ASIC releases DDO FAQ for advisers and licensees

Financial advisers providing personal advice will still need to consider the reasonable steps obligations under design and distribution obligations (DDO) to meet the best interest duty.

According to the FAQ issued by the Australian Securities and Investments Commission (ASIC) on 16 September, the regulator clarified what obligations applied to financial advisers when they were providing personal advice.

DDO applied to issuers and distributors of financial products who engaged in retail product distribution and must set out a target market for products in a target market determination (TMD).

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Advice licensees and financial advisers were considered ‘distributors’ when providing financial product advice and needed to ensure they took ‘reasonable steps’ to ensure the product was distributed in line with the TMD.

However, they were exempt from meeting the reasonable steps obligation when they were providing personal advice.

The regulator said: “While advice licensees and financial advisers providing personal advice are exempt from taking reasonable steps to ensure products are distributed consistently with the TMD, we expect them to consider the TMD as part of meeting their best interests duty in the same way they would consider other sources of research or information about a financial product.

“This is because the TMD will contain important information about the product and the class of consumers the issuer considers the product is likely appropriate for.”

However, the information only applied to personal advice; if advice licenses and financial advisers were giving general advice to a client or providing execution-only services, then they would need to meet the reasonable steps obligation.

“This is because, in these circumstances, the advice is not tailored to the individual circumstances of the client and the adviser must consider whether the client falls within the class of consumers that the issuer has identified in the TMD,” it clarified.




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