ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125

The instrument introduces or relies on several key concepts that determine its scope and practical operation. Lack of independence is not defined in the instrument itself; it borrows from the Act’s definition in section 923A and related provisions. Under the Act, an entity is not independent if it or an associate receives certain commissions, volume payments, or other forms of conflicted remuneration, or if it is owned by or controlled by a product issuer or institution that offers such payments. The statement that triggers the instrument’s requirements is the one mandated by paragraphs 942B(2)(fa) (for licensees) and 942C(2)(ga) (for authorised representatives), which require a statement that the entity is not independent, impartial or unbiased if that is the case. The instrument does not say when the statement must be included; it only says how it must be displayed.

First substantive page is defined in section 4 for FSGs as “the first page of the Financial Services Guide that is not a cover page or a blank page”. This is critical because the statement must appear on that page, not just anywhere in the FSG. A cover page, even if it contains substantive content like a table of contents or licensing information, is excluded. The “first substantive page” is the page immediately after any cover and any blank pages. If the FSG has no cover page but starts with content, that first content page is the first substantive page. The instrument does not address the situation where the FSG is a multi-page document and the statement is on the first substantive page but the box spans across a page break; presumably the box must fit on that single page. The definition also states, for avoidance of doubt, that a reference to FSG includes a Supplementary Financial Services Guide.

Box and bold heading are not further defined but appear to be plain-language requirements. A “box” likely means a rectangular border enclosing the statement text. The heading must be bold and must include the phrase “Not Independent” or “Lack of Independence” or “another phrase of like import”. That last phrase gives some flexibility - for example, “Not Independent or Impartial” would likely suffice. However, using a heading like “Disclosure of Conflict” would not be of like import because it omits the core concept of independence. The heading must be part of the box, presumably at the top or within it.

Font size at least the same as that predominantly used for other text relates to the type size used in the statement. The comparator is the font size “predominantly used for other text (if any) in the Financial Services Guide” (section 5(2)(c)) or “in the website disclosure information” (section 943JA(c)). If the FSG or website information is entirely blank aside from the lack-of-independence statement, there is no other text, so the requirement may be deemed satisfied by any legible font size. In practice, most FSGs contain other text, so the statement must not be in a smaller font than the main body text. The instrument does not require a minimum absolute size, only relative to other text.

Prominent position applies only to website disclosure information (section 943JA(a)). The instrument does not define prominence; ASIC would likely consider factors such as placement above the fold, near the top of the webpage, not hidden behind a link, and visible without scrolling. Unlike the FSG rules, there is no equivalent of “first substantive page” for websites; prominence is a more subjective test that will depend on the design of the particular website.

Not appear in a footnote: this restriction applies to both mediums. A footnote is generally text at the bottom of a page separated by a line or in smaller type. The statement cannot be placed there; it must be in the main body, within the box.

The instrument directly affects providing entities as defined in the Act: financial services licensees (who issue FSGs under section 942B) and authorised representatives (who issue FSGs under section 942C). Each such entity that is not independent within the meaning of the Act must include the mandatory statement. The instrument’s formatting requirements apply regardless of the size of the entity, the number of clients, or the medium of disclosure (paper or electronic). Therefore, the compliance burden falls on the entire financial advice and product distribution industry to the extent that participants are not independent.

Smaller financial advisers and single practice licensees are disproportionately affected. A large bank-owned advice firm may have dedicated compliance staff and template management systems that can update all FSGs and websites at relatively low marginal cost. A sole practitioner or small firm may have to manually redesign documents and webpages, incurring fixed costs that are high relative to their revenue. The instrument does not provide any exemption or reduced requirements for small entities, nor does it differentiate based on the client base. This is a uniform rule that increases the minimum compliance investment for every non-independent provider, potentially creating a barrier to entry for new advisers or those operating on thin margins.

Consumers are the intended beneficiaries of the prominence rules. Retail clients who receive an FSG or visit a website are more likely to see the disclosure that their adviser is not independent. However, the regulation does not change the substance of the disclosure; it only changes its presentation. A client who previously ignored a prominent disclosure may still ignore a boxed bold disclosure. The instrument assumes that visibility leads to understanding and informed decision-making, but it does not mandate additional explanation or educational material. The cost of compliance ultimately flows through to clients in the form of higher fees or reduced availability of advice.

