Electronic disclosure requirements – more is needed

A lack of consistency and tricky restrictions in regulatory requirements for electronic disclosure documents means financial planners, insurance providers, credit providers and Fintech companies should all be doing their homework before transacting electronically.

While the AFS, ACL, AML-CTF and Privacy regimes all allow disclosures to be communicated electronically, their requirements are all different.

The Fold Legal managing director, Claire Wivell Plater says ASIC’s recent consultation on facilitating electronic disclosure was sorely needed, even though electronic disclosure was already permitted for financial services and credit providers.

“Currently, disclosure documents can be an attachment to or a hyperlink in an email or by written notice to the client whether it be print or electronic, that the disclosure is available electronically,” Ms Wivell Plater says. “But you need the client’s agreement to provide disclosures in this way. Otherwise a printed document has to be either posted or handed to the client in person.”

Ms Wivell Plater says ASIC is proposing to streamline the disclosure process so that there will be no need to obtain a client’s consent to provide disclosures electronically.

“Under the proposals, providers will be able to send an attachment or hyperlink to the disclosure using any address the client has provided for the purpose of receiving disclosures – including an SMS. They won’t need to personally satisfy that the client has received the disclosure.”

The notification will need to explain how to access the disclosure and also offer postal or email delivery, Ms Wivell Plater says. “Providers will also need to be reasonably satisfied that the client can store the disclosure and access it in the future.”

The Fold has made a submission to ASIC on behalf of a Fintech client suggesting that the new disclosure arrangements may not go far enough, especially when it comes to online businesses.

“There seem to be some subtle, but tricky restrictions in the proposals,” Ms Wivell Plater says. “It is odd that a provider needs to be satisfied that an address has been provided for the purpose of receiving disclosures. Disclosures should be able to be sent to any address provided by the client, unless, of course, the client nominates a preferred method of communication.”

LinkedIn, Facebook, Twitter and other forms of social media are increasingly being used for communication and Ms Wivell Plater argues that disclosures should also be able to be made through them.

“Many online services allow users to sign in using Facebook or LinkedIn and use Facebook Messenger or LinkedIn email to communicate. The power remains with the user to can choose whether to use their social media profile to register. Privacy issues are managed via privacy settings where users can elect to make communications either non-public, visible to their contact network or to the whole world. Even twitter is adding video and group private messaging to provide similar capability to Facebook Messenger, LinkedIn and WhatsApp.”

Ms Wivell Plater also questions whether the proposals facilitate businesses which mostly deal with their customers online. “Why should it be necessary to send a disclosure by email or post, or even SMS, to consumers who access the services by visiting the provider’s website? It’s not exactly timely. The consumer is already online and ready to transact. Requiring the disclosure to be provided by a different medium to the one they have chosen to interact with surely increases the risk that they won’t access it before proceeding.”

A good solution for online businesses, Ms Wivell Plater says, would be ‘pop-ups’. “For online businesses, it’s easy to draw the client’s attention to a disclosure using a pop up. They’re timely and, if further assurance is needed that the consumer has received the disclosure, for example because it’s particularly significant or contains individual information like an SoA, the consumer can be asked to signify receipt by a well-placed checkbox.”

Ms Wivell Plater says giving consumers more communication options enables them to engage in a way that suits them, increasing the likelihood that they’ll access the disclosure.

“And consistency between the AFS, ACL, AML-CTF and Privacy regimes would certainly reduce red tape,” she said.

Because of the lack of consistency, electronic disclosure can be quite complicated. The Fold offers specialized advice and services in this area.