September 30, 2022

Volume XII, Number 273

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September 30, 2022

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Australia: DDO Implementation and Enforcement

ASIC have announced the first enforcement action it has taken in relation to the Design and Distribution Obligations (DDO), which were introduced late last year. The enforcement action shows that, as described by ASIC deputy chair Karen Chester, “ASIC’s focus has now shifted to compliance. Industry has had sufficient time to bed down its implementation of the DDO regime.

The DDO are a set of obligations which took effect on 5 October 2021. The DDO intends to improve consumer experience by requiring product issuers to design financial products to meet the needs of consumers and distribute their products only to consumers they are suitable for.

Under the DDO, product issuers are required to create Target Market Determinations (TMDs) in relation to their financial products. In creating a TMD, issuers must consider the design of their products (including its key attributes) and determine an appropriate target market for the product by ensuring that the key attributes of the product are likely to be consistent with the with the likely objectives, financial situation and needs of the target market.

On 28 July ASIC announced that it had put in place interim stop orders in relation to financial products issued by three financial firms.  ASIC alleges that two of the businesses failed to have a TMD in place and that the third business had a TMD which did not show how the product was consistent with the likely financial situation of its target market.

This recent enforcement action shows the importance of having appropriate TMDs in place prior to distributing financial products.

ASIC’s media release can be found here: DDO Stop Orders.

Copyright 2022 K & L GatesNational Law Review, Volume XII, Number 213
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About this Author

Daniel Knight, KL Gates, financial services industry lawyer, retail fund managers attorney
Senior Associate

Mr. Knight is a commercial and regulatory lawyer with a focus on the financial services industry. He advises a range of wholesale and retail fund managers, banks, financial advisers, superannuation fund trustees and other financial services firms.

Mr. Knight concentrates on commercial transactions in the industry and on advising clients about Australian licensing, disclosure, and compliance obligations. He regularly advises international fund managers about offering their products in Australia.

Mr. Knight also has...

61-3-9640-4324
James Gray Investment Attorney K&L Gates Australia
Lawyer

Simon Kiburg is a lawyer in our asset management and investment funds practice area at the Melbourne office.

Simon advises clients on a range of regulatory and compliance issues relevant to financial advisers, superannuation fund trustees, payment facility providers, fintechs, wholesale and retail fund managers, and other financial services entities

+61 3-9205-2117
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