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

FinancialASIC has released Info Sheet 264 – FAQs: Design and distribution obligations for advice licensees and financial advisers prior to the Design and Distribution Obligation (“DDO”) commencement date of 5 October 2021 to explain how DDO  applies to Financial Advice licensees and Financial Advisers when providing personal financial product advice to retail clients.

ASIC has divided the information sheet into (2) sections:

  1. DDO overview; and
  2. Specific obligations applicable to Financial Advice Licensees and Financial Advisers.

For a DDO overview, refer to our previous blog article

What is the Exemption from the Reasonable Steps Obligation?

Financial Advice Licensees and Financial Advisers are exempt from the requirement to comply with the reasonable steps obligation. This means that Financial Advice Licensees and Financial Advisers are exempt from the requirement to take reasonable steps to ensure financial products are distributed consistently with a Target Market Determination (“TMD”) as the provision of personal financial product advice requires Financial Advice Licensees and Financial Advisers to provide clients with advice that is tailored to their individual circumstances. However, the TMD should still be considered to ensure compliance with the best interests duty. ASIC considers the TMD should be taken into account when discharging their obligations under the best interests duty as the TMD contains information as to the class of clients that the product issuer considers the financial product is likely to be appropriate for.

It is important to note that Financial Advice Licensees and Financial Advisers must still comply with the reasonable steps obligation when providing financial services to a retail client other than personal financial product advice (e.g. when providing general financial product advice or execution services).

What is the Reasonable Steps Obligation?

Issuers and distributors of financial products have the obligation to take reasonable steps, that will or are reasonably likely to result in the distribution of financial products being consistent with the TMD.

How can Sophie Grace Assist?

We have developed templates which you can use as a starting point for implementing the DDO regime within your business. There are a number of options available according to your business type – if you are unsure which is relevant for you, please do not hesitate to call, email or chat with us.

Further Reading:

Check our our Compliance Portal

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