In short
A Target Market Determination (TMD) is a document required under Part 7.8A of the Corporations Act 2001 (Cth) for most financial products issued to retail clients, describing the class of consumers for whom the product is likely to be appropriate, the distribution conditions and restrictions that keep it within that market, and the review triggers that require the issuer to reassess it. Both issuers and distributors have obligations under the design and distribution regime, not just product manufacturers.
Why DDO changed the drafting exercise
Before the design and distribution obligations commenced in October 2021, product disclosure was largely a one-way exercise: tell the consumer what the product does and let them decide if it suits them. Part 7.8A flips that logic. The issuer now has to positively determine, before the product is distributed, which class of consumers it's likely to be appropriate for, and then build distribution conditions that keep the product within that class. A TMD that simply restates the PDS in different language, without genuinely narrowing the target market by reference to the product's risk, term, cost and likely objectives, doesn't meet the standard ASIC set out in RG 274 and is one of the most common defects we're asked to fix.
We draft TMDs by working backwards from the product's actual features — capital risk, liquidity, complexity, cost structure — to identify who it's genuinely suited for and, just as importantly, who it isn't, because the negative target market description is often where a TMD's real analytical work sits.
Distribution conditions — where issuers and distributors share risk
The distribution conditions section sets out how the product can be distributed consistently with the target market: permitted channels, required advice thresholds (personal advice only versus general advice permitted), and any exclusions. Distributors — advisers, brokers, platforms — have their own obligation under section 994E to take reasonable steps that will, or are reasonably likely to, result in distribution being consistent with the TMD. That means a TMD drafted without genuine input from the distribution network tends to fail in practice even if it reads well on paper, because the conditions don't map to how the product is actually sold.
Review triggers and the reporting obligation
Every TMD must specify review periods and review triggers — events such as a significant dealing outside the target market, a spike in complaints, unexpectedly high claims or cancellation rates, or regulatory action that would prompt an out-of-cycle review. Section 994F requires distributors to report 'significant dealings' outside the target market to the issuer within 10 business days, and issuers must in turn notify ASIC of significant dealings. We build review trigger thresholds that are specific enough to be monitored (a defined complaint volume or a stated percentage of sales outside the stated age band, for example) rather than vague statements that a review will occur 'if concerns arise'.
TMDs alongside the PDS and FSG
The TMD doesn't replace the Product Disclosure Statement or the FSG — it sits alongside them, and inconsistency between the three documents is a specific ASIC review focus. If the PDS describes a product as suitable for investors seeking capital growth over a long time horizon but the TMD's target market includes investors with a short investment timeframe, that inconsistency undermines both documents. We cross-check TMDs against the current PDS and FSG as part of every engagement.
What we deliver
A TMD built from the product's actual features rather than generic language, distribution conditions tested against how the product is actually sold, specific and monitorable review triggers, and a short compliance note flagging any inconsistency we find between the TMD, PDS and FSG.
What the fixed fee covers
- Positive and negative target market description tied to product features
- Distribution conditions matched to actual distribution channels
- Review periods and specific, monitorable review triggers
- Significant dealing reporting workflow for distributors
- Cross-check against existing PDS and FSG for consistency
- Distributor notification pack summarising conditions
Mistakes we see
- Target market description that just restates the PDS instead of genuinely narrowing the class of consumers
- Distribution conditions that don't reflect how the product is actually sold (e.g. assuming personal advice when it's sold via general advice channels)
- Vague review triggers that can't be objectively monitored
- No process for distributors to report significant dealings outside the target market
- TMD inconsistent with the PDS on risk profile, time horizon or investment objectives
Who this is for
- Product issuers (fund managers, insurers, deposit-taking institutions)
- Platforms and distributors needing to assess distribution conditions
- Businesses launching a new retail financial product
- Issuers responding to ASIC review or reportable significant dealings
Frequently asked questions
- Which products need a TMD?
- Most financial products issued to retail clients that require a PDS or are otherwise caught by Part 7.8A, including managed investment schemes, superannuation products, general and life insurance, and credit products regulated under the National Credit Code. A small number of exemptions apply (such as certain basic banking products), which we check against the current ASIC class order relief before assuming an exemption.
- Who is responsible for keeping the TMD up to date?
- The product issuer, but distributors have an independent obligation to distribute consistently with the current version and to report significant dealings outside the target market. If a distributor keeps using an outdated TMD after being notified of a review, that's a separate compliance failure on the distributor's part.
- What counts as a 'significant dealing' that has to be reported?
- There's no fixed numerical threshold in the legislation; ASIC's guidance in RG 274 describes it as a dealing that is not minor or infrequent, assessed against factors like the nature and extent of the inconsistency with the target market and the actual or potential harm to consumers. We help clients set internal thresholds that are defensible and practical to monitor.
- Can general advice be given on a product with a TMD restricted to personal advice only?
- No — if the TMD's distribution conditions specify personal advice, distributing via general advice channels is a breach of section 994E's reasonable steps obligation, regardless of how the product is otherwise marketed.
- How often should a TMD be reviewed?
- At the intervals stated in the TMD itself (commonly annually for straightforward products, more frequently for complex or high-risk ones) and immediately upon any review trigger event occurring, whichever comes first.
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