It’s another year and as a finance industry we have yet another regulatory change to deal with! ASIC published a new Regulatory Guide (RG274: Product design and distribution obligations) on 11 December.
In amongst all the news about BID (Best Interests Duty) you’d be forgiven for missing it, so we wanted to raise it here and over the course of 2021 we’ll provide further, more detailed updates.
As of 5 October 2021, new Design and Distribution obligations (DDOs) come into force for those involved in the issuance or distribution of financial products.
In summary, the DDOs place a specific responsibility upon issuers and distributors to design and distribute financial products with a customer-centric approach. In particular:
- Each financial product must have a defined Target Market Definition (TMD) designed and implemented by the product issuers (ie. lender).
- The design of the product must then be consistent with the likely objectives, financial situation and needs of intended consumer targets.
- Issuers and Distributors (ie. brokers) must take ‘reasonable steps’ to enhance the reach of products to the intended (and specified) target market.
- Issuers must monitor consumer outcomes to ensure they remain in line with the objectives and needs of the intended target market.
An ‘Issuer’ is typically a lender or insurer and a ‘Distributor’ will include Finance Brokers.
Relevant financial products covered by DDOs include:
- Products of which a PDS must be prepared.
- Securities of which disclosure documents must be prepared.
- NCCP regulated credit products.
So, the main onus is placed upon Lenders and Insurers to create and publish TMDs. A broker must then distribute the product consistently with the TMD and report any identified issues and inconsistencies to the Issuer.
Consumers must have access to publicly available TMDs for any financial product they are issued with.
Over the coming months, lenders will need to generate these TMDs and issue to their broker market. SalesKey will remain closely connected to the process and ensure our Compliance Partners stay up-to-date and well prepared.
Our business remains focussed on helping to de-mystify regulatory compliance and take the stress out it for our retained service compliance partners. We are passionate about helping them “get on with business” whilst we arm them with the compliance support necessary to create sustained success.
If you are not currently a retained compliance partner of ours, we’d love to speak with you and explain more about what we do and how we offer cost-effective and customised support solutions for Finance Brokers, Aggregators and Lenders.
Please call us for an obligation-free chat on 1800 954 488.
Here’s to an amazing 2021 and creating Better Outcomes together!
Scott and Darren.