What is DDO and how does it impact Financial Advisers and Licensees?
DDO refers to the product Design and Distribution Obligations which are applicable to both product issuers and product distributors and must be complied with from October 5th, 2021.
The intention is to help consumers obtain appropriate financial products by requiring that products are designed for and distributed to the right people.
ASIC has produced Regulatory Guide RG 274 to assist you in complying with the new requirements, and has prepared an FAQ for advice licensees and financial advisers.
Who is a Distributor?
Distributors are regulated persons, who engage in retail product distribution conduct. The definition of ‘regulated person’ is wide and includes:
- AFS licensees; and
- Authorised Representatives
A Financial Adviser engages in retail product distribution when providing financial product advice.
What is a TMD and how do I use it?
A Target Market Determination (TMD) is a document that describes:
- The target market for whom a product is designed, including details of the consumer’s likely objectives, financial situation and needs;
- The key attributes of the product;
- The distribution conditions and restrictions that Financial Advisers and AFSL must comply with, including reporting information that must be provided to AustralianSuper. These are legally enforceable; and
- The review periods for the Target Market Determination.
A TMD must be published by all product Issuers for each of the financial products they provide and made available to the public at no cost. Financial Advisers must make the TMD readily available to their clients, even if providing personal advice.
AustralianSuper’s TMDs can be found at australiansuper.com/tmd.
I am an Adviser providing personal advice – does my client need to be within the target market described by the TMD?
When providing personal advice that is in your client’s best interest as per the Best Interest Duty, you can make a recommendation to them if they are outside the target market. However, you must have regard to the TMD, be able to identify when your client falls outside the target market and provide this information to your Licensee for reporting purposes.
What is the role of Licensees as Distributors under the DDO obligations?
- Take reasonable steps to ensure that that distribution is in accordance with the TMD when providing General Advice and Execution only/Implementation services;
- Collect, keep and provide distribution information in order to comply with the issuer’s reporting requirements and monitor for significant dealings;
- Notify AustralianSuper of any significant dealings inconsistent with the TMD, even if it is under personal advice within 10 business days of becoming aware of a significant dealing; and
- Notify AustralianSuper where you have received complaints in relation to any of AustralianSuper’ s products, within 10 business days of the end of the standard calendar quarter.
What reporting do Distributors need to provide?
The DDO obligations require that Distributors provide AustralianSuper with the following reporting:
Reporting Information about this product to be reported Complaints
Quarterly, within 10 business days after the end of the calendar quarter
- The number of complaints received about this product
- Reasonable details of each complaint, including the resolution
Significant Inconsistent Dealings
As soon as practicable, but no later than 10 business days, after the distributor becomes aware of a significant inconsistent dealing
Reasonable details of each significant inconsistent dealing, including:
- relevant date ranges,
- the number of members to whom the dealing applies,
- whether personal advice was provided
- whether harm or detriment has or is likely to have occurred
- any other information of the kind ASIC expects to receive from a product issuer in relation to a significant inconsistent dealing.
Who needs to provide reporting?
Licensees and financial advisers are responsible for complying with the reporting requirements within our TMD. It is our expectation that Licensees will provide the required reporting on behalf of all advisers authorised under their AFSL. However, if you are an Authorised Representative and your Licensee is not registered with AustralianSuper you may need to provide this yourself.
Personal information about the client should not be included in any reporting provided. Where this is not possible, please redact or de-identify the information.
Do distributors need to provide a report when no complaints have been received?
The law no longer requires reports to be submitted when the number of complaints is nil. Complaints reporting is only required where a complaint(s) about the product has been received by the distributor in the relevant reporting period.
When do you need to provide a complaints report?
Provide a quarterly complaints report via email to firstname.lastname@example.org by the 10th business day of the end of each financial quarter.
What is a significant dealing?
A significant dealing refers to dealing to clients outside of the TMD. ‘Significant’ is not defined by the Corporation Act or by AustralianSuper. Licensees must determine for themselves, what dealings outside of the TMD are significant having regard to:
- Proportion of clients not in the target market;
- Actual or potential harm to consumers, including amount of loss; and
- Nature and extent of inconsistency of distribution to the target market determination.
If you are not sure whether a dealing is significant, we encourage you to report the dealing to AustralianSuper at email@example.com
If my client has a shorter time horizon for an investment than is stated in the TMD will the client be outside the TMD?
AustralianSuper does not expect Licensees and Advisers to identify dealings outside the target market based solely on investment timeframes. As described above, Licensees must also have regard to actual or potential harm, including amount of loss.