The Government and the Australian Securities and Investments Commission (ASIC) need to clarify the definition of what represents a "fee" and what represents a "cost" in Product Disclosure Statements (PDS), according to the Association of Superannuation Funds of Australia (ASFA).
As well, the superannuation group has used a submission to ASIC on a Draft Class Order on disclosure of fees for superannuation trustees and managed investment scheme responsible entities, to argue that legislative action might be preferable to the issuing of a class order.
"We appreciate the efforts that ASIC is making to clarify the requirements regarding disclosure of fees and costs in PDSs through Class Order modification," the submission said. "However, as we have indicated to ASIC and Treasury in previous submissions and meetings, we consider it critical that the disclosure requirements in the Corporations Regulations 2001 (Corporations Regulations) are themselves revisited as a matter of urgency.
It said that, in particular, ASFA believed there was an urgent need to provide clarity around what is a ‘fee' as opposed to a ‘cost', ensuring that industry is provided with clear definitions and guidelines around the intended definition of each for disclosure purposes.
The submission said the terms ‘fee' and ‘cost' were not defined in the relevant regulatory provisions and that the existing guidance provided by ASIC was example-based rather than definitional.
The submission also pointed to "the difficulties associated with identifying ultimate underlying assets and the costs of interposed vehicles".
It said its concerns around this were similar to concerns raised by the industry in relation to portfolio holdings disclosure, which had been deferred pending further consultation.
"In ASFA's view, the difficulties associated with identifying and disclosing indirect costs warrant the same level of consideration and analysis, to ensure the burden on trustees is balanced with the perceived benefits that would arise from greater transparency," the ASFA submission said.