Design and Distribution Obligations
On 5 October 2021, the Design and Distribution Obligations (DDO) came into effect for all issuers and distributors of financial products that are covered by the DDO regulations.
DDO requires issuers and distributors of financial products to have a customer-centric approach to the design and distribution of their products, with the aim of helping customers to obtain financial products that are appropriate for their objectives, financial situation and needs.
The obligations apply to a broad number of financial products including, but not limited to managed funds, investment platforms such as IDPS (Investor Directed Portfolio Services) and bank accounts.
What is a Target Market Determination (TMD)?
As a product issuer it’s our responsibility to create a TMD for each of our products covered by DDO that:
- Describes the Target Market: outlines the likely objectives, financial situation and needs of customers the product has been designed for.
- Establishes Distribution Conditions: details the conditions or restrictions on the sale of the product.
- Establishes Reporting Requirements: sets out the relevant information that must be provided to us by distributors at our required frequency. At a minimum, a distributor must regularly report the number of complaints it receives about the issuer’s product to the issuer, as well as report any significant dealings in the product that are inconsistent with the TMD.
Key obligations for a product issuer
Our key responsibilities as a product issuer are:
- to create and maintain the TMD for all our products that are covered by DDO.
- to take reasonable steps to ensure our products are distributed in line with those TMDs.
Key obligations for a product distributor
The key obligations for product distributors are:
- to ensure there’s a TMD in place for all of the products that they distribute that are covered by DDO.
- to understand and follow the distribution conditions and reporting requirements set by the product issuer in the relevant TMD, e.g., they must collect and keep the information specified in the TMD, including complaint numbers.
- to take reasonable steps to ensure the product is distributed in line with the TMD.
- to keep records of distribution information.
If you are a distributor of our product(s), what’s expected of you?
You are expected to understand the requirements we establish in the TMDs for our products. This means you need to:
- understand the target market defined in a TMD and take reasonable steps to ensure the product is distributed in accordance with the TMD.
- understand and adhere to any distribution conditions established in the TMD.
- provide information as specified in the TMD, at the required frequency and in the required form.
- keep accurate records of the reasonable steps taken and any information provided to us.
- report to us where you believe a significant dealing in the product which is inconsistent with the product’s TMD has occurred.
- to report information to the issuer as required by the TMD.
How do we distribute our TMDs ?
Current TMDs will always be available on our website, we have also entered in to a strategic partnership with Morningstar and IRESS, who will make available to subscribers a document library which will contain TMDs for each of our products in scope. When we make change to one of our TMDs, the update will also be made directly available to Morningstar.
How will complaints and significant dealings be managed?
We have created a detailed procedure guide to assist you in meeting your DDO reporting requirements across a number of areas including:
- the reporting of complaints,
- the reporting of dealings outside of the TMD; and
- how to notify us of significant dealings outside of the TMD.
We have also created some report templates that you can use for this reporting, we do also accept reports in the FSC standards. We have also included some email templates for your ease of use. The procedure and templates are available here: