Australian Securities & Investments Commission secures Federal Court order for Firstmac to pay AUD 8 million for design and distribution obligation breaches

The Australian Securities & Investments Commission announced that the Federal Court has ordered Firstmac Limited to pay AUD 8 million in penalties for failing to comply with the design and distribution obligations (DDO) in connection with marketing its High Livez registered managed investment scheme to term deposit holders. The Court found Firstmac contravened section 994E(3) of the Corporations Act by failing to take reasonable steps that would have resulted in, or were reasonably likely to have resulted in, distribution consistent with the product’s target market determination (TMD), in ASIC’s first civil penalty action against a distributor involving DDO breaches. The Court previously found Firstmac implemented a cross-selling strategy that marketed High Livez to 780 existing term deposit customers and, from October 2021 to September 2022, sent product disclosure statements without first taking reasonable steps to ensure consistency with the TMD. In the penalty decision, Justice Downes found Firstmac “courted the risk” of distribution outside the target market and described the conduct as “objectively reckless”; Firstmac was also ordered to pay ASIC’s costs.