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Design and Distribution Obligations – Data Capture, Record Keeping and Reporting

Record keeping

Effective data management

This is the fourth topic in a series of articles where we discuss the top 5 issues to consider in relation to the new Financial Services Design and Distribution Obligations (DDO) due 5th October.

Click here for an overview or click below to unpack each issue discussed.

  1. Identifying, confirming and driving clear accountability;
  2. Designing effective Target Market Determinations; and
  3. Establishing the processes to comply with your Target Market Determinations

This insight will outline the issue of building out effective sustainable compliance with effective data capture, record keeping and reporting.

Capturing and retaining records across the entire lifecycle of a product – from design to sales, to use, to the analysis of results, to the determination of corrective action taken – including decisions made, the reasons for those decisions and the results – are all obligations under DDO.

Substantial value beyond compliance

Whilst financial service businesses and their distributors generally do the above today, it is common that these elements are not done consistently, and the records are not centrally stored. As a consequence, analysis is often hobbled, making decisions on how to improve performance much more difficult.

There are a number of other factors that make effectively meeting these obligations important for more than just ‘compliance’.

Consider the ‘Product Manager’ dynamic:

  • Largely a newish role (70% have <3 years’ experience);
  • The Role of Product Manager is not common in all sectors;
  • Relatively quick turnover (18-24 months) which is well under the product lifecycle duration which can be 10, 20, 30+ years in some cases; and
  • Product managers do not see their institution’s Governance Risk and Compliance system as a tool they would use to manage the lifecycle of their products and critical to meeting the core responsibilities and objectives of their role.

Business can achieve material benefits from more effectively capturing ‘corporate memory’ and better tracking of performance against the decisions made, reducing the level of scepticism in business cases so that investment/de-investment can be based more on objective performance.

Effective Data Management Examples

In this area of DDO (data capture, record keeping and reporting) there is a substantial level of prescription and detail. Here are some examples:

Data Capture and Record Keeping

An issuer must keep complete and accurate records of:

  • The decisions made regarding its TMDs;
  • Associated reviews, including the reasons for those decisions (as well as the data underlying those decisions);
    • This data must be kept for up to seven years; and
  • Distribution Information (if the issuer engages in distribution) that includes aspects regarding:
    • Complaints about each product (not only the number but also the substance of complaints and general feedback relating to the product and its performance);
    • The steps taken to ensure consistency with the target market determination;
    • Reporting information requirements; and
    • Reporting timeframes.

A distributor must keep complete and accurate records of distribution information, including:

  • Complaints about each product (the number, the substance of complaints and general feedback);
  • All information specified by the issuer in each TMD; and
  • Information about any ‘significant dealings’ (basically any material that is not done as required or does work as intended e.g. information that suggests that in spite of the distribution restrictions customers to whom the products are sold are unlikely to achieve the intended benefits).

For both issuers and distributors:

  • Must maintain documentation of product governance arrangements (decision making) to demonstrate compliance, including:
    • Details of who is responsible;
    • The timeframes involved; and
    • Associated record keeping and reporting.

With regards to complaints: ASIC sets out in RG 271 the data that must be collected, analysed and reported to senior management for every complaint.

Reporting

Distributors (including those providing personal advice or engaging in conduct associated with such advice) also have obligations to report specified information to issuers, including when there is a significant dealing that is not consistent with the TMD. Distributors must also keep records of ‘distribution information’ and this data must be kept for up to seven years. Distributors must report the required information to the issuer as soon as practicable, but in any case within 10 business days, after the end of the relevant reporting period.

Issuers have prescribed review timeframes stipulated, and in certain circumstances, there are requirements to notify ASIC (within short timeframes).

This may require changes to your governance forum schedules and issue escalation procedures.

With DDO to soon become enforceable, it is important to ensure your organisation is on track to be both compliant and capitalise on the opportunities that the DDO present to improve product management discipline and deliver improved financial outcomes.

If you have questions about DDO or need assistance in working out what needs to be done or how you are travelling in your preparations, we are here to help.

 

Complete our free Design and Distribution Assessment here.

Insync offers a high-level assessment, in-depth assessments, and assistance in developing roadmaps for business resilience programs so that you can do ‘the doing’ yourself and augment your skillset along the way.

Michael Hartman

Senior Manager Risk & Compliance

A dedicated practitioner who is always across the detail, Michael applies a structured approach to risk assessment, assurance information gathering, decision making and implementation to ensure execution matches intention.

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