It is one thing to have taken steps to prepare for the new Design and Distribution Obligations (DDO), which commenced on 5 October 2021. The real challenge lies in continuing to manage and maintain these process changes across your whole business.
Here, consultant Jeunesse Meldrum and lawyer Joe Fleming share some practical tips for ongoing compliance.
What have you done so far?
If you’re an issuer or distributor of financial products to retail clients, by now you will have done the following:
- Made target market determinations (TMDs) for open retail products.
- Formalised product governance arrangements, including a product governance policy.
- Updated advertising material to describe a product’s target market or specify where the TMD is available.
- Taken reasonable steps to ensure distribution channels are appropriate for a product to reach consumers in its target market.
But DDO doesn’t stop there – it continues to apply across the life cycle of a financial product.
Practical tips for ongoing compliance
Your consumer-centric approach to design and distribution requires monitoring and review. Here are some practical tips to ensure your business continues to comply with DDO:
- Train your staff about DDO generally and specifically on your product governance arrangements.
- Check in with your distributors:
- Confirm they know how to access your TMDs and how to report to you.
- Ask about the form and content of the reports they will provide to you. You may want to offer pro forma reporting templates for distributors to use to report complaints and dealings outside the TMD, noting the requirement for distributors to provide ‘nil’ reports has been removed.
- Find out how any distribution conditions are working in practice.
- Enquire about any feedback being received from consumers.
- Let your existing investors know about DDO and how it applies to you.
- Develop a DDO landing page on your website as a convenient place for distributors (and investors) to access information about DDO.
- For responsible entities, engage with your compliance plan auditor about how they intend to approach DDO in your schemes’ next compliance plan audit.
- Monitor any significant dealings in your products and, if identified, report them to ASIC as soon as practicable, but no later than 10 business days after becoming aware. For the moment, significant dealings can be reported to ASIC by email (firstname.lastname@example.org), but ASIC intends to incorporate these reports into the ASIC Regulatory Portal in future.
- Ensure relevant staff know the review triggers in your TMDs and implement an efficient and timely internal TMD review process. Keep in mind issuers and distributors are required to cease distribution of the product during a TMD review.
- Conduct regular desk-top audits of your financial products having regard to the review triggers in the TMDs and any dealings that are not consistent with the TMDs.
- Regularly review your product governance policy.
Does your business continue to comply?
DDO is all-encompassing and requires careful consideration of your end-to-end product life cycle, while managing and maintaining these changes across your business may prove to be complex.
Contact our Funds Management team for help with understanding your ongoing obligations and practical tips for compliance.