The Federal Court has found Firstmac Limited breached provisions by failing to take reasonable steps that would have resulted in one of its investment products being consistent with its target market determination for the product.
The conduct occurred between October 2021 and September 2022.
This is the first finding by a court against a distributor of financial products for contravening the DDO provisions. The case was commenced by ASIC in the Federal Court on 14 December 2022.
The Court found Firstmac implemented a ‘cross-selling strategy’ of marketing investments in its High Livez investment product to 780 consumers who held existing term deposits with Firstmac. These term deposits were guaranteed by the Commonwealth Government up to $250,000 per account; in contrast, High Livez was not a capital guaranteed product.
The TMD indicated that customers seeking a capital guarantee were not in the target market; nor were their investment timeframes suitable for Livez.
Justice Downes found the steps which Firstmac took were wholly inadequate to meet the statutory obligation imposed by the DDO legislation.
Her Honour said, "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."
ASIC will now seek orders from the Court imposing pecuniary penalties against Firstmac Limited. The proceedings have been listed for a case management hearing on 19 July 2024.