Dixon Advisory fined AU$7.2m by Australian court for representatives’ inappropriate advice

Rick Steves

“Licensees need to ensure their representatives are taking into account their clients’ specific needs and circumstances.”

Could ASIC ban CFD trading in Australia?

An Australian federal court has fined Dixon Advisory and Superannuation Services Limited a $7.2 million penalty for failing to act in their clients’ best interests and to provide advice appropriate to their clients’ circumstances.

The ruling follows a compliant by the Australian Securities and Investments Commission that alleged that six of the advisory firm’s representatives were involved in inappropriate practices. Dixon Advisory was also ordered to pay ASIC’s legal costs of $800,000.

Risky investments in New York real estate

ASIC Deputy Chair 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.”

According to the court, on 53 occasions between October 2015 and May 2019, Dixon Advisory 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.

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. The URF was established by Dixon Advisory.

Dixon Advisory representatives did not conduct a reasonable investigation of the clients’ circumstances before providing the advice, in some cases resulting in the client’s self-managed superannuation fund being 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. “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.”

Former clients of Dixon Advisory may be eligible for compensation under a potential future Compensation Scheme of Last Resort (CSLR) but will need to take action as soon as possible (22-205MR).

Former clients who believe they have suffered loss as a result of the misconduct of Dixon Advisory and/or their former Dixon Advisory financial adviser should make a complaint to the Australian Financial Complaints Authority (AFCA). Lodging a complaint with AFCA is a necessary step for clients to preserve their possible eligibility under a potential future CSLR.

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