DDO Update from ASIC Commissioner
by Leica Ison
Update on Design and Distribution Obligations by Sean Hughes, ASIC Commissioner, At The 30th Annual Credit Law Conference, 26 October 2020
Summary:
- ASIC states the days of tick a box product governance are over and ASIC expects compliance with DDO from day one – 5th October 2021.
- The step-change stance from ASIC is strong - as of October 2021, ASIC won't tolerate tick a box product governance.
- ASIC signals the need to invest in data systems now and to properly monitor outcomes of products.
- This lines up with recent Productivity Commission report that highlighted the scope for deeper adoption fo SaaS for regulatory monitoring, reporting and compliance.
Excerpt from speech -
Design and distribution obligations
The design and distribution obligations, which now commence on 5 October next year, represent a step-change in financial services regulation, placing greater responsibility on issuers and distributors of financial products to appropriately design and distribute their financial products.
The obligations should reduce harms seen from past misselling conduct and poor product design, including those identified during the Royal Commission.
The obligations embed a consumer-centric approach to the product lifecycle and should assist industry to deliver better outcomes for consumers whilst managing non-financial risks and avoiding costly remediation.
Under the design and distribution obligations, industry must design fit-for-purpose products that meet consumer needs. They will also need to take steps to ensure their products are reaching the right consumers.
This includes consideration about how products are marketed and the sales practices adopted. Where poor consumer outcomes are identified, industry will need to consider whether changes are required to the design of their products and how they are being sold.
ASIC expects compliance with DDO from day one. Not in a ‘tick-a-box’ way, but compliance in a way that meaningfully improves outcomes for consumers. Ultimately, this means firms will need to understand their products and the outcomes they are delivering to consumers. In order to do this, industry needs to invest in the data systems now and ensure that they are properly able to monitor the outcomes of their products come 5 October next year.
ASIC will be releasing its final guidance on these obligations soon.
- Sean Hughes, ASIC Commissioner
Is your product governance up to scratch?
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