The Government will make a number of changes to the requirements of the Design and Distribution Obligations, which it says are designed to clarify the law and ensure its application is consistent.
Under DDO, which takes effect on October 5, financial services companies will be required to identify the target market for their product and will need to design the product for that market. They will have to select appropriate distribution channels and periodically review those arrangements to ensure they continue to be appropriate.
The scheme is aimed at reducing the harm of mis-selling.
Treasury has issued a notice, saying it proposes to make a number of changes before the regime starts. They include:
• clarifying that margin lending to corporates is exempt from DDO obligations, consistent with the intention that all margin lending is to be exempt from DDO;
• clarifying that employees of licensees are not subject to their own separate set of DDO obligations;
• ensuring that a 31-day term deposit falls within the DDO regime;
• providing consistency in the application of retail and wholesale investor definitions across the Corporations Act by ensuring it extends to the DDO regime;
• exempting foreign cash settled immediately from the DDO; and
• exempting non-cash payment facilities from the DDO, except for certain facilities, specifically credit and debit card facilities and stored value facilities.
Treasury said the changes were made after industry consultation. To provide certainty as to DDO requirements in the period prior to the Government making these amendments, ASIC will make interim changes consistent with the Government intentions, using its modification and exemption powers under the Corporations Act.