Treasury has released for public consultation exposure draft Corporations Amendment (Design and Distribution Obligations) Regulations 2019 to support the Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019. Background.
The purpose of the Regulations is to extend the DDO regime by altering the products and persons in relation to which the DDO regime applies.
The amendments:
- extend the DDO to additional persons;
- extend the DDO to additional products; and
- exclude certain products from the DDO.
Additional Persons
The Regulations extend the definition of regulated person to include credit licensees and credit representatives within the meaning of the Credit Act. They also extend the definition of regulated person to a person who is exempt from the obligation to hold a credit licence under section 29 of the Credit Act because of an exemption under sections 109 and 110 of the Credit Act.
Additional products
These 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 ADI (authorised deposit-taking institution) 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 certain situations where the DDO could be avoided.
Excluded products
These Regulations exclude the following products from the DDO regime:
• interests in eligible rollover funds (ERFs);
• defined benefit interests;
• medical indemnity insurance products;
• 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;
• bank drafts (and money orders issued by or for Australia Post);
• credit facilities not issued in the course of a business of providing credit;
• credit provided for business purposes;
• certain ‘credit facilities’ that do not involve the provision of credit;
• credit provided by pawnbrokers;
• the provision of a mortgage (as distinct from the credit contract secured by the mortgage); and
• financial products not received in this jurisdiction that are not already excluded from the DDO.
The Regulations commence on the later of the day after registration of the Regulations or the commencement of the DDO amendments in the Act (which commence on 5 April 2021, two years after the Act received Royal Assent).
