Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .

PART 7.8A - DESIGN AND DISTRIBUTION REQUIREMENTS RELATING TO FINANCIAL PRODUCTS FOR RETAIL CLIENTS  

Division 2 - Target market determinations for financial products  

SECTION 994B   TARGET MARKET DETERMINATIONS FOR FINANCIAL PRODUCTS  

Requirement to make a target market determination

994B(1)    
Subject to subsection (3) , a person must make a target market determination for a financial product if:

(a)    under Part 6D.2 , the person is required to prepare a disclosure document for the product; or

(b)    under Part 7.9 , the person is required to prepare a Product Disclosure Statement for the product; or

(ba)    

the product is not a financial product (as defined in Division 3 of Part 7.1 ) and:

(i) the person issues the product to another person as a retail client; or

(ii) the person sells the product under a regulated sale; or

(c)    regulations made for the purpose of this paragraph require the person to make a target market determination for the product.

994B(2)    
A person required by subsection (1) to make a target market determination for a financial product must do so before:

(a)    if paragraph (1)(a) , (b) or (ba) applies - any person engages in retail product distribution conduct in relation to the product; or

(b) if paragraph (1)(c) applies:

(i) the time or event specified in regulations made for the purposes of that paragraph; or

(ii) if there is no time or event so specified - any person engages in retail product distribution conduct in relation to the product.

Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1) ).

Note 2: This subsection is also a civil penalty provision (see section 1317E ). For relief from liability to a civil penalty relating to this subsection, see section 1317S .

994B(3)    
Subsections (1) and (2) do not apply to:

(a)    a MySuper product; or

(b)    a margin lending facility; or

(c) (Repealed)

(d)    a fully paid ordinary share in a company or a foreign company (except a fully paid ordinary share covered by subsection (4) ); or

(e)    

a financial product issued, or offered for regulated sale, by an exempt body corporate of a State or Territory or by an exempt public authority; or

(f)    a financial product of a kind prescribed by regulations made for the purposes of this paragraph.

Note: Division 1A of Part 7.12 (Employee share schemes) contains a separate regime for the making of offers in connection with employee share schemes. Subsections (1) and (2) of this section do not apply in relation to securities that are issued, sold or transferred under an offer that is eligible to be made under that Division: see subsection 1100ZC(6) .

994B(4)    
Paragraph (3)(d) does not apply to a fully paid ordinary share in a company or a foreign company if:

(a)    on the issue of the share, the company intended that the share be converted into a preference share within 12 months after the date of issue; or

(b)    the company:

(i) carries on a business of investment in financial products, interests in land or other investments; and

(ii) in the course of carrying on that business, invests funds subscribed, whether directly or indirectly, after an offer or invitation to the public (within the meaning of section 82 ) made on terms that the funds subscribed would be invested.

Requirements for target market determinations

994B(5)    
A target market determination for a financial product must:

(a)    be in writing; and

(b)    describe the class of retail clients that comprises the target market (within the ordinary meaning of the term) for the product; and

(c)    specify any conditions and restrictions on retail product distribution conduct in relation to the product ( distribution conditions ), other than a condition or restriction imposed by or under another provision of this Act; and

(d)    specify events and circumstances ( review triggers ) that would reasonably suggest that the determination is no longer appropriate; and

(e)    specify the maximum period from the start of the day the determination is made to the start of the day the first review of the determination under section 994C is to finish; and

(f)    specify the maximum period from the start of the day a review of the determination under section 994C is finished to the start of the day the next review of the determination is to finish; and

(g)    specify a reporting period for reporting information about the number of complaints about the product (see subsection 994F(4) ); and

(h)    specify the kinds of information needed to enable the person who made the target market determination to identify promptly whether a review trigger for the determination, or another event or circumstance that would reasonably suggest that the determination is no longer appropriate, has occurred and, for each kind of information, specify:

(i) the regulated person or regulated persons that, under subsection 994F(5) , are required to report the information to the person who made the determination; and

(ii) a reporting period for reporting the information under subsection 994F(5) .

Note 1: For paragraph (c), an example of a distribution condition for a financial product is a restriction limiting the distribution of the product to specified methods of distribution.

Note 2: The requirements of this subsection also apply when a new target market determination is made as a result of a review under section 994C .

994B(6)    
A period specified under paragraph (5)(e) or (f) , and a reporting period specified under paragraph (5)(g) or subparagraph (5)(h)(ii) , must be reasonable.

994B(7)    
In determining what is reasonable for the purposes of subsection (6) , regard must be had to:

(a)    the need to identify promptly whether a review trigger for the determination, or another event or circumstance that would reasonably suggest that the determination is no longer appropriate, has occurred; and

(b)    the likelihood, nature and extent of detriment to retail clients that may result if:

(i) a review trigger for the determination, or another event or circumstance that would reasonably suggest that the target market determination is no longer appropriate, has occurred; and

(ii) the target market determination is not promptly reviewed.

994B(8)    
A target market determination for a financial product must be such that it would be reasonable to conclude that, if the product were to be issued, or sold in a regulated sale:

(a)    to a retail client in accordance with the distribution conditions - it would be likely that the retail client is in the target market; and

(b)    to a retail client in the target market - it would likely be consistent with the likely objectives, financial situation and needs of the retail client.

994B(8A)    

A target market determination for a financial product is appropriate if it satisfies the requirements of subsection (8) .

Making target market determinations public

994B(9)    
A person who makes a target market determination must ensure that the determination is available to the public free of charge.

Note 1: Contravention of this subsection is an offence (see subsection 1311(1) ).

Note 2: This subsection is also a civil penalty provision (see section 1317E ). For relief from liability to a civil penalty relating to this subsection, see section 1317S .

Note 3: This subsection applies to all target market determinations, including those that have ceased to apply.