DDO changes to remove nil complaint requirement

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.

Related News:

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.


Recommended for you




Canberra bubble morons Frydenberg, Hume, Ms Press / ASIC in such constant hast to STRANGULATE ADVISERS WITH MASS OVER REGULATION they have Zero regard for the cost and Red Tape rubbish they implement.
- How the hell does such utter rubbish as Nil reporting even get legislated?
- How the hell are these morons allowed to rush everything through without any real thought or impact?
Morons, morons, morons, morons must be removed !!!!!

Relief aside (3 weeks out from the start of the regime), DDO is just wasteful legislation. It fails the "good policy" test on every count. I can't remember seeing any kind of regulatory impact statement preceding the release of the draft legislation?? If we look back 13 years to just before the GFC there were product failures - agribusiness, highly geared and complex structured products and even the humble mortgage funds that were frozen for many years. If DDO had been introduced in 2005, it would not have prevented the fallout from the GFC. All these years later, most advice-related complaints and claims received by AFCA and various IDR teams involve fee for no service and advice implementation incidents, not product failure. The closest thing to product is usually claims involving underperformance. So we in licensee land are scratching our heads wondering what all this extra administrative burden and associated cost is actually trying to solve (given that the exemption relating to the provision of advice is largely useless with product issuers relying on product distributors (advisers/licensees) to meet their requirements). And contrary to ASIC's assertions (which are frankly moronic and only designed to capture some headlines and convince their equally moronic government shareholders that they are doing a good job), there is no perceivable good client outcome from this legislation. In fact, the reverse is true. Who do you think has to bear the cost burden of this regime - mum and dad retail clients - 'nuff said.

Have we seen any regulatory impact statements since the RC when it comes to policy formulation?

Quite sick of this profession being governed by people who don't properly understand what we do but are more than prepared to tell us what to do and how we should do it with what feels little to no consideration for what the means for clients and/or advisers.

Beautifully summarised. This can all be circumvented by ASIC actually reviewing all products available to retail and wholesale investors and signing off that they are fit for purpose. One set of experts instead of replicating this process all the way through the supply chain.
The FSC would complain about stifling innovation but their real fear is that they can’t outsource product failures to licensees and advisers. Private equity and alternative asset providers would scream blue murder but the good ones would have no trouble getting through realistic filters.

"ASIC actually reviewing all products...signing off that they are fit for purpose".
That is a super bad idea for so many reasons. Sure ASIC could say a PDS is compliant with the law but nothing more substantial is needed.
Poor quality companies eventually go broke and bad products fail. That's how markets work.

And they should be nowhere near retail investors. There is no reason ASIC could not hire a professional research company to do the work and charge the fund managers. We do this one level down now but pay for it ourselves. The DDO rules are about fit for purpose and outlining who they should be available to. Fund managers have to do it anyway and then pass to REs and Trustees to sign off – under DDO each platform is doing their own rather than collectively. Why not centralise it and save costly and unnecessary replication.
Research houses will still have a roll as they will need to look more deeply at one manager over another. They still filter the universe for licensees and then licensees then further filter by their APLs. Just because something is fit for purpose doesn't mean it is the same quality as an alternative but it protects consumers the poor companies that you describe

Do you have to comply with these rules of selling product via Social Media ie unlicensed?

Add new comment