ASIC Places First DDO Stop Orders, Prevents Three Financial Firms from Offering Financial Products to Consumers

ASIC has placed interim stop orders on three financial firms in response to deficiencies in the target market determination (TMD) for their products. These actions are ASIC's first use of the stop order powers under the design and distribution obligations (DDOs), which took effect on 5 October 2021.

A TMD is a mandatory public document that sets out the class of consumers a financial product is likely appropriate for (the target market). It also sets out matters relevant to the product's distribution and review. The three financial firms did not appropriately identify the consumers they intended to target or did not have a TMD, which meant the products may have otherwise been marketed and sold to retail investors for whom they were not appropriate or too risky.  

The interim stop orders prevent Responsible Entity Services Limited (RES) and two companies in the UGC Global Group (UGC), UGC Global Alpha Limited and UGC Global Alpha Fund Limited, from issuing the relevant managed investment scheme interests or shares to retail investors.

"The design and distribution obligations were created to deliver better consumer outcomes," ASIC Deputy Chair Karen Chester said. "Under the law, firms must embed a consumer-centric approach. They need to design financial products that meet the needs of consumers in their intended target market, and distribute those products in a targeted way. Where firms are not doing the right thing and there is potential for consumer harm, ASIC can now take quick action to disrupt poor conduct and prevent harm," Ms Chester said.