ASIC defers commencement of design and distribution obligations for retail financial products

On Friday, ASIC announced a 6 month deferral for the commencement of the design and distribution obligations (DDOs) that will apply to issuers and distributors of financial products to retail customers.

The announcement follows the Federal Government’s announcement last week that it will defer the implementation of commitments associated with the banking Royal Commission for 6 months in response to the COVID-19 pandemic.

The DDOs will now commence on 5 October 2021 (rather than 5 April 2021, as previously anticipated).

ASIC has been consulting with industry stakeholders and has indicated that it will work towards releasing final guidance on the new DDO regime in mid-2020.

Don’t just stand there – do something!

The deferral will no doubt come as welcome news for issuers and distributors currently struggling to cope with the business impacts of COVID-19.

But while it does give financial services businesses some breathing room, issuers and distributors shouldn’t allow preparation for the new DDO regime to slip too far down the “to do” list.

In our earlier article, we outlined some of the key features of the new design and distribution regime that will apply to issuers and distributors of financial products to retail customers (e.g. retail issuers and distributors of insurance, asset management, superannuation, derivative and credit products).

In particular, over the next 18 months, issuers and distributors should make sure that they:

  • understand the scope of the DDO regime and whether it will apply to them and the financial products they issue or distribute;
  • have adequate measures in place to ensure that all relevant staff and personnel have a detailed understanding of the DDOs;
  • (for issuers) formulate compliant target market determinations for each applicable financial product and ensure adequate review mechanisms are in place; and
  • (for distributors) have adequate measures in place to ensure that distribution of any financial product subject to the DDO regime will be consistent with any applicable target market determination.

Issuers and distributors may also wish to liaise with each other to fine-tune target market determinations and iron out any wrinkles in the issue / distribution process before the new regime takes effect.

If you would like advice about the new DDO regime and whether (or how) it applies to you, please contact us.

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