ASIC itself is affected as the regulator: it must now police compliance with these specific formatting rules in addition to the underlying substantive obligations. This may increase the regulator’s workload in document reviews and surveillance, though it also gives ASIC a clear standard to enforce. The industry bodies, such as the Financial Planning Association or the Stockbrokers and Financial Advisers Association, will need to issue guidance to members on how to comply.

Third-party service providers (e.g., software developers of FSG generators, website platforms) are indirectly affected. They must incorporate the box, bold heading, and no-footnote rule into their templates. This may result in product updates and associated costs that are passed on to licensees.

The instrument imposes a duty on the providing entity to format the lack-of-independence statement in accordance with sections 5 and 943JA. This duty is part of the broader obligation under the Act to include such a statement in the first place. The duty is not a standalone obligation; it attaches to the statement when one is required. Consequently, an entity that erroneously believes it is independent (and thus omits the statement) does not need to worry about the formatting rules, but it will be in breach of the Act for failing to disclose lack of independence. Conversely, an entity that includes the statement but does not comply with the formatting rules (e.g., places it on page 5 in a footnote, without a box) breaches the Act, because the instrument’s requirements are specified for the purposes of subparagraphs 942B(2)(fa)(iii) and 942C(2)(ga)(iii). Non-compliance means the statement does not meet the legislative requirements, and the entity is treated as having failed to provide the required disclosure.

The duty is strict: there is no qualification such as “reasonable steps” or “best endeavours”. The statement must appear on the first substantive page (for FSGs), in a box, under a bold heading, in the same font size, and not in a footnote. For website disclosures, it must be prominent, in a box, under a bold heading, same font size, not a footnote. There is no discretion to use alternative means of achieving prominence; the instrument prescribes the method.

There are limited rights for consumers arising directly from the instrument. Consumers do not have a private right of action solely for breach of the formatting rules; they would rely on the Act’s general provisions for compensation or damages if they suffer loss due to a misleading or deceptive disclosure or failure to disclose. However, the prominence rules likely increase the chance that a consumer who reads the FSG will see the disclaimer, which may affect their decision to proceed with the adviser. If the formatting is wrong, a consumer may argue that the disclosure was not properly given, affecting the enforceability of the advice contract or the adviser’s liability for loss. Courts may consider compliance with ASIC instruments as relevant to whether the adviser discharged their disclosure obligations.

The instrument also creates a right for entities to choose the wording of the heading within the statutory parameter. They can use “Not Independent”, “Lack of Independence”, or another phrase of like import. This flexibility allows some tailoring to the entity’s brand or the specific type of independence missing (e.g., “Not Independent - We Receive Commissions”). However, any phrase must clearly convey lack of independence; using euphemisms like “We have conflicts” may not suffice.

The instrument itself does not prescribe penalties; it is a legislative instrument that modifies the Act. Contravention of a requirement in the Act that is specified by the instrument attracts the same penalties that would apply for a breach of the Act provision. Under Part 9.4 of the Corporations Act, civil penalties apply for contraventions of financial services disclosure obligations. The maximum penalty for an individual is currently 5,000 penalty units (currently $1,565,000) and for a body corporate 50,000 penalty units ($15,650,000) or three times the benefit derived, whichever is greater. Additionally, ASIC can seek infringement notices, banning orders, or disqualification of responsible officers.

Enforcement will be primarily by ASIC. ASIC may conduct surveillance of FSGs and websites, either proactively or in response to complaints. The instrument gives ASIC a clear, easily checkable compliance standard: is there a box? Is the heading bold? Is the statement on the first substantive page? Is it not in a footnote? These are objective checks that do not require judgment calls. This reduces ASIC’s enforcement cost and increases the likelihood of detection of non-compliance. However, it also means that a minor technical breach - such as the box being slightly outside the required position - could theoretically lead to enforcement action, though in practice ASIC would likely issue a warning or infringement notice for minor breaches.

