The Design and Distribution Obligations (DDO) and Product Intervention Powers (PIP) legislation was passed in April 2019 and ASIC released its draft guidance paper and regulatory guide - Consultation Paper 325 Design and Distribution Obligations (CP 325) - on 19 December 2019.
You can access Consultation Paper 325 here.
The regime introduces targeted and principles-based design and distribution obligations in relation to financial products. The obligations require issuers and distributors to have an adequate product governance framework to ensure products are targeted at the right people.
The financial products captured under DDO broadly include:
- Products that require disclosure to investors, and
- Products that require a Product Disclosure Statement.
There are, however, exceptions for financial products and distribution methods where there are existing similar laws or other competing policy priorities.
The design obligations applicable to issuers include requirements to:
- Make a target market determination and make it publicly available
- Review the target market determination for appropriateness
- Keep records about the target market determination, and
- Notify ASIC about significant dealings in respect of the target market determination.
The distribution obligations applicable to distributors include requirements to:
- Not engage in retail product distribution without a target market determination
- Not engage in retail product distribution where a target market determination may no longer be appropriate
- Take reasonable steps so that distribution is in accordance with the target market determination
- Collect, keep and provide distribution information, and
- Notify the issuer of any significant dealings inconsistent with the target market determination.
Importantly an IDPS platform operator must comply with both the issuer and distributor obligations.
ASIC has not yet released a final Regulatory Guide due to the impacts of the COVID-19 pandemic. However their announcement of 8 May 2020 advised a six month delay to the proposed commencement date, pushing it out from 5 April 2021 to 5 October 2021.
In the absence of further information Equity Trustees has developed a DDO project plan based on a commencement date of 5 October 2021, in order to be as prepared as possible to meet the expected commencement date.
Equity Trustees is applying industry standard templates and will be contacting investment managers shortly to kick off the project.
|Kick off engagement with investment managers and service providers
|Conduct test run of draft TMD with investment managers
||January - February 31 2021
|Finalise draft TMDs, including reasonable steps and review triggers
|Finalise information sharing/reporting and monitoring requirements
|| May 2021
|Finalise changes to agreements – distribution, Investment management, third parties
| July 2021
|Test run of TMD process (TBC)
| August 2021