The corporate regulator has taken a wholly owned subsidiary of Evans Dixon Ltd (ASX: ED1) to the Federal Court.
Dixon Advisory and Superannuation Services Limited faces allegations of not acting in its clients’ best interests and providing inappropriate advice.
The Australian Securities and Investments Commission (ASIC) also accuses Dixon Advisory of not dealing with a conflict of interest between its clients’ and businesses within Evans Dixon.
The specific allegations refer to 51 instances of advice provided to 8 clients relating to investment in US Masters Residential Property Fund Unit (ASX: URF).
According to ASIC, URF was created by Dixon Advisory back in 2011 and paid “substantial fees” to companies within Evans Dixon – including Dixon Advisory itself.
A total of 126 contraventions are alleged to have occurred between 2 September 2015 and 31 May 2019.
The maximum civil penalty is $1 million for each breach before 13 March 2019, and $10.5 million per contravention after that point.
Evans Dixon, in a statement to the ASX on Friday, indicated it would mount a defence.
“[Dixon Advisory] will be defending the proceedings and in due course will file a comprehensive defence after it has received and had a reasonable opportunity to review ASIC’s detailed statement of claim,” announced the company.
ASIC is also seeking a court order that Dixon Advisory put systems in place to meet clients’ best interests in the future.
URF is an ASX-listed real estate investment trust (REIT) that allows shareholders exposure to the New York City residential property market.
Evans Dixon is a financial services conglomerate that provides personal wealth advice to 9,200 clients, representing $20.1 billion in investments. The company also advises institutional customers.
Evans Dixon shares were down more than 15% at 12.14 pm AEST to 45 cents. The Evans Dixon share price was $1.60 in May last year.