What are design and distribution obligations?

DDO splits the job in two. The issuer that creates a product writes a target market determination: a plain-language description of the product, the class of consumers it is designed for, the conditions on how it can be distributed, the events that trigger a review, and what distributors must report back. The obligations sit in Part 7.8A of the Corporations Act, and ASIC's guidance on the regime is Regulatory Guide 274.

Distributors then have to take reasonable steps to sell within that target market. In practice that means platform filters that screen out consumers outside the TMD, adviser or broker attestations that a sale fits, training records, and periodic file reviews. Both sides keep records so they can show the regulator what they did if distribution goes wrong.

A significant dealing is a sale or pattern of sales that materially departs from the TMD and affects a class of consumers: thousands of sales through an unapproved channel, a system error that mis-sells a product, or a spike in complaints or defaults. Once you become aware of one, you notify ASIC as soon as practicable, and in any case within 10 business days of becoming aware of it, through its online portal, describe what happened, estimate how many consumers are affected and set out the remediation plan.

Breaches can lead to directions to stop distribution, orders to notify and compensate affected consumers, infringement notices, civil penalties, enforceable undertakings and court action. ASIC expects prompt reporting, evidence that reasonable steps were taken, and remediation that is proportionate to the harm.

A TMD complements a product disclosure statement but does not replace it: the PDS describes the product to the consumer, while the TMD describes who the product is for. Distributors must still meet their licence conditions and, where it applies, the best interests duty. ASIC can also use its product intervention powers alongside DDO enforcement where consumer harm is systemic.

If your product is asset finance, consumer lending or vehicle finance, the TMD needs to reflect the features of that product class rather than describing it as suitable for everyone. Over-broad TMDs, poor version control, and relying on trust rather than platform controls are the common pitfalls.