A director of a $20 million investment fund has admitted to borrowing clients' money to resolve personal "financial difficulties" and to settle a colleague's divorce.

But Peter Daly, whose network of companies is now being investigated by the Australian Securities and Investments Commission (ASIC), denied seeking a loan to pay for his daughter's wedding.

Speaking to Background Briefing against the advice of his public relations team, Mr Daly said he believed the 150 people who signed up to the fund would be comfortable with his actions.

"I would think that most people who have gone through experiences like we have experienced or have built their own companies would probably understand and be sympathetic," he said.

Peter Daly describes the market as his "backyard", adding he knows it "damn well". ( ABC News: David Lewis )

ASIC has since shut down the Investport Income Opportunity Fund (IIOF), which consists of two funds, one registered and one unregistered.

It alleges Mr Daly's companies have mismanaged funds, misled investors, and breached the Corporations Act.

"It's been brand damaging so, you know, the consequences have been extreme," Mr Daly said.

"It's undermined and potentially destroyed my own personal reputation."

ASIC has submitted evidence to the Federal Court alleging a substantial amount of money in the IIOF was funnelled into business acquisitions and loans to directors, including Mr Daly.

The 59-year-old borrowed $70,000 from the fund in September 2015, to help with personal financial issues.

But a fellow director told the corporate watchdog there was another possible explanation for the loan.

"He's got his daughter's wedding coming up in the next few weeks and it strikes me as an expensive wedding," the director stated during an interview with ASIC investigators.

Mr Daly strongly denies the claim.

The corporate watchdog ASIC is investigating a number of companies linked to Peter Daly. ( ABC News: David Lewis )

A separate loan for $30,000 was paid to another of director of the fund to cover a "cashflow hurdle" relating to a property dispute with his ex-wife.

"She is a lawyer by profession and has sought to make matters as difficult as possible and as costly as possible," the director wrote in a letter dated April 2016.

In the letter, the director hinted at how he might repay the loan.

"I have a number of costs associated with my ageing mother's fall," he wrote.

"I am the sole beneficiary of her estate, including the home — her life expectancy is three years."

Background Briefing sent a list of questions to all four directors of the fund but they did not respond.

Mr Daly has defended his approval of the loan, which he said was to help make up for the director's reduced salary.

"He took a very, very small salary so that he could build the business, and that's been the sacrifice that all of us have made," he said.

Peter Daly is a director of several companies, including an $8 billion financial planning business. ( ABC News: David Lewis )

Financial planners field calls from panicked investors

In August, the Federal Court appointed an administrator to the fund.

Mr Daly and his fellow directors cannot access the $20 million it contains.

Investors are questioning whether they will ever see their money again.

David Ruthenberg, a financial planner from Victoria, said nine of his clients invested a combined $1.3 million in the fund.

He believed their money was going into a mix of loans and property, but has since discovered that was not the case.

"It makes me sick to the stomach, to be quite honest," Mr Ruthenberg said.

"This is my client's money and it's hard-earned money."

Paul Green, a forensic accountant, has examined IIOF records and has grave concerns about the solvency of the fund.

"They're not receiving any cash income and the cash they are receiving is simply new investment funds," Mr Green said.

"I mean other than the last leg, which requires a fraud, it's identical in its premise to a Ponzi scheme."

Peter Daly denies claims he used investors' money to pay for his daughter's wedding. ( ABC News: David Lewis )

Mr Daly maintains he had nothing to do with setting up the IIOF. He said the product disclosure statement contained all the information about where clients' money would be invested.

Jeanie Sinclair, a former compliance officer who worked with Mr Daly at his $8 billion financial planning business The Beacon Group, told Background Briefing she tried to raise concerns about compliance during her time there but they fell on deaf ears.

"There were many, many warnings, there were many issues identified in various compliance committee meetings and they were not adhered to, they were not followed through," she said.

"It was as if particular management knew there were issues to be addressed but they ignored them."

Mr Daly said he takes compliance seriously, describing it as "absolutely critical".

However, a report by auditors Grant Thornton, obtained by Background Briefing, found the trustee of the fund "failed to comply in full with the scheme's compliance plan".

"A failure to comply with the scheme's compliance plan may indicate the licensee's arrangements to ensure compliance with financial services laws are inadequate and therefore we have raised these matters to ASIC," the report concluded.

The Federal Court has delivered a preliminary finding regarding the allegations raised by ASIC with Justice Roger Derrington, concluding there is a prima facie case that directors had broken the Corporations Act.

But Justice Derrington said this would need to be tested further.

When asked whether he felt he had broken the law, Mr Daly cited the preliminary finding, saying, "We potentially have, yes".