HW 3

We are pleased to respond to your request for comment on the Design & Distribution Obligations Draft
Legislation.

1. Practical difficulties for Issuers regarding Target Market Determinations for investment
products for which there are a wide range of uses and investor types
(a) Difficulties in defining a Target Market (by Class of Investor)
While we recognise that there may be some investment products suitable for a narrowly defined target market,
there are also many investment products that have a very wide target market.
Using the example of an investment product which offers exposure to Australian shares, there would be a very
large number of reasons why an investor may legitimately acquire such a product, and a large variety of investor
types. These may include:

(i) investors wanting to hold a long term exposure to Australian shares;
(ii) investors wanting to speculate on the short term outcomes of Australian shares;
(iii) investors wanting to take exposures that combine well with various other asset classes or
which offset liabilities
(iv) investors concerned with the comparative prospects of other asset classes
(v) retail and wholesale investors
(vi) geared and ungeared investors
(vii) affluent and less affluent investors
(viii) corporate, individual and super fund investors
Because the potential uses of the investment product are so wide, and the potential investor characteristics and
financial situations of those investors are so wide, we contend that it is not possible to define the target market in
terms of an investor class, it is only possible to define the target market in terms of the investment itself.
That is, in this example, it would appear that the target market for an Australian share fund in many cases could
only be “Investors seeking exposure to a managed portfolio of Australian shares”.
Accordingly, we consider it vital that the legislation and legislative guidance accommodates the definition of target
markets in terms other than (narrow) investor classes. That is, the Target Market must be able to be defined in a
manner that is sensible, practical and appropriate for each particular investment product.