Financial advisers will not have to report nil complaints to product issuers under the upcoming design and distribution obligation (DDO) regime as the Government looks to include the change as part of a raft of amendments.
Under the original DDO requirements, advisers and licensees were required to report complaints to product issuers in writing during the reporting period. This included submitting a ‘nil complaints’ report even if no complaints were received.
Treasury issued updated amendments to the DDO regime which is set to begin on 5 October, 2021, after receiving feedback from stakeholders.
On nil complaints, it said proposed changes would seek to: “Removing the requirement for distributors to report whether they have received a complaint or acquired information requested by the issuer, including where there are nil complaints or nil information.
“Distributors will still be required to report to issuers, complaints and other requested information that they receive, assisting issuers to assess whether their product governance arrangements are appropriate and their products are meeting the needs of consumers.”
Commenting, Association of Financial Advisers (AFA) general manager for policy and professionalism, Phil Anderson, said the association was pleased to see that nil reports were no longer required.
“In the absence of this relief, financial advice licensees would have been faced with substantial reporting requirements on a regular basis. Given the vast majority of these reports would have had no content, they would have been of no value to the product issuer,” he said.
“Whilst we remain very concerned about the complexity and additional administrative workload that will come with the commencement of DDO on 5 October, 2021, this relief will make a big difference.
“The apparent need to capture information on clients who are outside the target market determination and the reporting of ‘significant dealings’ for clients who are outside the target market determination remain areas of particularly concern.”
Treasury noted the Australian Securities Investments Commission (ASIC) would consider making short-term interim changes consistent with the Government’s policy intentions by using its modification and exemption powers of the Corporations Act to provide certainty of the amendments.
“This will allow the Government time to make these changes permanent and will avoid industry needing to implement product governance arrangements, ahead of commencement, for products that are ultimately not intended to be caught by these reforms,” it said.
The other proposed changes included:
- Clarify that margin lending to corporates is exempt from DDO obligations, consistent with the intention that all margin lending is to be exempt from DDO;
- Clarify employees of licensees are not subject to their own separate set of DDO obligations – this was not an intended consequence of the regime;
- Ensure 31-day term deposits fall within the DDO regime which is consistent with Government’s intention to capture all basic deposit products;
- Provide consistency in the application of retail and wholesale investor definitions across the Corporations Act by ensuring it extends to the DDO regime;
- Exempt foreign cash settled immediately from the DDO regime, as the risk for consumers is relatively low;
- Exempt non-cash-payment facilities (NCPFs) from the DDO regime except for certain facilities, specifically credit and debit card facilities and stored value facilities – broadly NCPFs are not standalone services and provide a facility for consumers to make non-cash payments, posing lesser risk to them;
- Clarify that where a product disclosure statement (PDS) is given in the course of providing personal advice as required by law, this conduct is within the scope of excluded conduct, consistent with the original intention of excluded conduct;
- Expand the employer exemption to ensure that employers are not regulated as distributors when providing a PDS for their default fund product to employees, consistent with the original intention that employers not be subject to the DDO regime where their conduct relates to default products. These changes will have no effect on the form of the PDS; and
- Exempt the Government’s Cashless Debit Card and the BasicsCard from the DDO regime, as the key design and distribution features of these products are set out in legislation, consistent with the treatment of other products which are also subject to special product-specific rules under legislation and are exempt from the DDO regime, including MySuper products.
