Firstmac breached distribution laws, court rules

First DDO case ends in ASIC win

Firstmac breached distribution laws, court rules


By Mina Martin

The Federal Court has found Firstmac in breach of the new design and distribution provisions, marking the first court finding of such a contravention, ASIC reported.

Firstmac failed to take reasonable steps to ensure the distribution of its High Livez investment product was consistent with its target market determination (TMD).

Cross-selling strategy fails

The court said that Firstmac implemented a “cross-selling strategy” by marketing the High Livez investment product to 780 term deposit holders between October 2021 and September 2022.

This strategy breached the design and distribution obligations (DDO) as it did not ensure consistency with the product’s TMD.

See LinkedIn post here.

ASIC’s stance on consumer protection

ASIC deputy chair Sarah Court (pictured above) expressed concerns about the risks to consumers.

“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,” Court said.

“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.”

Judgment details

Justice Kylie Downes highlighted Firstmac’s inadequate steps in ensuring compliance with the DDO legislation.

Firstmac failed to take reasonable steps to ensure the distribution of the High Livez PDS to term deposit holders was consistent with the target market determination,” Downes 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.”

Next steps for Firstmac

ASIC will seek pecuniary penalties against Firstmac, with proceedings listed for a case management hearing on July 19.

Background on Firstmac and DDO regime

Firstmac is a non-bank lender and the investment manager of High Livez, a registered managed investment scheme.

ASIC commenced civil penalty proceedings against Firstmac on Dec. 14, 2022, marking ASIC’s first DDO civil penalty action against a financial product distributor.

The DDO regime, effective from Oct. 5, 2021, mandates issuers and distributors to adopt a consumer-centric focus in designing, marketing, and distributing financial products.

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