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ASIC has commenced proceedings in the Federal Court against an advice firm in relation to alleged failures to act in the best interest of clients when providing investment advice to SMSF clients.
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SMSF firm taken to court over alleged advice failures
07 September 2020
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In a public announcement, ASIC stated that it has commenced proceedings in the Federal Court of Australia against Dixon Advisory and Superannuation Services Limited (Dixon Advisory), a subsidiary of ASX-listed Evans Dixon Limited.
ASIC has alleged that Dixon Advisory representatives failed to act in their clients’ best interests and to provide advice that was appropriate to the clients’ circumstances.
ASIC also alleges that, in giving the relevant advice, Dixon Advisory representatives “knew or ought to have known that there was a conflict between their clients’ interests and the interests of entities associated with Dixon Advisory within the Evans Dixon group, and failed to give priority to the clients’ interests”.
This action relates to financial advice given to eight sample clients, who were advised to invest in the US Masters Residential Property Fund (URF) and URF-related products between 2 September 2015 and 31 May 2019, the corporate regulator said.
“The URF is an ASX-listed property fund established in 2011 to give investors exposure to the US residential property market, by investing in residential property in the New York metropolitan area,” ASIC stated.
The URF was established by Dixon Advisory and, at the relevant time, paid substantial fees to several companies owned by Evans Dixon, including Dixon Advisory.
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According to documents lodged as part of the proceedings, the eight sample clients engaged Dixon Advisory and Superannuation Services to provide investment advice, generally, in relation to their SMSFs.
Each of the sample clients was a “retail client” for the purposes of chapter 7 of the Corporations Act.
ASIC alleges that a total of 51 separate instances of financial advice were provided to the eight sample clients in the relevant period, each of which resulted in two or more contraventions of “best interests duties” under the Corporations Act.
ASIC stated that it is seeking declarations of contraventions and pecuniary penalties against Dixon Advisory.
The maximum civil penalty for contraventions alleged against Dixon Advisory is $1 million per contravention for contraventions prior to 13 March 2019, and $10.5 million per contravention after that date.
ASIC is also seeking orders that Dixon Advisory put in place appropriate systems, policies and procedures to ensure that Dixon Advisory representatives comply with best interests obligations, and provide a written report from an independent expert confirming this compliance.
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