Australian Securities & Investments Commission secures Federal Court AUD 7.125 million penalty against Australian Unity for design and distribution failures

The Australian Securities & Investments Commission reported that the Federal Court has ordered Australian Unity Funds Management Limited, as responsible entity of the Australian Unity Select Income Fund, to pay an AUD 7.125 million pecuniary penalty for breaching design and distribution obligations by failing to take reasonable steps to ensure the fund was distributed only to retail investors within the criteria set out in its Target Market Determinations (TMDs). Australian Unity admitted it issued interests to retail clients on 89 occasions without requiring a completed suitability questionnaire and on 239 occasions without reviewing submitted questionnaires to check alignment with the TMDs. In total, 328 non-advised investors applied for interests in the fund, and up to 144 of the 239 questionnaires submitted contained at least one response suggesting the investor was not in the target market. The Court also ordered Australian Unity to publish an adverse publicity notice, send it to impacted investors (those who were not required to submit a questionnaire, or whose questionnaire was not reviewed despite indicating potential misalignment with the target market), and pay ASIC’s costs. The Federal Court orders were made in December 2025. ASIC noted that Australian Unity updated the fund’s TMD from 6 October 2023 to introduce distribution conditions requiring questionnaire review before issuing interests, made the questionnaire compulsory for prospective investors from October 2023, and added “knock out questions” from July 2024.