Treasury has released for consultation the Corporations Amendment (Design and Distribution Obligations and Product Intervention Powers) Regulations 2018. Background.

These Regulations will complement the operation of the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Bill 2018 (once passed) by:
applying the regime to a range of financial products not covered by the Bill and by ensuring that the regime operates as intended when applying to distributors of financial products; and
altering the products that may be subject to a product intervention order by ASIC.

The purpose of these Regulations is to enhance the DDO and product intervention regimes by altering the products and persons in relation to which the DDO regime applies and the products that may be subject to a product intervention order by ASIC.

These Regulations exclude the following products from the DDO regime:

• interests in eligible rollover funds (ERFs);

• defined benefit interests;

• medical indemnity insurance products; and

• depository interests in foreign fully paid ordinary shares, being shares in relation to which, if they were offered directly to retail clients, the DDO obligations in the Act would not apply.

The Regulations extend the DDO regime so that it applies in relation to the following products:

• simple corporate bonds depository interests in simple corporate bonds, where the simple corporate bonds are, or are to be, issued under a 2 part simple corporate bonds prospectus;
• debentures of a body that is an Australian ADI or registered under section 21 of the Life Insurance Act 1995;

• basic banking products;

• custodial arrangements that are not already subject to the new regime, including an interest in an investor directed portfolio service (IDPS); and

• products sold in situations where the DDO could be avoided.

The Regulations extend the DDO to additional persons in situations where the DDO could be avoided by those persons.

The regulations also extend the DDO to certain distributors of financial products that are subject to the DDO.

The Regulations also extend the product intervention regime contained in Part 7.9A of the Corporations Act so that product intervention orders can be made in relation to:

• funeral expenses policies;

• certain extended warranties that are functionally equivalent to add-on insurance; and

• short-term credit that is not regulated under the Credit Act.