ASIC has called out product issuers to ensure Design and Distribution Obligations practices are up to scratch, pointing to flawed consumer questionnaires being the catalyst for some recent interim stop orders.
In an update from the regulator, the call to action follows ASIC’s latest DDO surveillance, which looked at the obligation for product issuers to take reasonable steps to support appropriate distribution of their products.
ASIC reported the findings of its surveillance of 19 issuers of high-risk investment, insurance and credit products between October 2023 and August 2024 in ‘Report 795 Design and distribution obligations: Compliance with the reasonable steps obligation’.
The report recommends issuers improve distribution practices regarding the selection and supervision of distributors, training staff, marketing materials, consumer questionnaires, and information and monitoring outcomes.
ASIC said its review revealed:
- Many issuers had limited due diligence arrangements to assess and monitor third party distributors;
- Some issuers of high-risk products were relying on broad search terms in online marketing;
- Many issuers used poor quality consumer questionnaires; and
- Only a few issuers monitored consumer outcomes and product performance.
ASIC also released minor updates to ‘Regulatory Guide 274 Product design and distribution obligations’ (RG 274) to provide greater clarity around guidance on the appropriateness requirement for target market determinations (TMDs).
The changes to RG274 will not require product issuers to update their TMDs.
DDO compliance came into effect in October 2021.