What is RG181 Disclosure?
RG 181.50 Adequate disclosure means providing enough detail in a clear, concise and effective form to allow clients to make an informed decision about how the conflict may affect the service being provided to them. We expect disclosure by licensees to focus on material conflicts.
RG 181.51 Disclosure helps clients to assess the service they are being offered in light of the licensee’s own interests and to decide on the extent (if any) to which they will rely on the service. Having adequate arrangements in place to manage conflicts of interest ‘will include ensuring that there is adequate disclosure of conflicts to investors, who can then consider their impact before making investment decisions’: see the Explanatory Memorandum to Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2003 at para 5.597.
RG 181.52 Disclosure about conflicts of interest should:
(a) be timely, prominent, specific and meaningful to the client;
(b) occur before or when the financial service is provided, but in any case at a time that allows the client a reasonable time to assess its effect; and
(c) refer to the specific service to which the conflict relates.
In our view, the use of generic (‘boilerplate’) disclosures is unlikely to satisfy the conflicts management obligation. In order to be effective, conflicts of interest disclosure should refer to the specific service to which it relates, and should be specific and clear enough for the client to understand the conflict and its potential impact on the service they are being offered. Disclosures may generally be given in writing or orally.