ASIC releases RG 274 - "Product Design and Distribution Obligations"

The long-awaited RG seeks to ensure that consumers obtain appropriate financial products by imposing a series of design and distribution obligations on financial product issuers and distributors.

In December last year, ASIC published the long-awaited Regulatory Guide "RG 274 - Product design and distribution obligations". The RG's stated objectives are:

• to help consumers obtain appropriate financial products;

• to reduce poor product development or distribution practices which result in adverse consumer outcomes.

• to prevent consumer detriment.

The RG gives effect to these aims by imposing a series of design and distribution obligations (DDO) on issuers and distributors of financial products.

These DDO obligations include the following:

Financial product issuers

Financial product issuers must:

• prepare a Target Market Determination ("TMD");

• make the TMD publicly available;

• take reasonable steps to ensure that distribution of the product is consistent with its TMD;

• review the TMD to ensure it remains appropriate;

• notify ASIC of "significant dealings";

• keep records.

Financial product issuers

Financial product distributors must:

• not distribute unless a TMD has been made;

• take reasonable steps to ensure that distribution is consistent with the most recent TMD;

• notify the issuers of "significant dealings";

• keep records.

The Regulatory Guide (and related legislative instruments) can be accessed here.