There have been no reported cases specifically under this instrument as of the compilation date. However, the underlying Act provisions (942B and 942C) have been subject to litigation in other contexts, particularly regarding whether a statement of lack of independence was sufficiently clear. The instrument attempts to remove ambiguity in how the statement should be presented, thereby reducing scope for litigation over whether a statement was “clear and prominent” enough. But it may create new disputes over interpretation of the instrument’s own terms, such as what constitutes a “phrase of like import” or whether a two-page box that continues onto the next page is a valid “box”. The 2024 amendment extending requirements to website disclosures may also lead to disputes about prominence - e.g., if a box appears at the bottom of a page below the fold.

ASIC’s regulatory guide on disclosure (RG 168) may offer further guidance, but the instrument itself is the binding law. Entities cannot rely on RG 168 if it contradicts the instrument.

The instrument sits within the broader framework of Part 7.7 of the Corporations Act, which governs disclosure to retail clients for financial products and services. Sections 942B and 942C require licensees and authorised representatives respectively to provide an FSG that includes information that “is specified in regulations or in an instrument under subsection (7A)”. The instrument is that instrument. It therefore has the same legal force as a regulation. Part 7.7 also deals with other content requirements for FSGs (fees, benefits, dispute resolution) and the obligation to provide a Statement of Advice (SoA) with more personalised disclosure. The instrument does not affect those other requirements.

Section 943J of the Act deals with website disclosure information - a requirement for certain licensees and representatives to publish on their website key information, including fees and the lack-of-independence statement. The instrument modifies section 943J to insert section 943JA, which applies the same formatting rules to those website disclosures. The interaction with the rest of the Act means that if an entity provides both an FSG and website disclosure, it must have two separate compliant statements, potentially with slightly different visual design (due to the “prominent position” requirement for websites vs the “first substantive page” rule for FSGs).

The instrument must be read consistently with other ASIC instruments and regulations made under the Act. For example, the ASIC Corporations (Conditional Relief for Independent Financial Advisers) Instrument 2021/126 or similar instruments that provide relief from the independence disclosure obligations may interact: if an entity obtains relief from the requirement to state it is not independent, then the instrument’s formatting requirements would not apply because no statement is required. Conversely, entities that rely on class orders to use a different disclosure format must ensure they are not excluded from this instrument’s requirements.

State legislation, such as the Fair Trading Acts, generally do not apply to financial services covered by the Corporations Act due to constitutional coverage. However, the Australian Consumer Law (as a schedule to the Competition and Consumer Act 2010) applies to conduct in trade or commerce, including misleading or deceptive conduct. Even if an entity complies with the instrument’s formatting, it could still be liable under the ACL if the overall impression of the FSG or website is misleading about independence. The instrument does not override the ACL; it merely adds a specific duty.

Privacy laws (Privacy Act 1988) are not directly relevant, though website disclosure information may contain personal information about representatives; the instrument does not create special privacy obligations.

Professional standards laws (e.g., the Tax Agent Services Act) may require additional independence disclosures for tax-related advice. The instrument operates in addition to those requirements.

The instrument was originally made on 24 March 2021, registered as F2021L00300, and commenced on 1 July 2021. It was compiled as Compilation No. 1. The original version contained only sections 1 through 5, addressing FSGs. It did not cover website disclosure information.

On 5 July 2024, the ASIC Corporations (Amendment) Instrument 2024/554 (F2024L00864) was registered, amending the original instrument. The amendment commenced on 10 July 2024, which is the compilation date shown on this document. The amendments were:

• Section 2 (which originally provided solely for commencement) was repealed by operation of section 48D of the Legislation Act 2003 (which repeals provisions that only provide for commencement once they have had effect). This is a routine editorial change and has no substantive impact.
• Section 5 was amended. The endnote does not specify the nature of the amendment, but the current text of section 5 as shown in the compilation includes the first substantive page definition (originally in section 4) and the four subparagraphs. It is likely that the amendment added the requirement that the statement must appear on the first substantive page (rather than any page) and clarified the font size comparison to “other text (if any)”. The original instrument may have allowed the statement to appear anywhere in the FSG, which the 2024 amendment tightened. Without the original text, the exact change is not verifiable from this compilation alone.
• Section 6 was added (ad. 2024/554). This is the most significant change: it extends the formatting requirements to website disclosure information by modifying sections 943J and inserting 943JA. This amendment reflects ASIC’s view that online disclosure is equally important and that the same prominence standards should apply. It likely arose from reviews of compliance and consumer complaints about buried online disclaimers.

