These FAQ's have been prepared for distributors to assist with the implementation of Design and Distribution Obligations (DDO).
- not engage in 'retail product distribution conduct' in relation to a product unless the distributor is providing personal advice or reasonably believes (after making all such reasonable enquiries) that a TMD has been made, or that a TMD is not required
- take reasonable steps that will, or are reasonably likely to, result in a distribution being consistent with the most recent TMD (unless personal advice has been provided)
- notify the issuer if they become aware of a significant dealing in the product that is not consistent with the TMD as soon as practicable, but within 10 business days
- notify the issuer about whether they received complaints in relation to the product during the reporting period specified in the TMD, and if so, the number of complaints received
- keep complete and accurate records of distribution information, including the number of complaints received about a product as well as information specified by the issuer in the TMD.
Product issuers must:
- make a 'target market determination' (TMD) for each product covered by the DDO
- take reasonable steps to ensure that distribution is consistent with the most recent TMD
- notify ASIC if it becomes aware of a significant dealing in the product that is not consistent with the TMD as soon as practicable but within 10 business days
- keep complete and accurate records of decisions made in relation to TMDs, reviews and reasons for those decisions, as well as distribution information.
- Advisers must meet the distribution obligations at the point of distributing products that are covered by DDO, this will include when providing general or personal advice or providing execution only services to a retail client.
- Advisers need to consider the TMD when providing personal financial advice. This is not an obligation under DDO, but rather, part of their best interest duty obligations.
- Advisers must ensure they meet their obligations to report complaints and other information set out in the TMD to the issuer, either directly (authorised representatives) or through their licensee. Advisers could be in breach if they do not fulfil this requirement.
- The obligations under DDO apply to financial products offered to retail clients for which a prospectus, product disclosure statement (PDS) or disclosure to investors is required under the Corporations Act.
- This includes (but is not limited to) investment platforms, managed funds, personal insurance, exchange traded funds and education bonds.
- They are the steps advisers must take when personal advice has not been provided in relation to a product that will, or is reasonably likely to, result in distribution being consistent with its most recent TMD.
- It also includes steps to prevent distribution where advisers have identified that the product is clearly unsuitable for the client.
- They are individual dealings (or an aggregate of individual dealings) where a client is outside the product's TMD and are determined to be significant. They must be reported to a product issuer to help them make timely and appropriate decisions regarding their TMD (for example, a decision to review the TMD as it may no longer be appropriate or report the significant dealing to ASIC).
- Reporting will be required by advisers and licensees as distributors of our products.
- Reporting is also required by platform providers as distributors of our investment funds on their products. A product's TMD will specify the reporting requirements but will typically include complaints received from clients about the product and significant dealings.
- Product issuers will specify, as part of their product's TMD, any conditions or restrictions on how their product should be distributed. Distribution conditions can include minimum amounts and how to distribute e.g. via personal advice.
- Distributors will need to adhere to the distribution conditions and restrictions established in the TMD.
- Advisers must keep and provide complete and accurate records of all distribution information. Where an adviser's distribution conduct doesn't include personal advice, the record keeping will include the reasonable steps taken to ensure their distribution was likely to be consistent with the product's TMD.
- Depending on the type of distribution conduct, advisers will need to use the TMD to meet their relevant obligations.
- Where the distribution conduct does not include personal advice, advisers must use the TMD to meet their reasonable steps requirement (and other distribution obligations).
- Where the distribution conduct includes personal advice, advisers can use the TMD to assist with their product research and meeting their best interests obligations.
- In all instances, the TMD will be required to ensure advisers can meet their record keeping and reporting obligations.
- TMDs will be publicly available on product issuers websites including that of IOOF. Research houses ie. Morningstar and financial planning software. Further details will be provided as solutions are brought to the market.
- No. They may if they wish, but they're not required to provide the TMD to the client. TMDs are not disclosure documents. The TMDs are developed with the distributor in mind, so while they are publicly available, the intended audience are distributors.
- Generally, a product that requires a TMD must not be distributed if a TMD has not been made. Where personal advice has been provided in relation to a product covered by DDO, advisers will be exempt from the obligation not to distribute product unless a TMD has been made.
- Where retail product distribution conduct occurs with the provision of personal advice, existing Best Interest Duty controls and processes would typically go above the reasonable steps required to distribute according to the TMDs.
- As part of DDO, advisers will need to keep accurate records and report certain information to the licensee to support its reporting requirements to product issuers on information like complaints received relating to the product and any dealings that are outside of the TMD.
- Advisers may also be required to report significant dealings in the product that are not consistent with the product's TMD directly to the product issuer.
- As an advice led business, some of our products can only be distributed by authorised advisers.
- For IOOF issued products (excluding MLC products) reporting on dealings can be submitted via an online portal, DDO Online, to allow reports to be submitted by distributors/licensees. These reports will then be collated, reviewed and submitted to the respective product issuer.
- Reporting can be submitted via DDO Online by either completing an online form, or by uploading a CSV file using the FSC data reporting standards. Please use the CSV template that can be found in DDO Online.
- For products issued by MLC, please refer to mlc.com.au/adviser/partnering-with-us/design-distribution-obligations-reporting for information on how to provide reporting.
If you have further questions regarding DDO please reach out to your IOOF Client Solutions Manager.