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In this Funds Update for 9 January 2026:
Federal Court imposes penalty for not using and reviewing DDO questionnaires
On 23 December 2025, the Federal Court of Australia declared that a responsible entity (RE) which had issued units to retail clients had failed to take reasonable steps that would result in, or that were reasonably likely to result in, retail product distribution conduct in relation to the units being consistent with the target market determination (TMD) for the units, under the design and distribution obligations (DDO).
The Court found that from October 2021 to October 2023, the RE had failed to take these reasonable steps by:
- on 89 occasions, issuing units to retail clients without requiring them to submit, as part of their application, a completed DDO questionnaire with answers to questions to determine whether they were within the target market described in the TMD; and
- on 239 occasions, issuing units to retail clients without reviewing submitted questionnaires that had been completed by the applicants to determine whether they were within the target market described in the TMD.
The Court made a declaration that the RE had contravened s 994E(3) of the Corporations Act 2001 (Cth) and imposed a pecuniary penalty of $7,125,000. The RE was also ordered publish a written adverse publicity notice setting out its contravening conduct.
The Court's orders can be found here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
