has been given been given an extra year to comply with the corporate watchdog’s controversial fee disclosure regime known as RG 97, ahead of the release of a much-anticipated consultation paper early next year.

In a statement released on Tuesday, the Australian Securities and Investments Commission (ASIC) said it was pushing the start date for Regulatory Guide 97 fees and costs disclosure regime from 2019 to 2020.

This follows a one-year extension to the rules in November 2017 which pushed the compliance date out to 2019.

Consultation over the reforms has been rolling on for more than four years. The reforms were implemented in September 2017. However just two months later, ASIC was forced to appoint an independent expert, Darren McShane, to review the changes due to widespread industry criticism over the regime’s complexity and lack of flexibility.

Industry funds that hold significant investments in unlisted assets complained the RG 97 requirements would increase costs. There was also disagreement over whether investment platforms should be forced to disclose consolidated costs that included the fees for using the platform in addition to those for the investments to which they offered access.

The reason for the latest extension, according to ASIC, is to give the sector time to respond to ASIC’s consultation paper due in January. The paper is a response to 34 recommendations made by McShane in his external review released in July.

“ASIC has decided to again extend the transition dates by one further year…so that industry need not incur additional time and expense where ASIC is consulting on proposals that could, for example, change the treatment of property operating costs,” the corporate watchdog said.

Australian Institute of Superannuation Trustees chief executive Eva Scheerlinck said the longer transition periods would provide the industry with the opportunity to ensure the new requirements are consistent across products and therefore meaningful to consumers.

“While a lot of time and effort has already been spent on developing these disclosure requirements, it is clear that more work is needed to get them right,” Ms Scheerlinck said. “Improving fee and cost disclosure in superannuation is vitally important both for consumers and regulators, but poor disclosure is not going to help anyone and could lead to serious unintended consequences.”

Speaking at the Australian Institute of Superannuation Funds’ annual Superannuation Investment Conference (ASI 2018) in September, ASIC senior executive leader for superannuation, Jane Eccleston, said the corporate watchdog was “mulling” McShane’s recommendations and planned to release a consultation paper “before Christmas”.

“It will contain a lot of detail and something that you can practically engage with, rather than just some high-level ideas,” Eccleston said. “In some ways, Darren has been the ‘ideas man’ and now we want to translate that report into something more concrete for everyone.”

She told a panel there would be “some sort of change”, but that the regulator wanted to ensure the changes are practical for funds to implement while also providing transparency and useable information for consumers.

While stating that ASIC’s RG 97 was a “notable improvement” for consumers over what existed before its implementation in September last year, McShane’s report also said those looking to compare products could still do so only by comparing Product Disclosure Statements – “a laborious and time-consuming exercise that most consumers would likely avoid or short-cut”.

Eccleston said in September that, over the last six months, ASIC had engaged with trustees at super funds that had provided what the regulator had determined were “misleading” disclosures of fees and costs.

“We made them correct that behaviour and will continue to monitor that area while we formulate how we respond to the review,” she said. “I’d really stress that while we’re preparing our response, we expect all trustees to act in good faith and we will act against any deliberately misleading disclosures.”

Appearing on the same panel, McShane described his 223-page report as “turgid” and said fee and cost disclosure continued to “grate”, both here and internationally.

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