The two pillars
- Design. Product issuers must identify the target market for each retail product and publish a Target Market Determination (TMD) describing it.
- Distribution. Distributors, including financial advisers when they recommend a specific product, must take reasonable steps to ensure their distribution is consistent with the TMD.
Who DDO applies to
DDO applies to retail financial products with limited carve-outs. On the issuer side, that's superannuation trustees, insurers, fund managers, banks issuing retail deposit and credit products, and so on. On the distributor side, it captures product issuers distributing their own products and any third party in the distribution chain, including AFSL-holding advice practices and their authorised representatives.
Advisers giving personal advice to retail clients are distributors under DDO whenever they recommend a specific product.
What the issuer must do
- Publish a TMD for each retail product
- Set out the target market, distribution conditions, review triggers, and reporting requirements
- Review the TMD at the scheduled intervals and on every trigger event
- Take steps to address complaints or feedback that point to a target-market mismatch
What the distributor (adviser) must do
- Take reasonable steps to ensure distribution is consistent with the TMD, i.e. check the client is within the target market before recommending the product
- Comply with any distribution conditions on the TMD (eligibility, channel restrictions, screening questions)
- Keep records of the steps taken (which TMD you checked, when, and why the client falls within the target market)
- Report “significant dealings” that are not consistent with the TMD back to the issuer in the form and timeframe the TMD or the law requires
- Provide the issuer with the reportable complaints and dealing information they need to keep their TMD review honest
“The PDS was given” does not satisfy DDO. The TMD has to be checked and the file has to show it was.
How DDO sits alongside the existing duties
DDO does not replace the best-interests duty, appropriate-advice obligation, conflicts-priority rule, or any of the other Corporations Act obligations on advisers. It sits on top. In practice, a recommendation that satisfies best-interests duty will usually also satisfy the “reasonable steps” standard under DDO, but the file evidence is different, so both checks belong on the workflow.
Where the law lives
DDO is in Part 7.8A of the Corporations Act 2001. ASIC's guidance is in RG 274 Product design and distribution obligations. ASIC has issued a series of stop orders against issuers whose TMDs were judged inadequate, so the regime is being actively supervised, not parked.