The Federal Government has moved to extend the sweep of its Design and Distribution Obligations (DDO) via a set of regulations which make it harder for financial services participants, including platforms, to avoid.
The changes, announced by the Treasurer, Josh Frydenberg, will see the DDO regime extended to simple corporate bonds, debentures. Basic banking products, investor-directed portfolio services (IDPS), custodial arrangements and sales of financial products in situations that amount to indirect issue and off-market sales.
The changes have implications for platform operators, particularly with respect to investor-directed portfolio services, with the legislation explanatory material making clear that the operator of an IDPS must make a target market determination before any person engages in retail product distribution conduct.
“An IDPS is an unregistered managed investment scheme for holding and dealing with investments selected by investors. In broad terms, it provides custodial, transactional and reporting services where the investor makes all of the investment decisions,” the explanatory memorandum said.
“Under this table item platform operators who are regulated persons: are not required make a target market determination in relation to financial products offered or available on their platform (unless they are themselves the issuer); however they are required to make a target market determination in relation to the platform itself (as the platform is a separate financial product).”
Commenting on the move, Frydenberg said the updated DDO regime would further improve consumer outcomes requiring issuers and distributors of financial products to ensure products were only sold to customers for whom they were likely to be suitable.