While the Productivity Commission’s proposal to extend the product design and distribution obligations to SMSFs would be effective in weeding out unscrupulous operators, the creation of documentation for these obligations may initially be challenging for advisers, says a compliance expert.
One of the recommendations made by the Productivity Commission in its final report on superannuation was to extend the proposed product and design obligations to SMSF establishment.
The design and distribution obligations were introduced into Parliament in September last year and, once passed, will require financial services companies to provide specific design requirements to ASIC that explain who the target audience for the financial product is. Under the measures, financial service providers are required to specifically determine the segment of the consumer market that they’d be targeting with their service and ensure that the product is distributed in accordance with that determination. The current measures before Parliament do not apply to SMSFs.
Sophie Grace Compliance director Sophie Gerber said that, given the way in which the exposure draft for the current measures has been drafted, if the obligations were extended to include SMSFs, this would most likely require SMSF firms to prepare an internal document which sets out the kinds of individuals it would recommend SMSFs to.