Table of Contents
What are the Design and Distribution Obligations?
Design and Distribution Obligations (DDO) are consumer protection requirements that apply to financial product issuers and distributors.
DDO is designed to help ensure financial products are:
- designed for customers they are likely to be appropriate for, and
distributed in a way that supports good customer outcomes.
Challenger, as a product issuer, and advisers and platforms, as distributors, all have responsibilities under DDO.
Reporting requirements
Under DDO, advisers and platforms must report to Challenger:
- complaints received about Challenger products, and
- significant dealings that are not consistent with the relevant TMD
Reporting timeframes and requirements are set out in each product’s TMD.
Submitting a single report
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| Submitting multiple reports | DDO Complaints Reporting Template v1.4 DDO Dealings Reporting Template v1.4 |
The Target Market Determination (TMD)
A TMD describes who a product has been designed for and conditions on how the product can be distributed to customers. It also describes the reporting requirements for distributors.
Our TMD for each retail financial product are available here along with the relevant Product Disclosure Statement.
Please ensure you are familiar with these TMD which describes:
- the class, or type, of customers who the product is likely to be appropriate for;
- conditions and restrictions on how products can be distributed to customers;
- events or circumstances that will require the product issuer to review the TMD for their products; and
- outlines the information that distributors must provide to the issuer.
Each Challenger retail product available for new investment has a TMD.
What this means for advisers and distributors?
When distributing Challenger products, advisers and platforms are required to:
- consider the relevant TMD,
- take reasonable steps to ensure distribution is consistent with the TMD, and
- report complaints and significant dealings to Challenger.
Providing personal advice does not prevent you from recommending a product outside the target market where it is appropriate for your client. However, you must keep appropriate records and meet your reporting obligations.
What is a significant dealing?
A dealing can be considered a significant dealing when a product is distributed outside its target market in circumstances that may result in consumer harm.
Whether a dealing is significant depends on factors such as:
- the number or proportion of customers affected,
- the nature and extent of actual or potential harm, and
- the reasons the dealing is inconsistent with the TMD.
All significant dealings must be reported to us within 10 business days of becoming aware of them.
How to identify a significant dealing
Distributors are responsible for assessing whether a dealing (or group of dealings) outside the target market described in the TMD, is ‘significant’. This assessment should be made in the context of the distributor’s distribution model, product mix and customer base. As each distributor’s context differs, there is no uniform threshold for determining whether a dealing is significant.
However, to help you assess whether a dealing may be significant, we’ve included some examples below of dealings that could be considered significant dealings outside the target market of our products.
Example 1
A distributor notes that a number of their investors have asked to withdraw their Fixed Term annuities before the maturity date, not understanding that they could incur a financial penalty.
The target market for the Fixed Term annuity is an investor who has the intention to hold the product for their chosen term. While it can happen that an investor may need to withdraw due to unforeseen circumstances, multiple investors doing so may indicate that the investors objectives, financial situation and needs were not appropriately considered. Investors withdrawing before their maturity date are exposed to risk of consumer harm as they may receive a withdrawal value that is less than the value invested.
Example 2
A distributor sells a Lifetime Annuity (Liquid Lifetime) to an investor who has a terminal illness and who has indicated that they want the flexibility to make occasional lump-sum withdrawals from their investment.
The investor is outside the target market described in the Lifetime Annuity (Liquid Lifetime) TMD. The investor’s need for ongoing access to their capital is inconsistent with the product’s key features and intended purpose. Selling the product in these circumstances may indicate the investor’s objectives, financial situation and needs were not appropriately considered. The sale of this product may expose the investor to risk of consumer harm.
Sales outside target market
If you sell a product to a client outside the product’s target market (as defined in the TMD) you must notify Challenger. You can still recommend the product where it is appropriate for your client, but you must keep written evidence explaining why. Challenger may request this information.
Where a product is accessed via a platform, you must follow the platform’s process. The platform will report sales outside the target market to Challenger, and we may request further details.
Complaints – reporting
If you are a distributor or deal in our products you need to provide us with details of any complaints about our product design, product availability or distribution.
Reporting of complaints;
- Provide us with details of any complaints about our products you receive from your clients.
- Provide all the content of the complaint, having regard to privacy.
- Provide complaints details to us within 10 business days following the end of the calendar quarter or sooner.
- Where your client is investing in one of our products via a platform, you will also need to adhere to that platform’s process for reporting complaints.
Learn more: Resolving complaints
Adviser checklist for distributing Challenger’s products
- TMD: Please read, consider distribution conditions and assess product suitability for each client. Personal advice does not exempt you from all DDO obligations. It should form part of your appropriate advice reasoning and be documented in the SoA and client file.
- Sequencing: PDS sent only after TMD fit or advice pathway confirmed
- Application form TMD gating questions must be used when doing execution only (no personal advice)
- avoid coaching client answers in response to TMD gating questions or relying on administrative staff to perform TMD checks unsupervised.
- Any adviser or dealer group marketing channels and audience aligns with relevant TMDs: be careful when cross selling.
- Significant dealings and complaints checks and notification to Challenger.
Records retained 7+ years.
Recent cases & regulatory actions – key lessons for advisers
- Firstmac (2024–2025): Court found a distributor breached ‘reasonable steps’ by cross‑selling a higher‑risk investment to term deposit clients and distributing PDSs before filtering for TMD fit. Learn more: ASIC media release (25-003MR)
- Australian Unity Funds Management (2026). One of the clearest demonstrations of what not to do under DDO—and why proactive reasonable steps processes are essential. If a client falls outside the TMD, it should be escalated and assessed as a potential significant dealing. In this case, the questionnaire process failed for nearly two years because responses were never reviewed. Learn more ASIC media release (26-011MR)
- American Express (2024): Court imposed an $8m penalty for failing to review TMDs when high cancellation rates reasonably suggested the TMDs were no longer appropriate. Reinforces the need to monitor outcome signals and act quickly on review triggers, significant dealings and complaints systemic observations. Learn more ASIC media release (24-158MR)
- Mitrade stop order (2023): ASIC issued its first DDO stop order after finding Mitrade’s client questionnaires were ineffective - using leading questions, coaching prompts and unlimited retries—failing to properly screen out consumers outside the target market. This case highlights poor practices in questionnaire design and what should be avoided for effective distribution controls.) Learn More ASIC Press Release (23-141MR)