The Federal Court has issued Dixon Advisory with a $7.2 million penalty for having six of its authorised representatives fail to act in the best interest of their clients and provide advice appropriate to their clients’ circumstances.
In handing down its decision, the court found the six authorised representatives involved did not act in the best interest of eight clients on 53 occasions when advising them to acquire, retain or roll over holdings in the US Masters Residential Property Fund and related products.
More specifically, it was found the Dixon Advisory practitioners provided advice to clients without conducting a reasonable investigation into their personal situations. These actions saw some SMSF members exposed to the risk of capital loss due to having a lack of diversity in their fund portfolios.
The breaches in question were found to have taken place between October 2015 and May 2019.
“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 McAvoy 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.”
Commenting on the development, Australian Securities and Investment Commission (ASIC) deputy chair Sarah Court noted the importance for licensees such as Dixon Advisory to ensure their authorised representatives are taking into account the circumstances and specific needs of their clients before providing advice.
“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,” Court said.
In addition to the $7.1 million penalty imposed upon Dixon Advisory, the financial services organisation was also ordered to pay the legal costs of ASIC totalling $800,000.
Dixon Advisory was also ordered by the court to have proper procedures in place to ensure its representatives act in the best interests of their clients should the firm decide to provide financial services again in the future.
Dixon Advisory is currently in voluntary administration and ASIC suspended the company’s operating licence in April.
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