No other amendments are recorded. The instrument is ongoing; there is no sunset date or self-repeal provision noted. However, ASIC instruments often have periodic review requirements; this one remains in force unless repealed or replaced.

The compilation document does not cite any cases that have been decided under this instrument. As a relatively recent instrument (first version 2021, with the website amendment only effective from July 2024), it is unsurprising that no appellate decisions or even first instance judgments are reported. The instrument was designed to reduce ambiguity in disclosure, which may have the effect of heading off litigation that might otherwise have arisen over whether a particular statement was sufficiently prominent. In that sense, the instrument is a prophylactic regulatory tool.

It is possible that cases have been brought under the underlying Act provisions (sections 942B, 942C) concerning the adequacy of lack-of-independence disclosures prior to the instrument’s existence. For example, in the context of advice scandals (like the Banking Royal Commission), courts may have considered whether a sentence buried in an FSG was adequate. The instrument codifies what ASIC considers adequate prominence, thereby pre-empting some arguments.

Because the instrument modifies the Act, a contravention can be enforced via civil penalty proceedings. As of the compilation date, no published ASIC media releases or court outcomes specifically reference this instrument. However, ASIC may have issued infringement notices or used the instrument in regulatory assessments without public litigation. The lack of litigation history does not mean the instrument is unimportant; it may indicate high compliance or early stage.

Potential future litigation could centre on the interpretation of “phrase of like import” - for instance, whether “Not a Traditional Independent Adviser” is acceptable. Also, the definition of “first substantive page” could be litigated if an FSG has a table of contents on page 1 and substantive disclosure on page 2 - is page 1 still excluded as a “cover page” even if it contains content? The instrument defines it as “not a cover page or a blank page”, so a table of contents page that is not a cover page would be the first substantive page. This could be a trap for document designers who treat a table of contents as a preliminary page.

Another potential dispute is whether the font size requirement is “predominantly used” - if some text is in 12pt and some in 10pt, which is predominant? Typically, the most common font size throughout the document would be measured. If a website has multiple sections with different font sizes, compliance may be unclear.

Several features of the instrument are traps for the unwary.

The first substantive page rule (FSG): The definition in section 4 exempts a “cover page or a blank page”. But what counts as a cover page? A page that only contains the document title, ASIC logos, or a “preliminary” heading may be considered a cover page. If a licensee prints the FSG on double-sided pages and the “cover” is on the right-hand side, the back of that page might be blank or contain a table of contents. If it is blank, it is excluded; if it contains a table of contents, it is not blank and not a cover page - and thus could be the first substantive page. The licensee must then place the boxed statement on that table-of-contents page, which may be awkward and reduce the page’s readability. The instrument does not allow moving the statement to page 2 if page 1 has non-cover content. So careful page layout design is essential.

No footnote escape: The statement must not appear in a footnote. This seems obvious, but some entities might include the required statement as a footnote to a larger paragraph about conflicts. The instrument forces the statement into a standalone box, which may disrupt the flow of the document. It also means the statement cannot be integrated into a list or grid if that list is in a footnote.

Font size relativity: The statement must be in a font size “at least the same as that predominantly used for other text”. If the FSG has very small font for most text (say 8pt), the statement must be at least 8pt, which may be too small for readability. The instrument does not require a minimum absolute size. The entity could enlarge the rest of the text to make the statement larger, but that increases page count. Alternatively, an entity could reduce the other text to 6pt to avoid a larger statement - but that would likely breach other disclosure clarity obligations. There is a perverse incentive to shrink surrounding text rather than enlarge the disclaimer.

