Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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If you sell or issue financial products in Australia - think managed funds, superannuation, insurance or derivatives - you’ll quickly run into the term Product Disclosure Statement (PDS).
It’s a core document in the financial services space, and it’s regulated by the Corporations Act 2001 (Cth) and overseen by ASIC. Getting your PDS right isn’t just a box-ticking exercise. It’s how you clearly explain your product, manage risk, and stay compliant.
In this guide, we’ll break down what a PDS is, when you need one, what to include, and practical steps to build and maintain a compliant PDS - in plain English and tailored for Australian businesses.
What Is A Product Disclosure Statement?
A Product Disclosure Statement (PDS) is a disclosure document you must give to retail clients before (or at the time) they acquire a financial product. Its purpose is to help customers make an informed decision by understanding the product’s key features, benefits, risks, costs and how to complain or get help.
In Australia, the PDS framework sits in Part 7.9 of the Corporations Act. ASIC’s Regulatory Guides (for example, guidance on disclosure and fee presentation) set expectations for clear, concise and effective disclosure - not legalese that a typical consumer can’t understand.
Who issues a PDS? If you’re offering financial products to retail clients and you’re required to hold an Australian Financial Services Licence (AFSL), the onus is on you (or your authorised representative) to prepare and provide the PDS. If you’re unsure about your licensing position or authorisations, it’s worth getting AFSL advice early so your disclosure and authorisations stay aligned.
When Do You Need A PDS In Australia?
You generally need a PDS when you issue, sell or recommend a financial product to a retail client. Common examples include:
- Managed investment schemes (e.g. units in a fund)
- Superannuation products
- Life and general insurance policies
- Derivatives and certain structured products
- Non-cash payment facilities and deposit products
There are limited exclusions in the law, but the default position is: if it’s a financial product and your client is retail, a PDS will likely be required.
Retail vs Wholesale Clients
The PDS obligation is tied to retail clients. Wholesale clients (including sophisticated or professional investors) are treated differently under the Corporations Act. If you’re raising funds by issuing shares or other securities, offers to retail investors usually require a prospectus, whereas wholesale offers may rely on an exemption under section 708 (often documented via an information memorandum rather than a PDS or prospectus). Related concepts like sophisticated investors also affect what you must disclose. The key takeaway is that the document you need (PDS vs prospectus vs information memorandum) depends on both the product type and who you’re offering it to.
Advice And Disclaimers In Marketing
Even before a client gets your PDS, your advertising and website content must not be misleading or deceptive, which is a central rule across Australian consumer law frameworks (see the principles mirrored in section 18). Make sure any promotional material is consistent with your PDS and doesn’t downplay risks or overstate performance.
What Must A PDS Include?
The Corporations Act sets out baseline content requirements for a PDS. In practice, ASIC expects documents to be clear, concise and effective - written for real people. A typical PDS will cover:
- What the product is and how it works (features, eligibility, how to apply or redeem)
- The key benefits and who the product is suitable for
- Material risks (market, liquidity, credit, operational, counterparty, and product-specific risks)
- Fees and costs (including how and when they are charged, and their impact)
- Significant tax implications (high-level, not bespoke tax advice)
- Cooling-off rights (if applicable) and how withdrawals or cancellations work
- Dispute resolution, complaints handling, and external dispute resolution (e.g., AFCA)
- How to access additional information (e.g., website, updates, incorporated by reference documents)
- Contact details of the issuer and relevant authorisations
Design And Distribution Obligations (DDO)
If DDO applies to your product, you must also have a Target Market Determination (TMD). The PDS should align with your TMD: your disclosure must help ensure the product reaches the right customers and is distributed according to the TMD.
Incorporation By Reference
Some information can be “incorporated by reference” (e.g., detailed fee schedules published on your website). If you do this, ensure your PDS clearly tells clients where to find that information and that it remains accessible.
Plain English And Prominence
Clarity matters. Use plain language, headings, summaries, and tables to make the PDS easy to digest. Highlight material risks and costs; don’t bury them. ASIC will expect that important information is not hidden or downplayed.
PDS, Prospectus, FSG And TMD: What’s The Difference?
It’s easy to mix up the alphabet soup, so here’s a quick way to tell them apart.
- PDS: Required for most financial products offered to retail clients (managed funds, super, insurance, etc.).
- Prospectus: Used for offers of securities (like shares) to retail investors. Wholesale or exempt offers may rely on section 708 with an information memorandum (often paired with an information memorandum disclaimer).
- FSG (Financial Services Guide): A separate document that explains the services you provide as a licensee or authorised representative, your remuneration, associations, and how you handle complaints. It’s about your services, not a specific product.
- TMD (Target Market Determination): A DDO document that defines who the product is for and how it should be distributed. It sits alongside your PDS, not inside it.
