{"id":57686,"date":"2021-09-24T08:37:45","date_gmt":"2021-09-23T22:37:45","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=57686"},"modified":"2024-10-30T08:44:18","modified_gmt":"2024-10-29T22:44:18","slug":"design-and-distribution-obligations-what-you-need-to-know","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2021\/09\/24\/design-and-distribution-obligations-what-you-need-to-know\/","title":{"rendered":"Design and Distribution Obligations – What You Need to Know"},"content":{"rendered":"\n
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The rollout of the new range of income protection insurance products in the coming weeks will receive much attention – especially from risk advisers and licensees. But another significant development just around the corner is the implementation of the new Design and Distribution Obligations which take effect from 5th October.<\/h3>\n

Riskinfo thanks Sophie Gerber<\/strong> from compliance and legal specialist firm, Sophie Grace<\/a>, for the opportunity to re-publish this excellent summary of the DDO requirements and what this will mean – not just for product manufacturers, but also for product distributors…<\/h3>\n<\/div>\n<\/div>\n

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The commencement of the Design and Distribution Obligations (\u201cDDO\u201d) is now imminent with the regime coming into effect from 5 October 2021.<\/p>\n

Background<\/strong><\/p>\n

The origins of the design and distribution obligations are well-articulated in ASIC\u2019s Regulatory Guide 274<\/a>.\u00a0 Similar provisions have been implemented in other major jurisdictions around the world such as the United Kingdom (by the Financial Conduct Authority<\/a>) and Europe (by the European Securities and Markets Authority<\/a>).<\/p>\n

In Australia, the Financial System Inquiry\u2019s<\/a> (FSI) recommendation for the introduction of the design and distribution obligations in 2014 was based on its view of the limitations of a framework for consumer protection in financial services that relies heavily on disclosure, financial advice and financial literacy.<\/p>\n

In particular, the FSI concluded that \u2018disclosure can be ineffective for a number of reasons\u2019 and that \u2018disclosure alone is unlikely to correct the effect of broader market structures and conflicts that drive product development or distribution practices\u2019<\/em> that result in poor consumer outcomes.<\/p>\n

The FSI concluded that poor design and distribution practices played a significant role in contributing to consumer detriment. It is in this context that the FSI recommended the introduction of the design and distribution obligations as a supply-side intervention that places additional responsibility for consumer outcomes on issuers and distributors.<\/p>\n

The design and distribution obligations are intended to help consumers obtain appropriate financial products by requiring issuers and distributors to have a consumer-centric approach to designing and distributing products.<\/p>\n

The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2019<\/a> received Royal Assent on 5 April 2019 which amended the Corporations Act, the NCCP Act, and the ASIC Act.<\/p>\n

Who does the Regime Apply to?<\/strong><\/p>\n

The DDO apply to a range of financial products under the Corporations Act 2001<\/a> (\u201cCorporations Act\u201d), ASIC Act 2001<\/a> (\u201cASIC Act\u201d) and National Consumer Credit Protection Act 2009<\/a> (\u201cNCCP Act\u201d).<\/p>\n

\"\"<\/a><\/p>\n

There are some product exemptions, including:<\/p>\n