The Federal Court has imposed a $7.2 million penalty on Dixon Advisory and Superannuation Services after representatives failed to act in clients' best interests and failed to provide advice appropriate to their clients' circumstances.
The court on Monday found that on 53 occasions between October 2015 and May 2019, the firm 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 firm's high-risk US Masters Residential Property Fund and related products.
In some cases, clients' self-managed superannuation funds were insufficiently diversified and exposed to risk of capital loss.
Justice Timothy McEvoy in his judgment said there was "no evidence that the 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 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."
The court also ordered that if Dixon Advisory resumes providing financial services then it must have appropriate systems, policies and procedures in place to ensure its representatives act in the best interests of clients.
The firm, founded in Canberra, was also ordered to pay ASIC's legal costs of $800,000.
Justice McEvoy said the court's declaration and orders were "substantially in the terms sought by the parties".
Dixon Advisory in July 2021 entered a conditional heads of agreement with ASIC, which included paying the Commonwealth a pecuniary penalty of $7.2m and paying ASIC's legal costs, after the regulator started court proceedings in September 2020.
As part of the agreement, Dixon Advisory admitted to breaching sections of the Corporations Act 53 times.
The in-principle resolution was subject to the court's approval.
The ASX shows that the fund's share price during the period of breaches was trading at about $2.25 before it fell to about $1.10.
In January, the firm appointed PricewaterhouseCoopers' partners Stephen Longley and Craig Crosbie as voluntary administrators.
The administrators for the troubled firm, which had its financial services licence suspended in April, provided written consent for the legal proceeding to continue and did not oppose revised orders being sought by ASIC.
These included that ASIC would not seek to enforce the pecuniary penalty or any costs order against the firm without the court's approval.
The lead plaintiff in a class action against Dixon Advisory also launched a bid to ringfence the $7.2m penalty to benefit participants in the class action instead because of concerns the firm could not manage both. The application was discontinued in July.
Following Monday's judgment, ASIC deputy chairwoman Sarah Court said "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," Ms Court said.
ASIC urges former clients who believe they have suffered losses from Dixon Advisory's breaches to make complaints to the Australian Financial Complaints Authority for potential compensation.
