Design and Distribution Obligations (DDO): Target Markets that Work in Practice
Understanding DDO
Australia’s Design and Distribution Obligations (DDO) require issuers and distributors to ensure financial products are designed for a clearly defined target market and distributed with reasonable steps to reach that market. Core artefacts and processes include Target Market Determinations (TMDs), distribution conditions, significant dealings reporting, review triggers and periods, and monitoring and remediation that link product governance to real outcomes.
Why DDO Matters
DDO is now a primary conduct lens for ASIC. Weak product governance leads to stop orders, remediation, complaints and reputational harm. Strong execution improves product–customer fit, reduces mis-selling, and provides boards with decision-useful MI that evidences fair customer outcomes.
Key implications:
Clear TMDs with objectives/needs, suitability parameters, and distribution channels/conditions that actually constrain sales.
Reasonable steps frameworks that map risks to controls (advice, direct, digital, third parties).
Monitoring & feedback loops across complaints (RG 271), breaches (RG 78), fee disclosure (RG 97), and vulnerable customer indicators.
Significant dealings detection and escalation with defined thresholds, root-cause analysis and remedial action.
Review governance with triggers (e.g., loss ratios, lapse rates, claims/complaints spikes, channel exceptions) and periodic reviews.
Key Challenges Facing Firms
Translating policy into operationally enforceable distribution conditions for advice, broker and digital channels.
Achieving data lineage between TMD settings, channel controls, campaign rules, and outcomes MI.
Detecting out-of-market sales early across complex ecosystems (platforms, distributors, white-label partners).
Proving reasonable steps with evidence (sampling, QA, attestations, speech/text analytics).
Managing stop-order risk and responding fast with interim controls, communications and uplift plans.
Embedding product change governance so pricing/feature tweaks don’t invalidate TMD logic.
How OCG Can Help
Oceanic Consulting Group (OCG) helps issuers and distributors make DDO practical, defensible and measurable.
Our services include:
TMD design & review: segment logic, suitability parameters, distribution conditions and review triggers.
Reasonable steps frameworks: channel-specific control libraries, campaign rules, QA sampling and attestations.
Significant dealings operating model: detection thresholds, workflows, root-cause analysis and remediation.
DDO data & MI: dashboards that align TMDs, sales exceptions, complaints, lapse/claims and vulnerable customer indicators.
Distributor oversight: due diligence, reporting packs, exception management and termination playbooks.
Independent effectiveness reviews and stop-order response support (gap analyses, uplift programmes, evidence packs).
FAQs
What proves “reasonable steps”?
A risk-based control set tied to the TMD, e.g., eligibility and channel rules, pre-sale warnings, QA sampling, distributor reporting, and evidence that controls worked (or were strengthened when they didn’t).
When is a “significant dealing” reportable?
When distribution materially departs from the TMD (volume, harm or vulnerability indicators). Define thresholds up-front and automate detection where possible.
How should DDO integrate with complaints and breaches?
Complaints (RG 271) and breaches (RG 78) are core inputs to DDO reviews. Spikes or themes should trigger TMD reassessment, distributor remediation and, if needed, product changes.
Strengthen Your DDO & Product Governance
Work with OCG’s Product & Conduct Specialists
Make DDO work in the real world. We’ll design TMDs and reasonable-steps frameworks, stand up significant-dealing detection, and build MI that proves product–customer fit, reducing stop-order risk and improving outcomes.
