The Australian Federal Court has found that Firstmac Limited contravened the design and distribution obligations (DDO), which came into force in October 2021, as one of its investment offerings did not align with its target market determination. This ruling is the first under these regulations.
Firstmac Guilty Of Breaching DDO Rules With Cross-Selling Strategy
According to the Australian Securities and Investments Commission (ASIC), Firstmac used a “cross-selling strategy” to market its High Livez product to 780 consumers with existing term deposits. The company allegedly sent product disclosure statements to these clients without ensuring that they met the target market determination.
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This reportedly occurred between October 2021 and September 2022. ASIC’s deputy chairperson, Sarah Court, said:
ASIC took this case because we were concerned that customers were exposed to the risk they might obtain a financial product that was not appropriate to their needs and objectives. This should act as a deterrent to anyone engaged in cross-selling financial products who fails to consider their design and distribution obligations before sending product disclosure statements.
Federal Court Justice Kylie Downes indicated that Firstmac’s attempts to meet the DDO rules were completely “inadequate”. She noted:
It is self-evident that [there] were suitable and available ways to eliminate or minimise the likelihood that the High Livez PDS would be sent to a person who fell outside the target market for High Livez.
The Australian finance regulator stated that it will proceed to seek “pecuniary penalties”. A case management hearing in this matter is scheduled for 19 July 2024.
