ASIC will once again review naming conventions for exchange traded products with the aim of creating two levels of labelling: primary labels based on product type and secondary labels for specific risks or strategies.

ASIC released Consultation Paper 356 ETP naming conventions: Updates to INFO 230 (CP 356), which sought feedback on proposals to update the guidance in Information Sheet 230 Exchange-traded products: Admission guidelines (INFO 230), on naming conventions for licensed Australian exchanges that admit ETPs.

ASIC said based on feedback from product issuers, financial advisers, industry bodies and licensed exchanges there was still room for improvement and clarification on guidance.

“Because ETPs have different structures, features, strategies and risks to traditional warrants and listed products (including listed investment companies and listed investment trusts), we consider they should be labelled in a way that differentiates them from other listed products,” ASIC said in a media release.

Arian Neiron, Van Eck head of Asia Pacific, says the changes will be of more benefit to retail investors rather than advisers.

“Most advisers are going to speak to the fund manager,” Neiron tells Professional Planner.

“It’s better for the average investor because some of these names are long and convoluted so it’s going to simplify things, but it will simplify it for the adviser as well.”

James Kingston, head of iShares, BlackRock Australasia, says BlackRock takes a long-term perspective and are advocates for greater transparency as it is “absolutely critical” for the broader industry.

“An important part of our fiduciary duty to clients and to the broader Australian investor community, is to provide guidance and education to ensure investors are informed and ultimately, their long-term best interests are considered,” Kingston says.

“We tend to use the analogy of a food labelling system – much like the food people consume, investors need to know what they’re buying before purchasing ETPs, as investors may not be aware of the ramifications if they don’t.”

Primary labels

The proposed minimum standards would differentiate between collective investment vehicles like managed investment schemes which would be labelled as exchange traded funds and eponymously-labelled structured products which will apply to open-ended products which include derivatives, redeemable preference shares or debt securities.

“If our proposal for primary labels is implemented, the definition of ‘ETF’ will be broadened, and the ‘managed fund’ label will be retired from INFO 230 naming conventions,” ASIC said in the consult.

“One of the main issues raised with ASIC regarding the current ETP naming conventions is the confusion introduced by the ‘managed fund’ label.