With the design and distribution obligations (DDO) legislation coming into effect on 5 October, Iress has been helping clients from across the industry understand how to manage their requirements simply and easily.
We spoke to Gordon Little, Managing Director, Iress Blockchain, to find out more.
What is DDO?
The Design and Distribution Obligations (DDO) create a fundamental shift in how financial products are distributed to consumers. It’s purpose is to help consumers obtain financial products that are appropriate for them by placing obligations on both product issuers and distributors.
The legislation which comes into effect on 5 October 2021, is broad and requires product issuers to design products that are consistent with the likely objectives, financial situation and needs of the consumer for whom they are intended from.
Who is impacted by it?
All participants in the financial services value chain are impacted by DDO from product issuers to distributors. Broadly the legislation requirements are:
Product Issuers: design financial products that are consistent with the likely objectives, financial situation and needs of the consumers for whom they are intended (the target market), and take reasonable steps to ensure investors outside the target market are unlikely to acquire a product. Issuers include, but are not limited to, asset managers, insurers, operators of investment platforms, trustees of superannuation funds and banks.
Distributors: take reasonable steps to distribute financial products to the target market. Distributors (including personal advice distributors) are also obligated to report complaints, significant dealings and information specified by the product designers.
The consequences of not complying with these requirements are significant, with the legislation allowing for civil penalties up to $200,000 for individuals and $1 million for corporations, as well as potential criminal sentences.
What are product issuers like superannuation funds required to do?
Product Issuers must:
- create a target market distribution (TMD) for each product. This includes the class of consumers and any distribution conditions
- publish that TMD ensuring it is available to those distributing their product
- take reasonable steps in relation to distribution being consistent with the TMD, i.e. marketing and distribution should be focused on the target market
- notify ASIC of any significant dealings in a product in relation to a retail client that are inconsistent with the TMD
- review the TMD regularly to ensure it remains appropriate
- maintain records
How does the Iress DDO Solution support superannuation funds?
The Iress DDO Solution supports super funds with the ability to easily meet DDO requirements via individual or bulk target market determination (TMD) publishing. The transparency and auditability of the blockchain allows you to have complete visibility of all organisations accessing your TMDs.
It also provides a messaging service for managing complaints & significant dealings - provided in a consolidated manner adopting the FSC data standards. And It’s natively integrated with Xplan (with open APIs available for other advice software users) making it easy for financial advisers to view and assess TMDs as part of their existing advice process.
Why blockchain? What are the advantages of this technology?
Iress Blockchain is an end-to-end communications solution that enables the financial industry to
exchange information in a secure and streamlined way. It records and stores information in a digital
ledger that can be accessed by any system. Once information has been entered into the blockchain, it can never be altered or corrupted.
Iress Blockchain provides a shared source of truth, while facilitating the secure exchange of data and documents. It also provides a single point of reconciliation to secure the integrity of data sets at all times.
How can people find out more?
Speak to your Iress account manager for more information. You can also join us at our upcoming DDO Industry Forum on 23 September to hear from our expert panel.
Finally, visit our web page for more information.
