The Design and Distribution Obligations (DDO) and Product Intervention Powers (PIP) legislation was passed in April 2019.
You can get a copy of the legislation here.
The regime introduces targeted and principles-based design and distribution obligations in relation to financial products. The obligations require issuers and distributors to have an adequate product governance framework to ensure products are targeted at the right people.
The financial products captured under DDO mainly include:
There are, however, exceptions for financial products and distribution methods where there are existing similar laws or other competing policy priorities.
DDO is now applicable to credit products because they fall under the umbrella of ‘financial products’. Insurance, asset management, superannuation (except MySuper) and derivatives are the other products captured under the regime.
The design obligations applicable to issuers include requirements to:
The distribution obligations applicable to distributors include requirements to:
The legislation does not provide guidance on making a target market determination. Firms need to carefully consider what factors they use in determining the target market of their financial products captured under DDO.
ASIC now has a number of powers to support its regulatory role, including ability to request necessary information and issue stop orders. PIP can be used when there is a risk of significant consumer detriment. Civil and criminal penalties will be applicable to contraventions of the new obligations.
Having a robust product governance framework and product monitoring capability embedded across your orgnanisation are critical. Your organisation needs to assess the implications of DDO and PIP on the end-to-end product lifecycle and the related operational processes.
We can support you so you are ready when DDO is applicable, so please call us if you would like to discuss how Deloitte can assist you.
Read Learning lessons from MiFID II to discover more.
Read our DDO – ASIC Draft Regulatory Guide blog.
Read our DDO Final Guidance - What does this mean for banks blog.