ASIC Report 828: DDO in Practice – Lessons from the CFD Sector
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Authored by Meagan Sandiford
ASIC’s Report 828: Risky business: Driving change in CFD issuers’ distribution practices documents the regulator’s review of contracts for difference (CFDs) and the steps taken by issuers to improve compliance with Design and Distribution Obligations (DDO) and other regulatory requirements.
While the report focuses on CFDs, ASIC’s findings provide practical insight into how the regulator assesses whether DDO frameworks are operating effectively in practice, particularly for high-risk products distributed to retail clients.
DDO as Assessed by ASIC
ASIC reviewed the distribution practices of 52 CFD issuers and examined how DDO obligations were being implemented, including the development of target market determinations (TMDs), onboarding processes, and monitoring of distribution outcomes.
ASIC observed that, at the commencement of the review:
many issuers had TMDs in place, but
those TMDs were not always supported by distribution controls that effectively limited access to the target market.
ASIC noted instances where:
target markets were broad
client onboarding and screening processes did not sufficiently differentiate between suitable and unsuitable retail clients
issuers did not adequately use available data to assess whether products were being distributed consistently with the TMD
these observations informed ASIC’s engagement with issuers and its focus on improving distribution practices.
“Reasonable Steps” and Distribution Controls
In assessing compliance with DDO, ASIC examined whether issuers had taken reasonable steps to ensure that CFDs were distributed in accordance with their TMDs.
ASIC’s review considered:
how issuers screened retail clients at onboarding
whether knowledge and experience assessments were effective
how issuers monitored client trading behaviour and outcomes
whether issuers reviewed and updated TMDs in response to distribution data
ASIC reported that, in many cases, existing controls were not sufficient to demonstrate that distribution was occurring consistently with the intended target market.
Outcome Monitoring and Use of Data
ASIC highlighted the importance of monitoring distribution outcomes, including the use of client trading data to identify patterns that may indicate distribution outside the target market.
Following ASIC’s engagement, issuers implemented improvements such as:
enhanced monitoring of retail client trading outcomes
changes to onboarding questionnaires and screening criteria
refinements to TMDs to better reflect observed client behaviour
ASIC reported that these changes improved alignment between product distribution and target markets.
DDO and Remediation
ASIC’s review resulted in remediation outcomes for retail clients, with:
approximately 38,000 investors receiving refunds
total refunds of almost $40 million
ASIC linked these outcomes to deficiencies in distribution practices, including failures to meet obligations under the CFD product intervention order and weaknesses in DDO implementation.
ASIC also reported a significant increase in reportable situations lodged by issuers, reflecting enhanced identification and escalation of compliance issues.
ASIC’s Observations on Improved Practices
ASIC noted that, following its review and engagement:
39 issuers updated their TMDs
44 issuers improved client onboarding processes
42 issuers enhanced monitoring of client outcomes
46 issuers improved website disclosures
ASIC indicated that these changes reflected stronger compliance with DDO and related obligations.
Implications for Issuers and Distributors
ASIC stated that CFDs are high-risk products and emphasised the importance of:
robust target market determinations
effective distribution controls
ongoing monitoring of retail client outcomes
ASIC also indicated that it will continue to monitor compliance with DDO and distribution practices in the CFD sector.
Our Perspective
From a risk and compliance advisory perspective, Report 828 illustrates how ASIC assesses DDO by reference to evidence of how distribution operates in practice, rather than by the existence of policies or TMDs alone.
The report highlights the importance of:
aligning TMDs with actual distribution behaviour
using client data to monitor outcomes
reviewing and adjusting distribution arrangements where outcomes indicate misalignment
These themes are consistent with ASIC’s stated expectations for DDO and are relevant to issuers and distributors of other high-risk financial products.
For firms navigating the evolving DDO landscape, embedding robust, practical controls that deliver measurable outcomes can be complex. Owl Advisory by KWM has experience assisting financial services firms in uplifting their DDO frameworks, ensuring that policies, processes, and monitoring translate into real-world compliance and client outcomes.
If your organisation is seeking guidance on DDO implementation or outcome-focused distribution strategies, we can provide tailored support to help you meet ASIC’s expectations while maintaining operational efficiency.
This publication is a joint publication from King & Wood Mallesons, and KWM Compliance Pty Ltd (ACN 672 547 027) trading as Owl Advisory by KWM. KWM Compliance Pty Ltd is a company wholly owned by the King & Wood Mallesons Australian partnership. KWM Compliance Pty Ltd provides non-legal compliance and governance risk advisory services for businesses. KWM Compliance Pty Ltd is not an incorporated legal practice and does not provide legal services. Laws concerning the provision of legal services do not apply to KWM Compliance Pty Ltd.
