Last week, the Australian Securities and Investments Commission (ASIC) called for industry feedback on its proposed extension to the operation of the ASIC Corporations (Design and Distribution Obligations Interim Measures) 2021/784 instrument for a further five years.
According to ASIC, the design and distribution obligations (DDO) “require firms to design financial products to meet the needs of consumers, and to distribute their products in a more targeted manner”.
Following a recommendation of the Financial System Inquiry, Parliament passed the obligations in 2019 and firms were required to comply from 5 October 2021.
ASIC Instrument 2021/784 was initially made for a period of two years and implements measures announced by Treasury, including “relief for distributors from the obligation to report to product issuers if they received nil complaints during a reporting period”.
In a submission to ASIC, the SIAA said it supported the DDO extension and the relief for distributors from the obligation to report to product issuers if they receive nil complaints during a reporting period.
“Stockbroking and investment advice firms distribute products such as ETFs and managed funds from hundreds of issuers. Each of these issuers has multiple products. SIAA members receive very few complaints about these products,” the SIAA said.
“Without the relief from the nil complaints reporting requirement, our members would have been required to send many hundreds of ‘nil complaints’ reports every quarter. Before the original relief was provided in 2021 our members were telling us that the work involved in setting up a system to communicate these reports to issuers was proving to be costly and burdensome.
“As a result, SIAA advocated for a change to the DDO regime to exempt distributors from the requirement to lodge nil complaints reports, as it imposed a significant and unnecessary regulatory burden upon them without providing any benefit to issuers or consumers.”
The SIAA added that the legislative instrument is a “common sense decision to cut unnecessary red tape” that allows distributors and issuers to focus on actual complaints.
“We have been mindful of the looming expiration date for the relief instrument and raised this issue during recent Treasury roundtables held for the Quality of Advice Review,” it said.
“We note that the Quality of Advice Review Final Report recommends amendments to the DDO reporting requirements on the Corporations Act to remove the requirement for relevant providers to report to the product issuer where there have been no complaints due to its finding that the requirement creates a compliance burden with no apparent benefit. We agree with the independent reviewer and support the recommendation.”
The association also noted that with the Corporations Act unlikely to be changed before the relief expired, the five-year extension was necessary to “retain certainty for industry ahead of any law reform”.
