ASIC Chair, Joseph Longo, has warned industry that it will be expecting compliance with the Design and Distribution Obligation (DDO) regime and across the year will pursue a targeted surveillance approach, moving to enforce the obligations where necessary.
In a speech on ASIC’s priorities for the year ahead, the ASIC Chair stated that he considered that industry was reaching a point where it has had sufficient time to bed down its implementation of the regime.
‘’The obligations commenced in October 2021,’’ he said. ‘’ There was an initial two-and-a-half-year transition period before commencement, as well as a further period of adjustment after commencement.’’
The ‘further period of adjustment’ is a reference to ASIC’s announcement in August 2021 that it would take a reasonable approach in the early stages of the regulatory reforms coming into effect in October 2021, provided industry participants were using their best efforts to comply. That announcement was a response to a call from many in the industry, including SAFAA, to take account of the significant changes to business systems and processes that were necessary to implement a significant number of reforms arising from the Royal Commission recommendations, as well as DDO. These changes were taking effect at the same time industry was facing other challenges such as those resulting from COVID-19 and renewed lockdowns.
Ensuring that consumers receive the benefits of DDO is one of ASIC’s stated priorities for the coming year. The Chair stated that while early reviews of target market determinations (TMDs) highlighted some disappointing approaches, ASIC has seen some positive improvements in response, including from the ‘big end of town’.
There have been some interesting consequences coming out of the DDO regime recently for retail clients wishing to invest in hybrid securities. The TMD for ANZ’s offer of Capital Notes 7 contained a distribution condition providing that only retail clients who had received ‘personal advice from a qualified financial adviser’ were able to participate in the offer. This has resulted in self-directed retail clients not being able to participate in the offer. It will be interesting to see if other hybrid offers contain the same conditions.
This article is general information only.
