ASIC has published its joint report with the Dutch Authority for the Financial Markets entitled ‘Disclosure: Why it shouldn’t be the default’ (Report 632). The purpose of the report is to consider how financial services disclosure operates in ‘the real-world context’.

The report identifies the following criticisms of disclosure as a regulatory tool:

• Disclosure does not solve the complexity in financial services markets: it does not ease the contextual and emotional dimensions of financial decision making, both at the point of purchase and over time;
• Disclosure must compete for consumer attention with other information;
• One size does not fit all – the effects of disclosure are different from person to person and situation to situation;
• Disclosure creates unintended detrimental outcomes for some consumers;
• Warnings that firms have to display about the risks and features of certain products and services have limited effectiveness.

The report concludes that there are limits to the benefits of generalised, mandatory ‘one size fits all’ disclosure and that alternative regulatory tools that may improve consumer outcomes in some contexts include product design, governance and distribution.

The Report says it is incumbent on industry not to hide behind technical compliance with disclosure obligations. Firms that are proactive in aligning their product design, distribution and communications with consumer needs, capabilities and expectations will build customer trust and minimise regulatory costs.