In late 2021, the Design and Distribution Obligations (DDO) were introduced as a new Part 7.8A of the Corporations Act 2001 (Cth) (Act). The DDO applies to any person who creates (an issuer) or distributes (a distributor) a financial product. The obligations require them to take a consumer-centric approach when designing and distributing financial products. This article discusses whether the DDO applies to your FinTech and, if so, what this means for your business.
The DDO Regime
Before the DDO, the previous model of providing detailed information about financial products and expecting investors to read that information to make an informed decision was not working. Irrespective of the extensive disclosure information available, investors often still accessed financial products ill-suited for them. This led to adverse financial outcomes and results for them. Accordingly, the DDO aims to address this issue.
The main requirement under the DDO is for an issuer to prepare and maintain a Target Market Determination (TMD) document. The TMD should set out the target market for a particular financial product, and a distributor must only distribute a financial product in accordance with the relevant TMD.
Additionally, the Australian Securities and Investment Commission (ASIC) is the regulator that supervises issuers and distributors on their compliance with the DDO.
Does the DDO Regime Apply to Your Business?
The DDO regime applies to your FinTech business if your FinTech business is an issuer or a distributor of financial products. Those obligations vary depending on whether you are an issuer or a distributor. DDO applies to the issuers and distributors of any financial products that are available in the Australian market after the commencement of the DDO.
Continue reading this article below the formWhat is a Financial Product?
The DDO applies to any ‘financial product’. There are two key pieces of legislation that define this term: the Corporations Act 2001 (Cth) and the Australian Securities and Investment Commission Act 2001 (Cth). The laws cover financial products, which are defined very broadly and include the following:
- interests in managed investment schemes;
- derivatives;
- securities (except ordinary shares);
- non-cash payment facilities; and
- credit products.
However, the DDO does not apply to certain financial products, like credit provided for a business purpose. The complete list of the exempted financial products is provided in the Act and the associated regulations.
Issuer vs Distributor
The table outlines the difference between an issuer versus a distributor.
Issuer | Issuers are those responsible for preparing disclosure documents, issuing the financial product or otherwise are required to prepare a document called a TMD under Australian law. |
Distributor | Distributors are those who distribute the financial product to the market. Distributing is defined broadly to include a range of activities, like: • selling financial products; • providing the disclosure documents to potential investors to offer the financial product to them; and • providing financial product advice. Therefore, persons like credit licensees, financial advisers, credit representatives, and anyone who sells financial products to the market are distributors under the DDO. |
Obligations of Issuers and Distributors of Financial Products
DDO places different obligations on issuers and distributors. An issuer is responsible for:
- preparing, maintaining and updating the TMD;
- making the TMD available to the public free of cost;
- ensuring the TMD remains appropriate for the financial product;
- keeping relevant records in connection with the financial product; and
- complying with reporting obligations with ASIC.
On the other hand, distributors must ensure the following:
- that the financial product is only distributed in accordance with the TMD;
- that only the target market accesses the financial products; and
- keep relevant records in connection with the financial product.
What Must a Target Market Determination Include?
Australian law has clear guidelines on information an issuer must include in a TMD. Some of the requirements include:
- identifying the target market for the financial products;
- describing how to distribute the financial products and any restrictions on the distribution;
- outlining the mechanisms to monitor how the financial product is functioning in the market;
- outlining events to indicate to the issuer that the TMD should be amended to suit the financial product better; and
- detailing how TMD will be reviewed periodically.

The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
Key Takeaways
The DDO requires issuers and distributors of financial products to take a consumer-centric approach when designing and distributing financial products. The purpose is to ensure that only the target market accesses certain financial products. If you are an issuer or a distributor of a financial product, you must comply with various requirements under the DDO, including preparing, maintaining and complying with a TMD.
If you are a FinTech business involved in issuing or distributing financial products and want to understand the DDO regime and its impact, our experienced fintech lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
Issuers are those responsible for preparing disclosure documents, issuing the financial product or otherwise are required to prepare a document called a TMD under Australian law. On the other hand, distributors are those who distribute the financial product to the market. Distributing includes a range of activities, like selling financial products or providing financial product advice.
As a FinTech, your business may have Design and Distribution Obligations (DDO) under the Corporations Act 2001 (Cth). If you issue financial products, your obligations may include:
- preparing, maintaining and updating a document called a Target Market Determination;
- keeping relevant records in connection with the financial product; and
- complying with reporting obligations with ASIC.
As a distributor, your obligations might look involve:
- identifying the target market for the financial products; and
- describing how to distribute the financial products and any restrictions on the distribution.
We appreciate your feedback – your submission has been successfully received.