Financial firm Dixon Advisory has agreed to pay $7.2m in penalty as part of court proceedings after it allegedly failed to act in clients' best interests when advising them to invest in its US property fund.
The firm, which is owned and operated by E&P Financial Group and has a presence in Canberra, today entered a conditional heads of agreement with ASIC following Federal Court-ordered mediation.
In a statement released to the ASX, E&P Financial Group said it would pay the Commonwealth a pecuniary penalty of $7.2m and $1m to ASIC for its investigation and legal costs.
As part of the agreement, Dixon Advisory admitted to breaching sections of the Corporations ACT 53 times between October 2015 and May 2019 in relation to its troubled US Masters Residential Property Fund.
The ASX shows that the fund's share price during that period was trading at about $2.25 before it fell to about $1.10.
The breaches relate to not acting in the best interests of clients in relation to advice and/or providing inappropriate advice to clients if it had been in the best interests of clients.
ASIC, which began the legal proceedings in September 2020 and alleged 126 breaches from 51 instances of financial advice, has agreed to seek no further declarations of contravention.
The corporate regulator had said the maximum penalty for each breach was $1m before March 2019 and $10.5m after that date.
The conditional settlement also includes Dixon Advisory implementing appropriate systems, policies and procedures to ensure its representatives comply with the Corporations Act.
It also requires the firm to provide ASIC with a written report of an independent expert confirming its compliance.
In its statement, E&P said the agreement was an important step to resolving the legal proceeding with the corporate regulator.
"The board wishes to make it clear that extensive management and governance changes have occurred across the group over the last two years to ensure that DASS acts in its clients best interests at all times," the statement reads.
"The company has already commissioned its own external independent review of governance practices and implemented all resulting recommendations.
"The board looks forward to sharing the results of the further independent compliance review of DASS with ASIC in due course and to implementing any further appropriate advice protocols which it identifies."
The in-principle resolution is subject to the court's approval.
An ASIC statement said further comment would be made after the court has determined the matter.
Finalised documents, including agreed facts, are scheduled to be made jointly to the court some time in August.
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