In addition to the PDS, you’ll likely have online channels to distribute product information. Make sure your website has appropriate Website Terms and Conditions and a compliant Privacy Policy if you collect personal information when clients download the PDS or apply for your product.
How To Create And Maintain A Compliant PDS (Step-By-Step)
Here’s a practical roadmap to develop a PDS that works for your customers and meets Australian requirements.
1) Map Your Product And Authorisations
Start by confirming your product type, how it’s issued, and who it’s for (retail vs wholesale). Check your AFSL authorisations (or your authorised rep status) cover the product and distribution you’re planning. If there’s any gap or uncertainty, seek AFSL advice before you draft - disclosure must match your licence conditions.
2) Identify Core Disclosures
List the key features, benefits, risks, costs, tax considerations, and complaint pathways. Be specific. For fees, outline all entry/exit fees, ongoing fees, performance or management fees, and any indirect costs - with simple examples showing the dollar impact where helpful.
3) Align Your DDO And TMD
If DDO applies, prepare or review your TMD alongside the PDS. Ensure the PDS content and your distribution strategy are consistent with the TMD (including distribution channels, review triggers and reporting requirements).
4) Draft In Plain English
Write for a retail client. Use short sentences, headings, worked examples (e.g., fee scenarios), and plain-English risk descriptions. Prominently flag any limitations, assumptions or product conditions so customers don’t miss them.
5) Stress-Test For Clarity And Gaps
Have someone unfamiliar with the product read the draft. If they don’t understand a key concept, refine it. Cross-check every marketing claim against the PDS and vice versa to reduce the risk of inconsistent or misleading messaging. Where general information appears on your website, add a sensible disclaimer to distinguish general information from financial product disclosure or advice.
6) Check Your Surrounding Documents
Ensure your customer journey is consistent end-to-end. Your FSG, application forms, online journey, Website Terms and Conditions and Privacy Policy should all align with what your PDS promises, especially on eligibility, fees, cooling-off, and complaints handling.
7) Set A Review And Update Cycle
Material changes to the product usually require a PDS update or Supplementary PDS (SPDS). Create an internal trigger list (e.g., fee changes, investment strategy changes, new risks, regulatory updates) and a regular review cadence so you don’t miss required updates.
8) Train Your Team And Distributors
Sales, support and distribution partners should understand what the PDS says and how to keep their messaging compliant. Keep scripts and FAQs aligned to the PDS so no one inadvertently misleads customers.
9) Keep Records
Maintain version control, approval sign-offs, distribution logs, and complaints/incident reports. Good records make audits smoother and help you demonstrate compliance if ASIC asks.
Common PDS Pitfalls (And How To Avoid Them)
Avoiding these common issues will save you time and regulatory headaches.
Overly Technical Or Vague Language
If a typical consumer can’t understand your PDS, you’re missing the mark. Replace jargon with everyday language, define necessary terms, and use examples.
Inconsistent Fees Or Claims Across Channels
Promotional materials must be consistent with your PDS. If the website says “no fees” but your PDS lists them, that’s a red flag. Build a single source of truth and check that all content matches before release.
Downplaying Risks Or Past Performance
Be frank about material risks and avoid implying that past performance will continue. Use balanced messaging - benefits and risks side by side.
Not Updating When Things Change
Material changes require a Supplementary PDS or a replacement PDS. Set up a change management process so updates are captured promptly.
Mixing Up Disclosure Regimes
Not every capital raise uses a PDS. Offers of shares to retail investors typically require a prospectus. Wholesale offers may use section 708 exemptions and an information memorandum (often with an information memorandum disclaimer). When in doubt, get advice so you use the right document for the right audience.
Ignoring Broader Legal Basics
Your disclosure sits in a wider legal framework. Alongside your PDS, think about consumer protection principles (e.g., the prohibition on misleading conduct reflected in section 18), data protection obligations, and the terms that govern how people use your site and apply for your product (your Website Terms and Conditions and Privacy Policy should work together with your PDS).
Key Takeaways
- A Product Disclosure Statement helps retail clients understand a financial product’s features, risks, costs and complaint options so they can make informed decisions.
- You typically need a PDS when offering most financial products to retail clients in Australia; different documents apply to securities offers and wholesale-only raises.
- Core PDS content includes product features, benefits, material risks, fees, tax implications, cooling-off rights, and dispute resolution processes, all written in plain English.
- Make sure your PDS aligns with your licensing, your Target Market Determination under DDO (if applicable), and the claims in your marketing and website content.
- Keep your broader legal stack consistent - your FSG, application flow, Website Terms and Conditions, Privacy Policy and appropriate disclaimers should all match what your PDS says.
- Set a review and update process so you promptly issue a Supplementary PDS or replacement PDS when things change, and train your team to keep messaging compliant.
If you’d like a consultation on preparing or reviewing a Product Disclosure Statement for your financial product, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
