Dixon Advisory will pay a $7.2 million penalty following mediation of proceedings brought by the corporate watchdog, which alleged the arm of Evans Dixon recommended clients invest in a related property fund that has since dived in value.
The Australian Securities and Investment Commission (ASIC) and Dixon Advisory today entered into a heads of agreement to resolve the civil penalty proceedings brought by the watchdog in September 2020.
It is the latest stumble for Evans Dixon, which has since renamed to E&P Financial Group (ASX: EP1), after a $115 million bid from 360 Capital Group (ASX: TGP) fell through in April.
The proceedings alleged Dixon failed to act in the best interests of clients who were recommended to invest in E&P's US Masters Residential Property Fund (URF) and URF-related products between 2 September 2015 and 31 May 2019.
At the beginning of that window the URF share price was trading at around $2.25, but a string of poor results led it to fall to around the $1 mark by the end of May 2019 and just $0.30 today.
ASIC alleged this recommendation equated to Dixon Advisory representatives failing to act in their clients' best interests to provide financial advice appropriate to the clients' circumstances.
The corporate watchdog alleged that a total of 51 separate instances of financial advice were provided to eight sample clients in the relevant period, each of which resulted in two or more contraventions of 'best interests duties' under the Corporations Act.
The heads of agreement follow Court-ordered mediation and propose that Dixon Advisory pay a $7.2 million penalty for breaches of the Corporations Act as well as $1 million to pay ASIC's costs of its investigation and legal proceedings. The in-principle resolution between the two parties is subject to approval from the Court.
It caps off a tumultuous period for shareholders in E&P Financial Group, which have watched the company's share price dive from an opening of $2.50 upon listing in May 2018 to currently wallow at around 70 cents per share.
These include aforementioned troubles at URF, a FY20 loss of $30.5 million and the resignation of founder Alan Dixon in July for 'personal reasons'.
Shares in EP1 are up 7.86 per cent to $0.76 per share at 10.05am AEST.
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