This article is from the Australian Property Journal archive
AFTER two years, Dixon Advisory has been penalised $7.2 million by the Federal Court of Victoria for failing to acting in their clients best interest.
After representatives were found to have breached best interest obligations and failed to provide advice appropriate to their clients’ circumstances, the Court has imposed a $7.2 million penalty on Dixon Advisory and Superannuation Services Limited (Dixon Advisory).
The Australian Securities & Investments Commission (ASIC) first sued Dixon Advisory in September 2020, with the two parties entering a heads of agreement to resolve civil penalty proceedings on 8 July 2021.
Dixon advisory admitted to several allegations on 15 October 2021, before being placed in voluntary administration on 19 January 2022 and having its Australian Financial Services license suspended by ASIC in April.
“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,” said Sarah Court, deputy chair at ASIC.
The Federal Court found 53 occasions between October 2015 and May 2019 where Dixon Advisory was the responsible licensee of six representatives who did not act in the best interests of eight clients.
These occasions all related to advice concerning the Dixon Advisory-established ASX-listed US Masters Residential Property Fund (URF) and URF-related products and when to acquire, roll-over or retain interests in the fund.
The representatives of the wealth manager were found to have failed to conduct reasonable investigations into the client’s circumstances before handing out advice, leaving the client’s self-managed superannuation fund—in some cases—insufficiently diversified and exposed to risk of capital loss.
“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,” said Justice McEvoy, who handed down the judgement.
“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.”
Dixon Advisory has been order to have appropriate systems, policies and procedures in place to protect its clients, if it were to resume financial services.
In addition to the $7.2 million penalty, Dixon Advisory must pay ASIC’s legal costs of the $800,000.