Critics unmoved on ASIC disclosure

The Australian Securities and Investments Commission (ASIC) has been warned that its proposals aimed at providing increased online disclosure for financial services risks achieving the opposite.

ASIC last week released a second consultation paper revising its proposals for online disclosure after receiving submissions criticising the original proposals on the basis that they were too prescriptive — something that could be overcome by facilitating online disclosure.

However, the release of the second paper appears to have failed to win over industry critics, with some expressing concern that online disclosure carried with it the risk of details being obscured by the complexity of websites.

One of the amended proposals suggested product providers be allowed to “deliver a Product Disclosure Statement, Financial Services Guide, or Statement of Advice by sending an email with a hyperlink to the disclosure or a … reference to a website address where the disclosure can be found”.

However, chief executive of the Australian Institute of Superannuation Trustees Fiona Reynolds said such arrangements might lead to a situation in which the disclosure agreement was hidden on a particular website.

“I don’t want things to be hidden away on websites ... [With] all of these situations like Storm Financial and Westpoint, will things get even further hidden away [from the client]?” she asked.

One of the amended proposals also suggested providers be allowed to deliver online disclosure agreements instead of paper copies by default, without first obtaining the consent of the client.

Such a proposal would not cater for people who did not have an email address or were not computer literate, and providers needed to make sure those people were still able to receive information in hard copy, Reynolds said.

“We need to make sure that … we don’t end up with a system where people are just not receiving things.”

Association of Superannuation Funds of Australia director, policy and industry practice, Melinda Howes said if providers were allowed to email online disclosure agreements without obtaining client consent, there was a danger they could be sent to an inactive email account and clients would not see it.

“At the moment, [a disclosure agreement] is the only thing that members reliably read, so it’s a very, very important piece of information, and if it’s going to go off to a disused email box, that’s a problem,” she said.

“I understand why ASIC is trying to do this, and that’s what we’ve asked for as an industry, but it needs to be thought through how it’s going to work.”

The Investment and Financial Services Association said in its 2008 submission that there was no way to determine if a client had received the emailed disclosure agreement, and it should be up to the client to advise the provider if they had not received it.

ASIC was approached for comment but declined to respond.