Almost five years on from the commencement of the Design and Distribution Obligations (DDO) in October 2021, the expectations around how Fund Issuers oversee their distributors have moved on considerably. ASIC’s work – including Report 795 on compliance with the reasonable steps obligation – has made clear that oversight of distribution is not a box-ticking exercise completed once and filed away. It is an ongoing, holistic discipline.
And yet, in trying to get it perfect, some Issuers risk doing very little. The reasonable steps obligation in s994E of the Corporations Act does not demand a flawless, exhaustive audit of every distributor. It demands reasonable steps – proportionate to the product, the target market and the degree of harm that could result if distribution goes wrong. The trap is treating due diligence as an all-or-nothing project. Waiting until you can build the perfect programme too often means the real, practical steps that would actually improve outcomes never get taken.
So what does “good” look like today? Across the Issuers who are aligning well to regulatory expectations, four themes stand out.
1. Connecting the dots across your distribution data
Distribution oversight has too often been run in silos: complaints sit with one team, significant dealing reports with another, and distributor due diligence somewhere else again. Issuers who are getting this right are joining those data points together. A cluster of complaints about a particular distributor, an unexpected significant dealing notification, and a due diligence response that glosses over sales practices are far more meaningful read together than in isolation. Reasonable steps are best understood as a holistic assessment of an entity’s full framework of controls – not a series of disconnected activities – and that same logic applies to the data an Issuer already holds.
2. A dynamic and responsive approach – not just the annual cycle
An annual due diligence questionnaire remains a sensible backbone, but it should not be the whole story. ASIC’s observations point squarely at the limitations of a static, once-a-year snapshot: circumstances change, regulatory action and corporate activity create an additional layer. Leading Issuers supplement the annual cycle with responsive, event-driven review – asking follow-up questions when a response is generic or incomplete, revisiting a distributor when complaints or dealing data suggest something has shifted, and refreshing their view when a product or its TMD is updated. This is precisely the kind of iterative, follow-up behaviour ASIC highlighted as better practice in Report 795.
3. A risk-based approach, viewed through a customer lens
Reasonable steps are, by definition, proportionate. That means devoting the most effort to the areas of highest risk – higher-risk products, narrower target markets, less mature channels – rather than spreading a thin, uniform layer of scrutiny across everyone. The most effective Issuers calibrate their attention to where the potential for consumer harm is greatest, and they frame the question through a customer lens: how does the distributor align practices with expectation of the Fund Issuer in seeking to limit distribution to the target market.
4. Leveraging systems and data for efficiency – for both sides
Finally, the Issuers making real progress are using technology to make oversight efficient for everyone involved. Chasing responses by email, version-controlling Word documents and hunting through drives and inboxes for missing answers is not just painful – it actively works against good oversight, because effort is consumed by administration rather than analysis. A well-designed system reduces the burden on distributors (who answer once) and on Issuers (who review in one place), freeing both to focus on what actually matters: understanding the distribution and evidencing the reasonable steps taken.
Where Know Your Distributor (KYD) fits
This is exactly the problem Know Your Distributor (KYD) was built to solve. KYD is a complete solution that takes the pain out of distributor due diligence for Australian Fund Issuers and Distributors. It gives product issuers a secure, efficient and meaningful way to monitor the distributors of their fund products – and, critically, to evidence the reasonable steps expected under their Design and Distribution Obligations.
KYD is owned and supported by PX Partners, whose practitioners bring real-world experience of the DDO. The solution is powered by Carne Group technology – a platform that exists and is in use today, deployed in over 75 countries, used to monitor more than 2,000 distributors globally, and relied upon by clients who collectively manage over $1 trillion in assets. It is ISO 27001 certified, hosted on AWS with leading cyber-security. The KYD DDQ is the Australian questionnaire is designed by Australian practitioners with input from a range of Australian Fund Issuers and Distributors.
A questionnaire built for deeper review – beyond the FSC baseline
The KYD due diligence questionnaire is aligned to the Financial Services Council (FSC) standard DDQ, so it covers the industry baseline Issuers already recognise. On top of that, it includes additional KYD-developed sections that allow for a broader and deeper review, with consistent, closed-form questions that make answering easier while capturing more detail for meaningful analysis. Coverage spans:
• company information and ownership
• regulatory status
• product governance arrangements
• distribution and sales practices
• governance, risk, compliance and assurance
• training
• business continuity, and
• a dedicated financial crime section – which has taken on heightened importance following the significant changes to Australia’s AML/CTF regime that commenced on 31 March 2026, moving compliance toward a more risk-based, outcome-focused model.
In other words, KYD gives Issuers a richer, more structured evidence base than the industry-standard DDQ alone – the kind of information that lets you connect the dots described above, rather than simply file another completed form.
How it works
KYD centres on a dynamic, industry-aligned questionnaire built specifically for the Australian market, and runs the whole process end to end through one system. The KYD team arranges for your distributors to complete the in-system questionnaire; distributors answer once and control which product Issuers can view their responses. Issuers then review those responses in a single central record – seeking clarification, uploading supporting information, recording assessments and tracking completion in one place. KYD performs the follow-up of questionnaire responses, leaving you free to focus on the commercial relationship and your own assessment.
The efficiency dividend is substantial: based on analysis undertaken by clients of the underlying Carne technology, the KYD solution could save over 80% in person-days compared to running the same activity manually.
Independent review service by PX Partners
For Issuers seeking greater assurance, KYD offers an optional independent review delivered by the risk and compliance specialists at PX Partners, who have extensive experience with the DDO and broader regulatory compliance. The review pre-vets distributor responses before they reach you, enabling your teams to focus on the highest-risk areas. As part of that service, PX Partners:
• verifies corporate and licensing information against ASIC records, AFSL authorisations and appointed auditors;
• reviews complaints handling by assessing website information and confirming AFCA membership;
• performs financial crime screening, including PEP, sanctions and adverse media checks on the distributor and its directors; and
• benchmarks each distributor against peers to provide comparative insights.
The output is a board-ready report containing DDQ assessment results, RAG-rated findings, executive summaries, key exceptions and practical commentary – exactly what governance forums need to make informed oversight decisions, and to evidence that reasonable steps were taken.
The bottom line
The reasonable steps obligation was never about achieving a theoretical ideal. It was about putting adequate systems, policies and practices in place to address the risks of distribution going astray – and being able to show it. Issuers who connect their data, stay responsive between annual cycles, focus effort where consumer risk is greatest, and lean on systems to do the heavy lifting are meeting that expectation today.
Don’t let perfection be the enemy of reasonable steps. Take the practical ones – and let KYD make them efficient.
To find out how KYD can support your distributor oversight, visit knowyourdistributor.com.au or contact the team at PX Partners.