Website prominence ambiguity: For website disclosure information, the requirement is “prominent position” with no further guidance. ASIC may later issue guidance, but as of now, compliance is a matter of judgment. A box at the very bottom of a long webpage, even if above the footer, may not be considered prominent. Entities that rely on scrollable pages need to ensure the box appears near the top. If the website has multiple pages, the box must likely appear on each page, or at least on the page where the disclosure information is posted, which may not be the homepage. The modification inserts 943JA into the Act, and it applies “if this section applies to a statement” - which is the statement required by the Act to be in website disclosure information. So if the entity’s website disclosure information is a single PDF, the box must be in that PDF prominantly.

Supplementary Financial Services Guides: The definition says “a reference to a Financial Services Guide includes a reference to a Supplementary Financial Services Guide”. Therefore, if an entity issues a supplementary FSG that contains a new lack-of-independence statement (e.g., because its independence status changed), that supplement must also comply with the first substantive page rule. If the supplement is a one-page document, that page is both the first and last substantive page; the box must be on that page.

Amendment 2024 tightening: For those who complied with the original instrument (which arguably only required the statement to be in a box somewhere in the FSG, not necessarily on page 1), the 2024 amendment requires rework. Any FSG or website disclosure prepared before 10 July 2024 should be reviewed to ensure the statement is now on the first substantive page (for FSGs) and meets the website requirements.

Compliance requires a systematic review of all documents covered by the instrument.

Step 1: Identify all FSGs (including supplementary FSGs) and website disclosure information that your entity issues. This includes legacy versions still in use. Each must be checked individually. Do not assume that a template used for one product group works for all; variations in content may affect the first substantive page determination.

Step 2: Determine whether the entity is required to include a lack-of-independence statement. This is a threshold question under the Act. If the entity is independent (i.e., meets the criteria in section 923A of the Act), it does not need to make the statement, and the instrument does not apply. However, most retail advice providers are not independent due to commissions or ownership. If unsure, seek legal advice. If the entity is not independent, the statement must be included.

Step 3: For each FSG, locate the first substantive page. Remove any cover page and any blank pages. The first non-cover, non-blank page is the target. On that page, create a box (a visible border) containing the required statement. The box must have a bold heading. The heading must include the phrase “Not Independent”, “Lack of Independence”, or something similar. For example, “Important: Not Independent” or “Disclosure of Lack of Independence”. Do not use a heading like “Conflicts of Interest” as it does not directly convey lack of independence. The statement text (the body of the box) should be the words that comply with the Act (e.g., “We are not independent because we receive commissions from product issuers.”). The entire box content must not appear in a footnote.

Step 4: Ensure the font size of the statement (including the heading and body) is at least as large as the font size predominantly used for other text on that page. If the page has a title in 16pt and body text in 10pt, the predominant size is 10pt (assuming body text occupies more area). The statement should be at least 10pt. If the predominant size varies, use the size most common. In a borderline case, err on the side of using the next larger size.

Step 5: For website disclosure information, refer to section 943JA. Ensure the statement is placed in a prominent position on the webpage. “Prominent” typically means above the fold (visible without scrolling), near the top, not hidden behind a link or tab. It must be inside a box with a bold heading as described, same font size proportions, and not in a footnote. If the website disclosure information is in a separate document (like a PDF linked from the site), the PDF itself must comply with the box and prominence requirements, but the PDF’s “prominent position” on the webpage is also relevant. Probably the safest approach is to include the boxed statement directly on the website page, not as a download.

Step 6: Document compliance. Keep records showing the FSG and webpage as published. Note the date of review. This assists in defending any future ASIC inquiry.

Step 7: Train staff and implement change management. Ensure that any future updates to FSGs or websites are automatically checked against the instrument.

Consider engaging a graphic designer familiar with financial services compliance to create the box. Avoid using the box for any other purpose, as that may dilute its prominence.

For small entities with limited resources, the main cost is time. Templates are available from industry associations or software providers. Do not cut corners by placing the box on a non-first page or using a font smaller than body text; the risk of a penalty far outweighs the cost of correct formatting.