ASIC has commenced civil penalty action in the Federal Court against non-bank mortgage lender Firstmac for alleged breaches of the Design and Distribution Obligations.

The regulator’s proceeding against Firstmac is the first DDO civil penalty action taken against a distributor of financial products, which is the first DDO court action filed earlier this month against a financial product issuer, Amex, regarding credit cards issued in David Jones stores.

Firstmac distributes term deposits and other investment products, including interests in registered managed investment scheme Firstmac High Livez.

ASIC alleges that in marketing and distributing High Livez to term deposit holders, Firstmac failed to take reasonable steps to ensure that the product was distributed in accordance with the Target Market Determination.

ASIC’s case states that by adopting a cross-selling strategy of marketing and distributing High Livez to term deposit holders, there was a likelihood those customers would be outside the High Livez target market, because:

  • Unlike Firstmac’s term deposits which were guaranteed by the Commonwealth Government in the amount up to $250,000 per account, High Livez was not a capital guaranteed product. The TMD indicated that customers seeking a capital guarantee were not in the target market; and
  • The investment timeframes for term deposits ranged from 30 days to two years whereas the recommended investment timeframe for High Livez was a minimum of three years up to five years. The TMD indicated that customers seeking an investment timeframe of two years or less were not in the target market.

ASIC is seeking declarations and pecuniary penalties from the court.

The post ASIC takes civil penalty action against Firstmac for DDO breach appeared first on Professional Planner.

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