Design and Distribution Obligations (DDO) – Putting the Right Products in the Right Hands
What are the Design and Distribution Obligations?
Australia’s Design and Distribution Obligations (DDO) in Part 7.8A of the Corporations Act require product issuers and distributors to put consumers at the centre of product design and sales.
From 5 October 2021, affected products must have a documented Target Market Determination (TMD) and be sold under distribution arrangements that are reasonably likely to keep the product within that target market.
Under ASIC Regulatory Guide 274 (RG 274), issuers and distributors must:
Design products with clear key attributes, benefits and risks aligned to a defined class of consumers.
Prepare and maintain a TMD describing that class, when the product is likely to be suitable, and when it is not.
Set distribution conditions so that products are sold in a way that is consistent with the TMD.
Monitor, review and, where necessary, amend TMDs and distribution arrangements.
Notify ASIC of significant dealings that are not consistent with the TMD.Keep records and data to demonstrate reasonable steps and ongoing compliance.
Advice licensees and financial advisers are treated as distributors when they provide financial product advice that leads to product acquisition.
Why DDO matters now
DDO has shifted quickly from theory to enforcement:
The Federal Court has ordered Firstmac Limited to pay $8 million in penalties for DDO failures, in ASIC’s first court decision against a distributor and later penalty judgment.
American Express Australia was also fined $8 million for breaching DDO in relation to co-branded credit cards sold primarily in retail stores.
ASIC continues to issue DDO stop orders and, most recently, acted against FXCM over TMD deficiencies in leveraged FX products, reinforcing that poor TMDs and weak distribution conditions will attract intervention.
ASIC’s message is clear: DDO is a core conduct obligation, and poor product design, target markets or distribution strategies will be met with stop orders, court action and reputational damage.
Key requirements you must get right
Product design and TMDs
DDO requires issuers to consider:
The product’s key attributes, risks, costs and benefits.
Whether there is a class of consumers for whom the product is likely to be suitable.
A TMD that clearly describes that class, relevant customer attributes (e.g. risk tolerance, investment horizon, need for capital protection), and distribution conditions.
Triggers and periods for reviewing the TMD, including when issuers “ought reasonably to know” that a review is needed (e.g. persistent cancellations, complaints trends, distribution outside intended channels).
Distribution conditions and monitoring
Issuers and distributors must ensure:
Distribution channels and processes are appropriate for the target market (e.g. advice vs direct channels, online vs face-to-face, cross-selling).
Distributors take reasonable steps so that distribution is likely to be consistent with the TMD.
There is effective feedback data – sales patterns, cancellations, complaints, significant dealings, adviser behaviour – to detect mis-alignment early.
Significant dealing notifications
Issuers must notify ASIC of significant dealings in a product that are not consistent with the TMD, even if there is no breach of the law in a strict sense.
ASIC expects clear processes to:
Detect potential significant dealings (e.g. distribution spikes to un-intended cohorts).
Assess significance with documented reasoning.
Lodge timely, complete notifications and fix the underlying cause (TMD, distribution conditions, or controls).
Record-keeping and data
DDO relies heavily on data:
Issuers and distributors must keep adequate records of TMDs, reviews, distribution conditions, monitoring, dealings and remedial actions.
Without strong data governance, it is difficult to prove that reasonable steps were taken or to respond quickly when ASIC queries your product governance.
Common pain points for brokers, advisers and product issuers
We regularly see:
Copy-paste TMDs that do not reflect actual product risks or intended customers.
TMDs that fail to set clear negative target markets or realistic distribution conditions.
Cross-selling campaigns that ignore DDO (e.g. Firstmac promoting managed investments to term-deposit customers without checking suitability).
Limited integration between DDO, complaints (RG 271), breach reporting (RG 78) and DDO significant dealing reports, so signals are missed.
Fragmented data and systems, making it hard to monitor distribution and evidence “reasonable steps”.
How OCG helps you operationalise DDO
OCG works with issuers, stockbrokers, advisers and wealth platforms to build practical, defensible DDO frameworks.
Product governance and TMD design
Translate RG 274 and ASIC enforcement insights into product governance policies and playbooks.
Design TMD templates and libraries that capture real-world risk, target customer attributes and distribution conditions.
Define review triggers (complaints, dealing patterns, market events) and periodic review cycles.
Distribution controls and monitoring
Map all distribution channels (advice licensees, brokers, direct, digital) and align each with TMD conditions.
Build reasonable-steps frameworks for advisers and other distributors, including guidance, controls and monitoring MI.
Integrate DDO data with complaints, breach reporting, FAR and CPS 230 operational-risk frameworks.
Significant dealing & ASIC engagement
Design significant dealing assessment tools, decision logs and notification templates.
Prepare board and executive dashboards summarising DDO incidents, reviews and outcomes.
Support responses to ASIC queries, stop orders and thematic reviews, drawing on enforcement learnings from cases such as Firstmac, Amex and FXCM.
Assurance and uplift
File reviews and sample testing of actual distributions vs TMDs.
Thematic reviews across product sets (e.g. structured products, margin loans, managed funds, structured deposits).
Uplift programs with clear actions, owners and timelines.
FAQs
Who does DDO apply to?
DDO applies to issuers and distributors of financial products for retail clients, including responsible entities, insurers, banks, super trustees and advice licensees/advisers when they provide advice that leads to distribution.
What is a Target Market Determination (TMD)?
A TMD is a public document describing the target market, any negative target market, relevant distribution conditions, review triggers and reporting requirements. It must be consistent with the product’s key attributes and how the issuer reasonably believes it will be used.
How often do we need to review TMDs?
RG 274 expects regular review periods and event-based reviews when you ought reasonably to know circumstances have arisen requiring a TMD review (e.g. persistently high cancellation rates, complaints, changes in law, or ASIC engagement).
What happens if we get DDO wrong?
Consequences can include stop orders, enforceable undertakings, civil penalties (as seen in the Amex and Firstmac cases), remediation costs, and reputational damage. ASIC’s enforcement program shows it is prepared to take DDO matters to court.
Strengthen Your Product Design & Distribution Framework
Work with OCG’s DDO & Product Governance Specialists
DDO is no longer a “new regime” – it is a live test of how well you design, distribute and oversee products. OCG helps you build product governance, TMDs, distribution controls, data and assurance that keep products in the right hands, withstand ASIC scrutiny and build lasting customer trust.
