Corporate watchdog reviews 55 TMDs prepared by 27 superannuation trustees

ASIC found some had ‘poor practices’, being too ‘broad and not specific enough to determine when a review of the TMD would be triggered.’

Yesterday ASIC released a public statement regarding Target Market Determinations (TMDs) for superannuation products. After a sample review of 55 TMDs prepared by 27 superannuation trustees across the industry, retail, corporate and public sectors for both accumulation and retirement products, ASIC found some had ‘poor practices’, being too ‘broad and not specific enough to determine when a review of the TMD would be triggered.’

Responsibility of trustees

ASIC introduced the Design and Distribution Obligations (DDO) last year endeavouring to ‘improve consumer outcomes.’ ASIC Commissioner Danielle Press said, ‘As product issuers, it is the fundamental responsibility of trustees to know their product offering and who it is right for. Trustees should clearly define their target markets and review triggers in Target Market Determinations using objective, specific and measurable parameters.’

‘Some of the target market determinations that we looked at gave us comfort that they may be part of a well-designed and comprehensive governance program. However, others by their lack of specificity, raised questions about the underlying arrangements that trustees have in place to ensure their products reach the right consumers,’ Ms Press said.

Stop orders for non-compliance

Since the introduction of the DDO, ASIC has issued 4 interim stop orders preventing Responsible Entity Services Limited (RES), and two companies within the UGC Global Group (UGC) from issuing the relevant managed investment scheme interests or shares to retail investors. And most recently the interim stop order on Fawkner Property Ltd from offering, issuing, selling or transferring interests in the Fund based on existing product disclosure statements (PDS).

The order is valid for 21 days unless revoked earlier.

‘Trustees must not adopt a ‘set and forget’ approach to their target market determinations. Failure to review them regularly and take corrective action can result in harm if the product is inconsistent with the objectives, financial situation and needs of consumers in the target market. ASIC is now focussing on compliance with the design and distribution obligations, and we will move to enforce the obligations where necessary,’ Ms Press said. 

Act now and plan with a system in mind

To ensure your TMDs are compliant and remove the risk of stop orders there are 6 points we suggest to help with the TMD review:

  • Get them done early – Accommodate for unforeseen circumstances or time to review each TMD with distributors. ASIC advises reviewing TMDs yearly
  • Leverage templates – FSC has provided a range of templates to provide frameworks for organisations
  • Single source of truth – Create a centralised system to maintain all content that is updated and reviewed, as well as approvals to provide a clear audit trail
  • Clear definitions for Target Market – follow the advice from ASIC to clearly articulate the target market for each product and its differences
  • Defined Investment options – ASIC advises to be effective, investment sub-markets should be specific and comparable, using quantifiable investment objectives or identifiable benchmarks and commonly adopted measures
  • Leverage automation - Electronically lodge your final documents TMD automating the integration

The TMD review may feel overwhelming but with solutions that are designed to manage disclosure, it doesn’t have to be. Ensure you adopt a fit-for-purpose solution that meets your business needs. Find out how Objective Keystone can deliver a compliant and automated disclosure management process with best practices baked in.

Insignia Financial Group uses Objective Keystone to manage production of Target Market Determinations.

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