The Federal Court has ordered Australian Unity Funds Management to pay a $7.1 million pecuniary penalty following significant breaches of design and distribution obligations.
The ruling comes after the fund manager admitted it failed to ensure that interests in its Select Income Fund were distributed only to investors who met specific criteria outlined in its target market determinations.
The court found that these systematic failures resulted in hundreds of individuals being placed into financial products that were potentially unsuitable for their investment needs, creating a heightened risk of financial loss.
The compliance breakdown was stark: Australian Unity confessed to 89 instances where it failed to require a completed suitability questionnaire from applicants and 239 instances where it neglected to review submitted questionnaires to verify if investors fit the target market.
The company revealed that the employee tasked with managing DDO compliance lacked the appropriate training or experience for the role.
The revelation drew sharp criticism from Justice Moshinsky, who remarked that the lapse reflected poorly on the firm's "compliance culture" and suggested that regulatory obligations were not taken sufficiently seriously.
ASIC Deputy Chair Sarah Court emphasised that the penalty serves as a stern warning to the financial services sector regarding the importance of product suitability. "The failure to assess product suitability can expose investors to products which are not appropriate for them," she stated.
In addition to the multi-million dollar fine, Australian Unity has been ordered to cover the legal costs incurred by the Australian Securities and Investments Commission.