In Australian Securities and Investments Commission v Firstmac Limited (Penalty Hearing) [2025] FCA 12 the Federal Court of Australia ordered Firstmac Limited to pay $8 million in penalties for failing to meet its design and distribution obligations (DDO).
The Court found Firstmac contravened section 994E(3) of the Corporations Act when it failed to take reasonable steps that would have resulted in, or would have been reasonably likely to have resulted in, distribution of its High Livez investment product to term deposit holders being consistent with its target market determination (TMD). Background.
In July 2024, the Court found Firstmac implemented a ‘cross-selling strategy’ of marketing investments in High Livez (a registered managed investment scheme) to 780 consumers who held existing term deposits with Firstmac.
Firstmac did not have in place adequate systems, policies, practices and procedures to address identified or reasonably identifiable risks of retail product distribution conduct which was inconsistent with the High Livez TMD.
Justice Downes observed:
“Although High Livez was wound up in December 2024, Firstmac is a distributor of other financial products and has ongoing obligations to comply with the DDO in relation to those products, and any other financial product it might elect to distribute in the future. Given Firstmac’s size and financial position, a significant penalty is necessary to ensure specific deterrence by avoiding the possibility that Firstmac may perceive a civil penalty as an acceptable ‘cost of doing business’.
Contrary to Firstmac’s submissions that it engaged in two contraventions, Firstmac engaged in a total of 831 contraventions of s 994E(3) of the Corporations Act. That is because each occasion on which an email or a letter was sent constituted a separate instance of retail product distribution conduct …
That is an extensive number of contraventions over a significant period of time, with the first tranche of contraventions occurring over a period of seven months and the later contraventions occurring approximately ten months after the commencement of the DDO.
Having said that, each of those 831 contraventions arose from just two courses of conduct or two transactions, being (respectively) (1) the sending of the High Livez Documents and (2) the sending of the High Livez Information. There was a close interrelationship between the legal and factual elements of the contraventions relating to each of the High Livez Documents. As for the High Livez Information, the unchallenged evidence of Mr Gration was that a single decision was made to send each of the letters, which conduct occurred on the same day. Other than each recipient’s identity, the legal and factual elements concerning these contraventions are identical. Accordingly, the ‘course of conduct’ principle operates such that a concurrent or single penalty will be imposed for the contraventions that arose out of each of the two courses of conduct. Otherwise, the result would be wholly disproportionate.”
If you found this article helpful, then subscribe to our news emails to keep up to date and look at our video courses for in-depth training. Use the search box at the top right of this page or the categories list on the right hand side of this page to check for other articles on the same or related matters.
Author: David Jacobson
Principal, Bright Corporate Law
Email:
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.
