From 5 October 2021, issuers and distributors of 'financial products' - including mortgage brokers, AFS licensees and authorised representatives - need to comply with new product design and distribution obligations (PDDO), which, in some circumstances, includes the requirement to develop, comply with and review a document known as a target market determination (TMD).
This article outlines what the laws are, who must comply, what is required to comply and where further information and assistance may be obtained.Alisha Shamim, Maddocks Lawyers
The PDDO laws 1 have been developed with consumers in mind. They are intended to assist consumers to acquire financial products that are appropriate for them. The PDDO laws seek to achieve this by imposing additional obligations on 'issuers' and 'distributors' of 'financial products' (these terms are explored in the next section) across the lifecycle of financial products.
Please note that, as at the time of writing this article, it has been foreshadowed that there may be some changes to the PDDO laws - see here.
Determining who the PDDO laws apply to can be a complex task, as it involves considering whether you are an issuer or distributor of financial products, or both. Accordingly, the requirement to comply will depend on the meaning of 'issuer', 'distributor' and 'financial products' under the PDDO laws.
We set out below a high level (and general) summary of the definitions of each of these terms.
Issuer - an issuer includes persons who issue a financial product and must prepare a disclosure document under part 6D.2 or 7.9 of the Corporations Act.
Distributor - a distributor is taken to mean a 'regulated person' including AFS licensees, authorised representatives, credit licensees and credit representatives who engage in 'retail product distribution conduct'. Both 'regulated person' and 'retail product distribution conduct' are defined under the Corporations Act.
Financial product - the definition of financial product under the PDDO laws appears broader than what is typically understood to be a financial product from a financial services perspective. It includes:
products and securities requiring disclosure under parts 6D.2 or 7.9 of the Corporations Act - this may include securities, derivatives, interests in a managed investment scheme and debentures, stocks or bonds issued by a government, and superannuation products;
products that are not regulated under parts 6D.2 or 7.9 of the Corporations Act, but are within the scope of the ASIC Act (e.g. credit contracts and short-term credit facilities); and
other products prescribed by the Corporations Regulations 2001 (Cth).
The following financial products are excluded from the PDDO: MySuper products, margin lending facilities, most ordinary shares, securities issued under an employee share scheme and other products prescribed by the Corporations Regulations.
Please be mindful that the above summary simplifies the applicable definitions and each of the above definitions are multi-layered. Careful consideration will be required to determine whether you will be considered an issuer and/or distributor, and whether the product that you are issuing or distributing will considered a financial product, for the purposes of the PDDO laws. If you are unsure if the PDDO laws extend to you, you should seek independent professional advice.
The obligations that must be adhered to under the PDDO laws will depend on whether you are considered an issuer, distributor, or both.
We set out below a high level summary of some of the requirements that issuers and distributors must comply with under the PDDO laws:
Issuers of financial products arguably have more stringent obligations under the PDDO laws in that they must prepare a TMD. The TMD must be published and made publicly available by 5 October 2021. Careful consideration will need to be given to the drafting of the TMD as there is a list of content requirements contained in section 994B of the Corporations Act that must be included in the TMD.
If you think you may be an issuer or a distributor (or both) of a financial product for the purposes of PDDO laws, you should seek independent professional advice in relation to your obligations under the PDDO laws and your compliance with those obligations as soon as possible. This is particularly important given the nature of the obligations that may be imposed and, if you are considered an issuer, the need to have a TMD published by 5 October 2021.
ASIC has developed a useful guide to navigate the PDDO laws and how they may apply to you. That guide is available here.
You may also contact Maddocks on (03) 9258 3555 and ask to speak to a member of the Financial Services team.
You can read earlier ClearLaw Articles on a range of topics, including the following topics which you may find useful:
 were enacted by the Treasury Laws Amendment (Design and Distributions Obligations and Product Intervention Powers) Act 2019 (Cth) and are now incorporated into part 7.8A of the Corporations Act 2001 (Cth).(section 994B)
Leigh is a partner in the Maddocks Tax & Revenue team.
Leigh regularly provides advice on:
His advice covers both direct and indirect tax considerations.
Leigh advises Australian and multinational companies, high net worth individuals, accountants and financial advisers on all areas of taxation law.
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