Federal Court slaps Dixon Advisory with $7.2m penalty

The Federal Court has imposed a $7.2 million penalty on Dixon Advisory and Superannuation Services Pty Limited (Dixon Advisory).

On Monday (19 September), ASIC confirmed the penalty after six representatives failed to act in their clients' best interests and failed to provide advice appropriate to their clients' circumstances.

The Court found that on 53 occasions between October 2015 and May 2019, Dixon Advisory — now in voluntary administration — was the responsible licensee of six representatives who did not act in the best interests of eight clients when they advised these clients to acquire, roll over or retain interests in the US Masters Residential Property Fund (URF) and URF-related products.

Representatives of Dixon Advisory were also found to have failed to conduct a “reasonable investigation” of the clients' circumstances before providing advice.

“There is no evidence that the (Dixon Advisory) representatives conducted the necessary reasonable investigations into the recommended financial products or any alternative financial products, nor is there evidence that they considered the personal circumstances of the clients,” Justice Timothy McEvoy said.

“The contraventions were not the result of isolated or unauthorised conduct of the representatives. Six representatives committed the contraventions over a period spanning some three and a half years.”

ASIC deputy chair Sarah Court added: “Licensees need to ensure their representatives are taking into account their clients' specific needs and circumstances.

“Advice that fails to reflect client circumstances — or advice models that lead to one-size-fits-all outcomes — are less likely to meet best interest duty obligations and can expose clients to a risk of capital loss.”

As well as the $7.2 million penalty, Dixon Advisory was also ordered to pay ASIC's legal costs of $800,000.

Dixon Advisory filed for voluntary administration in January with E&P Financial Group directors saying at the time that it “determined that mounting and actual potential liabilities mean it is likely to become insolvent at some future time”.

The actual or potential liabilities relate to possible damages from proceedings that include a class action lodged by Piper Alderman last November which alleged that “Dixon Advisory failed to act in the best interests of clients after its investment committee reviewed, approved and recommended which products were to be pushed on to group members” whom Dixon Advisory stood to earn millions in fees from.

The liabilities also relate to claims against Dixon Advisory by the Australian Financial Complaints Authority (AFCA) and penalties by ASIC.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.