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The Federal Court in Victoria, Australia has upheld a $7.2 million fine against Dixon Advisory and Superannuation Services for failing to act in the best interests of its clients and failing to provide advice appropriate to the situation of its customers.

Two years ago, the Australian Securities and Investments Commission sued Dixon Advisory for breaching companies law and accused six of the advisory firm’s representatives of involvement. The corporate regulator claimed that Dixon Advisory failed to consider the conflict of interest between clients and entities associated with a predecessor company, Evans Dixon, and that the capital loss resulted from this negligence. In July 2021, Dixon Advisory reached an agreement to resolve ASIC’s civil penalty proceedings and admitted a number of allegations three months later.

“There is no evidence that the [Dixon Advisory] made the reasonable inquiries necessary into the recommended financial products or any alternative financial products, nor is there any evidence that they took into account the personal circumstances of the customers,” Judge Timothy McEvoy said in a statement. “The tickets were not the result of unauthorized conduct by the representatives. Six representatives committed the violations over a period of approximately three and a half years.”

Established in 2011 by Dixon Advisory, the US Masters Residential Property Fund exposed investors to the US residential real estate market by investing in real estate in New York. On 53 occasions between October 2015 and May 2019, Dixon representatives failed to act in the best interests of their clients and advised eight clients to acquire, transfer or retain interests in URF without investigating their backgrounds. .

These practices would have led to insufficient diversification of the self-managed pension funds of certain clients and the loss of a significant amount of assets. Brian Osborne was one of many clients who lost hundreds of thousands of dollars investing in URF, and Osborne believes the court’s decision was “just a slap on the wrist”.

“I was expecting to see something substantial, with some kind of compensation for investors who lost a large part of their retirement,” he said. Financial analysis.

In June 2019, the company’s vertical integration model began to receive negative attention after several clients said they were sometimes encouraged to invest more than half of their savings in stocks, hybrids and stocks. debts linked to the American real estate fund. According to ASIC, the fund paid Dixon $136 million in fees between September 2015 and June 2018, accounting for nearly two-thirds of Dixon Advisory’s revenue at one point. Prior to its collapse, Dixon Advisory was Australia’s fourth-largest self-managed superfund provider and provided wealth management services to more than 5,000 clients.

Despite Dixon’s efforts to create a renovation program, the overcapitalized fund still performed poorly and continued to charge high fees to clients. The company was criticized for dragging its clients into risky investments, and the talks escalated further when URF shares fell 50% between 2017 and 2019. Eventually, Dixon Advisory’s problems with URF resulted in the departure of former CEO Alan Dixon and the company’s merger with David. Evans’Evans & Partners in 2017.

“Licensees need to ensure that their representatives consider the specific needs and circumstances of their customers,” said Sarah Court, ASIC Vice President. “Advice that does not reflect the client’s situation – or advice patterns that lead to unique outcomes – is less likely to meet best interest obligations and may put clients at risk of capital loss.”

Last November, law firm Piper Alderman launched a class action lawsuit against Dixon Advisory for failing to act in the best interests of its clients. The lawsuit alleged that Dixon’s investment committee reviewed, approved and recommended which products should be “transferred to class members” whom the company believed could earn millions in fees. The lawsuit came just weeks after Maurice Blackburn sued the company for causing a couple to lose nearly $1 million in retirement savings, and a month before Shine Lawyers filed its own class action lawsuit.

Pair Dixon

Former Evans Dixon Group CEO Alan Dixon (left) with Chairman David Evans at the merger of the companies. Eddie Jim, Financial Review.

Dixon Advisory filed for voluntary administration in January, and on April 19 ASIC suspended its Australian financial services license. The court said Dixon Advisory can resume providing financial services if it implements appropriate systems, policies and procedures to ensure its representatives act in the best interests of their clients.

Stephen Longley and Craig Crosbie of Australia’s PwC were jointly appointed volunteer directors of Dixon Advisory & Superannuation in January. Accounting Today has asked for comment, but has not yet heard from the company.