New design and distribution obligations rules in the Australian financial services market came into effect on October 5, requiring product exporters and distributors to put consumers at the center of product and distribution.
The Australian Securities and Exchange Commission (ASIC) first issued guidance on design and distribution obligations for financial products last December, giving market players enough time to properly integrate them into their trading operations.
“Design and Distribution Obligations are intended to assist consumers in obtaining appropriate financial products by requiring exporters and distributors to take a consumer-centered approach to product design and distribution,” ASIC states in its guidelines.
The new rules require issuers of financial products to provide target market identification for all products issued to retail customers. The regulator has also defined the target market as the category of consumers suitable for the products under certain distribution conditions.
Apparently, these types of bases already exist in the UK and Europe.
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“An interesting difference between the two systems is that the ASIC system requires Target Market Determination (TMD) publication (which many brokers have emailed to their existing client base over the past week) while the FCA and ESMA system does not require Target Market Determination (TMD) deployment,” explained Sophie Gerber, director of Sophie Grace. and TRAction Fintech, “This document will be published.”
Determine the brokers for the customer base
Since obligations are mandatory for all Australian financial services firms, forex and CFD brokers align their services with the guidelines. But, it is interesting that the TMD documentation issued by each broker is a bit different, as reviewed before finance poles. The critical difference lies in the definition of the customer base.
This further shifts away from the reliance on the ‘disclosure regime’ that has underpinned the major financial services regulatory systems over recent decades, and shifts ASIC along the global theme of implementing a higher level of obligations on financial product issuers and distributors into a consumer-focused approach to product design and distribution. Gerber added.
ASIC Focus on Retail Investments
ASIC, which regulates Australian financial markets, has introduced several mandatory rules in recent months to make financial markets safe for retail investors. More recently, it decided to ban the retailing of unwanted financial products to curb misconduct in the banking, retirement and financial services sector.
Earlier, the Australian regulator also imposed severe restrictions on the distribution and marketing of CFD products and temporarily banned the controversial binary options for retail traders.