The Australian Securities and Investments Commission (ASIC) has released new guidelines on digital disclosure in a bid to give insurers and finance companies a bit more wiggle room based on how consumers digest documents as part of a long-running plan to reduce unnecessary red tape.
Organisations have reported that they are uncertain in some areas of digital communications, despite the Corporations Act 2001 expressly permitting electronic communications, since there are a lot of things the Act doesn’t expressly discuss, like providing interactive apps instead of printed or PDF product disclosure statements. The grey areas have now been clarified.
Armed with the details of Australians’ online access – 15 million Australians have a home internet connection, with 68 per cent of those using three or more devices to access the internet – ASIC wants to encourage the creative digital delivery of product disclosure documents as the norm.
The documents covered in this update are product disclosure statements (PDSs), financial services guides (FSGs) and statement of advice (SoA) documents, along with a couple of others, such as periodic statements and account statements. This guideline update supersedes the RG 221 issued in 2010, and includes a Good Practice Guide for providers.
ASIC Commissioner John Price explains that the new guidance and relief will reduce the cost of unnecessary printing and mailing, while maintaining the choice of those who prefer paper – for now – and taking product disclosure documents into the technological era to make the most of what’s available to us.
Price said, 'ASIC wants industry to harness the opportunities of digitisation and is encouraging the use of more engaging forms of communication using digital media – interactive, video and audio. This can boost consumer understanding of financial services and products.’
Regulatory Guide 221 Facilitating digital financial services disclosure (RG 221) was developed after a consultation was undertaken with stakeholders (Consultation Paper 224), with the following innovations and relief granted:
- Providers do not need permission to use clients’ email addresses to deliver disclosure documentation, since it can be naturally assumed that an email address has been provided for the express purpose of receiving communications from an organisation, either by a client directly, or through an agent. Clients must have the option to opt out.
- So long as the Privacy Act 1988 and the Corporations Act 2001 are adhered to, it is assumed that email addresses are for digital communications including disclosure, and the sharing of email addresses by related parties in certain circumstances is not an invasion of privacy.
- Providers are able to publish a digital disclosure document online, and then notify the client that it is available (publish and notify).
- Providers may offer consumers innovations in digital media for PDSs, FSGs or SoAs.
- Providers shall continue to provide clients with clear, concise and effective information digitally, with consumer protections retained.
What this looks like in real terms
Not all disclosures are created equal, and that is soon to become truer than it’s ever been, with the new broadening of creative outlets for companies when recreating droll documents into something more fun, interesting, or viewable.
Delivery of full disclosure documents can be made to an email address if the client has provided an email address (or other electronic address) as part of their contact details. In the case of superannuation trustees, the trustee can rely on ASIC Corporations (Instrument 2015/647) for disclosures to default members, for example if the member’s email address has been provided by a member’s employer.
- PDSs; and
- information statements for Commonwealth Government Securities (CGS).
Disclosures may be delivered via any digital method, for example using a link to a webpage, SMS, app notification or a digital message of some kind, if the client has agreed – in walks the opt out clause, which is easier than it might sounds, since this agreement can be verbal or written, or assumed after a notice has been issued stating the intention to deliver documents in this way.
If the client has not agreed, an organisation can load the disclosure online, then notify the client that it is available to them, but, the client must have had an opportunity to opt out of this method of delivery previously. Some information is specifically permitted to be delivered in this way by the Act, such as annual superannuation information and the confirmation of transactions.
These documents include:
- ongoing disclosure;
- periodic statements;
- confirmation of transactions;
- annual superannuation information; and
- unsolicited offers to buy finance products off-market.
Some of these disclosures can be made any way the client agrees to, including an online account or portal with or without extra notification emails. This agreement is more casual between the client and operator, and there is no legal requirement to record how this permission is obtained.
These disclosures include:
- ongoing disclosure;
- periodic statements;
- annual superannuation information and additional information provided by a superannuation trustee; and
- additional information on request.
There is no requirement to have paper copies available of disclosures where the terms and conditions satisfy the regulations and the consumer understands where to find this information. For this type of product, it is satisfactory to make ‘publish and notify’ the default method of communicating disclosure documents, but a client must be offered the opportunity to opt out within a week, to receive these in full by email, for example.
Publish and notify updates can be delivered for:
- ongoing disclosure of material changes and significant events; and
- periodic statements for CGS depository interests.
ASIC has said loud and clear that it wants to encourage providers to be creative in the way they engage with consumers, even going so far as to include gamification in their list of methods. The barriers identified by ASIC include the legal implications of certain types of communications (fulfilling obligations), and the second issue relates to the varying versions of disclosure that will ultimately exist, and the delivery of these versions to consumers.
This means that the ‘on request’ delivery requirement of any disclosure document can mean any version of the document that the provider has, and that meets the criteria – sending a digital copy of a document may be more time-consuming and costly than providing an already-existing paper copy, or the opposite may be true if a paper copy doesn’t actually exist, for example.
Another inherent difficulty is translating the requirements for paper disclosure documents into online formats, with the particularly notable example being the ‘at or near the front of’ requirement for certain words to appear. In this case, these words can appear ‘at or near the top of’ a webpage, be spoken at the beginning of a video, and so on. There is actually no requirement whatsoever that a disclosure document even have a printed version, but ASIC’s lodging requirements don’t actually have facilities in place for electronic lodgements, though they are working on it, and organisations can email ASIC for specific cases.
How to innovate with digital disclosure
ASIC has provided some clear examples of what’s hot and what’s not when it comes to providing consumers with good information. Navigation and easy access to critical information was high on the list when it came to apps and other digital media, but the presentation, whatever form it takes, must be timely, relevant, complete, promote understanding and comparison of products, highlight what’s important, and be in touch with consumers’ needs.
We can all look forward to some interesting, funny and useful new representations of eye-wateringly dull documents in future, as companies try to attract their target customers with games, apps, audio, video and smart animations that capture the heart of a document without putting the viewer to sleep.