Editor’s note: This is general educational information about the two main Australian retail disclosure regimes and how they differ. It is not investment advice and does not describe any particular company, fund or product. It is based on the ASIC regulatory guides and the ASX Listing Rules listed at the end.
Analysis: a story about a business, a specification for a product
The reason the two documents feel different to read is that only one of them is answering an open question. Section 710 asks what a retail investor and their adviser would reasonably require to make an informed assessment, and leaves the issuer to decide what that is. Section 1013D hands the issuer a list. An open test produces length, because an issuer facing a principles-based standard and a misleading or deceptive liability has every incentive to include more. A closed list produces page limits, because once the content is enumerated the regulator can cap the container.
That also explains where comparability lives. Two PDSs for similar products can be set side by side because the fee presentation is templated and the required headings are the same. Two prospectuses cannot, and are not meant to be. The prospectus regime is built to let a reader assess one business on its own terms, which is precisely why ASIC’s guidance on it is about ordering, emphasis and balance rather than about a schedule.
The practical test for a reader holding an unfamiliar document is not the thickness of it. It is whether the document had to be accepted by ASIC before it existed as a legal instrument, or whether it simply came into use and generated a notice afterwards. That single fact tells you which chapter you are in, what standard the drafting was measured against, and how much of what you are reading was chosen by the issuer rather than dictated by a schedule.
What the documents say
Two documents can arrive in the same week, both aimed at retail investors, both running to a hundred pages of risk factors and fee tables, and be built under entirely different laws. A prospectus is a Chapter 6D document about an offer of securities. A product disclosure statement is a Chapter 7 document about a financial product. The tests they must satisfy, the moment they acquire legal status, and the way ASIC sees them are not variations on a theme.
The prospectus family, and the moment a document becomes one
Chapter 6D does not contain a single form. ASIC’s Regulatory Guide 254 tabulates six kinds of disclosure document. A prospectus may be used for any offer of securities by a body, with no restriction on the amount raised, and answers to sections 710 and 711. A short-form prospectus incorporates by reference certain information already lodged with ASIC rather than repeating it, under section 712. A transaction-specific prospectus adopts special content rules for continuously quoted securities under section 713. An offer information statement is a shorter document that may be used instead of a prospectus for certain offers raising less than $10m, under section 715. A profile statement is shorter again, is prepared in addition to a prospectus, and its use requires ASIC approval. Offers of simple corporate bonds must use a two-part document comprising a base prospectus and an offer-specific prospectus.
One procedural point in RG 254 explains a good deal about how the regime operates. Each type of disclosure document is defined at least in part by reference to its lodgement with ASIC, so for the purposes of the Corporations Act a document that purports to be a disclosure document only becomes one when it is lodged, and it is not lodged unless and until ASIC accepts it for lodgement. The paper is not a prospectus because it says so on the cover.
The content standard is deliberately open. Regulatory Guide 228 lists what a prospectus preparer must do: word and present it in a clear, concise and effective manner under section 715A, include the information required by the general disclosure test in section 710, make the specific disclosures about interests and benefits of persons involved in the offer under section 711, and ensure it is not misleading or deceptive under section 728(1). ASIC states plainly that its guidance is general rather than prescriptive because the Corporations Act places responsibility on issuers to comply.
What that produces in practice is a document organised around persuasion and risk rather than specification. RG 228 asks for an investment overview as the first substantive section, generally after a chair’s letter that should run only a page or two, highlighting a meaningful summary of the information key to a retail investor’s decision and giving balanced disclosure of both benefits and risks.
The PDS, and a different centre of gravity
A product disclosure statement is not about an issuer raising money for the first time. Regulatory Guide 168 states the trigger: a product issuer or seller must give a PDS to a retail client before recommending or offering to issue or sell a financial product, so the client can make an informed decision about acquiring it. The document must be titled Product Disclosure Statement on the cover or at or near the front, and it must be dated, under sections 1013B and 1013G.
The content list under section 1013D is a specification, not a narrative test. A PDS must include, where applicable, the name and contact details of the issuer and seller, the fees payable, the significant risks, the significant benefits the holder may become entitled to and how and when they are provided, other significant characteristics, the factors affecting returns, the significant tax implications, information about any applicable cooling-off regime, the dispute resolution procedures available, and how other information not contained in the document may be accessed.
Format is regulated too, in a way no prospectus is. For products caught by the shorter PDS regime, RG 168 records that the page length must be a maximum of four A4 pages, eight A5 pages or 12DL pages for standard margin lending facilities, and a maximum of eight A4 pages, 16 A5 pages or 24 DL pages for other products, with a font size of at least nine points. Fee disclosure is standardised separately again through Regulatory Guide 97, which governs how fees and costs appear in PDSs, shorter PDSs, investor directed portfolio service guides and periodic statements, and which exists, in ASIC’s words, so that consumers have accurate information to help their decision making.
Lodgement versus notification
The sharpest procedural difference is what happens to the document after it is written. A prospectus must be lodged with ASIC and only becomes a disclosure document at that point. Most PDSs travel the other way. RG 168 says that if a PDS or supplementary PDS does not need to be lodged, the product issuer must instead notify ASIC when a copy is first given to someone in a recommendation, issue or sale situation, and must notify ASIC again when the product ceases to be available or when fees and charges in the Fees and Costs Summary change. Those notifications are made on Form FS88, the PDS in-use notice, Form FS89 for a change to fees and charges, and Form FS90 when a product ceases to be available. There is no fee for lodging them, though a late fee may apply if a form is lodged more than five business days after the event.
The two regimes meet at the exchange door. Condition 3 for admission as an ASX Listing requires that a prospectus or PDS be issued and lodged with ASIC and given to ASX, or, if ASX agrees, an information memorandum complying with Listing Rule 1.4. Whichever document is used, it must carry a prominent statement that ASX takes no responsibility for its contents.
