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ASIC’s Observations on Target Market Determinations

Since the commencement of the Design and Distribution Obligations (“DDO“) regime in October 2021, ASIC has issued eighty-one (81) interim stop orders for breaches of the requirements relating to Target Market Determinations (“TMDs“) by issuers of investment products. ASIC’s enforcement action highlights the important of all product issuers reviewing and improving the effectiveness of their TMDs.

A TMD is required to be implemented by any licensee who issues certain financial products to retail clients. TMDs must be clear, well-designed and include appropriate review triggers and controls.

A Summary of ASIC’s Commentary

As part of ASIC’s observations in their recent Report 762 – DDO: Investment products, it was found that investors were being inappropriately exposed to high-risk products. This exposure occurred primarily as a result of investment product issuers implementing a TMD template that did not consider the individual features and risks of their product to ensure that the target market reflected a suitable group of retail clients.

ASIC’s commentary on the TMDs which formed part of the review focused on improvement of the following areas:

  • Define the target market for the financial product:
    • ASIC noted that those licensees who defined their target market in a specific manner, including factors like age, occupation or industry, minimum investment balance, insurance needs (amongst other things) demonstrated a better understanding of their product and made it simpler for distributors to ensure distribution in line with the TMD. ASIC’s guidance included:
      • ensuring the target market is defined against each of the key attributes of the product;
      • ensuring the consumer objectives, financial situation and needs for which the product is likely to be appropriate are sufficiently covered by the TMD;
      • clearly articulating each product and the differences between the products in TMDs that cover multiple products.
  • Implementing appropriate product design processes
    • involving key senior staff in the product and TMD development process with final sign off by the Board;
    • monitoring and performing stress tests on schemes to improve outcomes under average market conditions and market stress; and
    • actively involving product distributors during the product design and TMD development process.
  • Appropriateness of a TMD
    • ASIC noted that issuers should:
      • consider all important indicators of risk that impact their financial products including drawdowns, returns volatility and the risk that returns may be positive (but may not meet a client’s objectives, financial situation and needs); and
      • consider how a product is likely to perform under conditions of market stress and average market conditions.
  • Investment sub-markets
    • ASIC’s commentary noted that describing objectives and risk levels of financial products in broad or non-numerical terms would not be considered effective. ASIC indicates that TMDs should include specific data, using quantifiable investment objectives or benchmarks to be effective.
ASIC Review of TMDs
  • Distributor complaint reporting
    • ASIC noted that TMDs should include regular complaint reporting to ensure licensees are informed about their product and assess whether the TMD remains appropriate.
  • Review Triggers
    • ASIC commented that review triggers should be specific and comparable over a set period of time and should not be overly broad.
  • Ongoing review periods
    • Whilst licensees which formed part of ASIC’s review included initial review periods in their TMDs, ASIC noted greater attention should be paid to setting ongoing review periods to ensure appropriateness of TMDs;
    • ASIC further noted that issuers should:
      • ensure checks are targeted and address the issues within the TMD or scheme raised by the review trigger, event or circumstance;
      • ensure checks are comprehensive and cover all aspects of the TMD or scheme;
      • test whether distribution conditions are working as intended via use of a questionnaire; and
      • test whether third party distributors remain competent and suitable to distribute a scheme through regular audits, distributor training or conducting a review of distribution outcomes.
  • Distribution and oversight arrangements
    • ASIC’s commentary noted that issuers should:
      • use key words that align with the target market to drive search engine optimisation and online marketing activities to better direct a scheme’s distribution;
      • conduct checks to ensure all marketing material aligns with the TMD; and
      • deliver regular training to staff responsible for distribution on DDO that can be applied when engaging with clients or responding to questions about a scheme.
    • ASIC’s commentary in relation to third-party arrangements include:
      • implementing communication and overseeing arrangements to monitor distributors;
      • reviewing internal risk controls used by the distributor; and
      • reviewing the distributor’s past conduct and history e.g. breaches and complaints.



ASIC’s observations of the TMDs of investment product issuers illustrates how ASIC will assess TMDs generally across their regulated population. The DDO interim stop orders have been used as a regulatory tool by ASIC to immediately stop poor consumer outcomes as a result of deficient TMDs. It is therefore important that all issuers of financial products who are required to provide a TMD are aware of ASIC’s guidance and look at reviewing and updating their existing TMDs and product governance arrangements.


The Design and Distribution Obligations (DDO) regime came into effect on 5 October 2021. The DDO applies to a range of financial products under the Corporations Act, ASIC Act 2001 (Cth)  and the National Consumer Credit Protection Act 2009 (Cth) and are intended to help consumers obtain appropriate financial and credit products by requiring issuers and distributors to have a consumer-centric approach to designing and distributing products.

A TMD is a mandatory public document that sets out the types of consumers a financial product is likely to be suitable for. A TMD also refers to a licensee’s product distribution, monitoring and review of its financial product. This document is provided to clients free of charge prior to engaging in retail product distribution conduct.

How can Sophie Grace Assist?

Sophie Grace can assist you to review your TMD.  Please do not hesitate to call, email or chat with us.

Further Reading:

ASIC Media Release – ASIC calls on investment product issuers to ‘lift their game’ on design and distribution obligations

Report 762 Design and distribution obligations: Investment products

ASIC Media Release – Super trustees urged to improve effectiveness of target market determinations

DDO Enforcement: ASIC issues first DDO stop orders

Design and Distribution Regime

Design and Distribution Obligations: How does it apply to Financial Advice Licensees and Financial Advisers?

ASIC Regulatory Guide 274 – Product design and distribution obligations

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