Appearing before the Senate economics references committee this Friday, ASIC deputy chair Sarah Court faced questioning regarding the absence of criminal sanctions against Dixon Advisory and the regulator’s decision to pursue civil proceedings instead.
In September last year, the Federal Court imposed a $7.2 million penalty on Dixon Advisory and Superannuation (Dixon Advisory) after six representatives failed to act in their clients’ best interests and failed to provide advice appropriate to their clients’ circumstances.
During a Senate session on Friday, Mr Bragg argued the imposed penalty of $7.2 million was insufficient considering the total claims made by customers amounted to over $368 million.
Asked whether the court outcome was considered “good” by ASIC, Ms Court said “in that matter we determined that civil proceedings were appropriate”.
“Those proceedings were instituted, and ASIC was successful, and a civil penalty was awarded.”
“The finding was made in the court that the company had not acted in the best interests of its clients, that’s a serious finding and a significant penalty was imposed. So that should send a message to other companies that that is inappropriate and contravening conduct.”
Addressing the issue of investors not recovering their losses, Ms Court lamented it is an unfortunate reality that investors often find themselves out of pocket due to conduct that violates the Corporations Act.
“This is the bread and butter of what our enforcement work does,” she added.
Earlier this month, the Australian Financial Complaints Authority (AFCA) confirmed it had received over 1,700 complaints against Dixon Advisory since the 3 August announcement by ASIC, taking the total for Dixon to more than 1,800 complaints.
“The level of complaints coming into AFCA may mean some delays, but consumers can be assured that by submitting their complaint they preserve any possible eligibility under a potential future compensation scheme of last resort,” AFCA said at the time.
Namely, last year in August, the corporate watchdog informed former Dixon clients they may be eligible for compensation under a potential future Compensation Scheme of Last Resort (CSLR) but noted they needed to act as soon as possible.
“ASIC will soon be writing to former clients of Dixon Advisory to inform them that if they believe they have suffered loss as a result of the misconduct of Dixon Advisory and/or their former Dixon Advisory financial adviser in providing financial advice, they should make a complaint to the Australian Financial Complaints Authority,” ASIC said in a statement at the time.
However, AFCA informed consumers early last year it had paused progress of all Dixon-related complaints until after the CSLR has been established.
Consequently, it was revealed in April this year just five claims had progressed to the case management stage, representing less than 1 per cent of the total number.
In a statement on Thursday, Financial Services Minister Stephen Jones confirmed the Senate has passed CSLR, marking “a significant victory for over 2,000 people, who have been waiting for a resolution on their cases”.
Commenting on its passage at the Senate hearing on Friday, Joe Longo said “ASIC welcomes its implementation”.
“We think it will have significant benefits for consumers. In circumstances where their concerns or issues have been upheld by AFCA and for reasons outside of their control and indeed AFCA’s control those awards can’t be paid or met because of insolvency or other circumstances affecting the entity, so I think yes ASIC welcomes the legislation taking effect.”
The corporate regulator cancelled the AFSL held by Dixon Advisory on 5 April 2023, with the terms obliging the firm to maintain membership of AFCA until 8 April 2024.
This means it will continue to be possible to lodge a complaint with AFCA until that time.
Criminal proceedings
On Friday, Mr Bragg pressed ASIC representatives for a more thorough explanation as to why criminal proceedings were not pursued.
“Well, there is a range of concepts in what you are referring to. ASIC frequently takes civil proceedings against corporate entities, we take criminal proceedings against individuals and on some occasion corporate entities where we have the evidence that will make the criminal threshold,” said Ms Court.
“We don’t as a matter of course in our civil proceedings seek compensation for individuals impacted. We do from time to time, but we don’t as a matter of course, we’re not resourced to do so. Our role as a public enforcement agency is to take enforcement action.”
ASIC representatives confirmed the investigation is not over in relation to the matter but disclosed criminal sanctions are highly unlikely.
So who funds the CSLR?
As an adviser I have to fund ASIC (no choice), I also have to maintain P.I to protect my customers (no real choice).
My ASIC fees have increased circa 60%, the PI has gone up about 20% and we’d never had a claim or a complaint found in the complainants favour. I’m obligated to conduct remediation if there’s any client detriment as a result of admin errors or advice mistakes.
Remind again why I bother with all that?
Dixon Advisory recommend clients go into in-house products where they’re clipping the ticket and who knows what else- but it was dodgy enough to cost investors 300mil plus and counting.
It seems like through ASIC’s utter incompetence and the shonky practices of other advisers, me and my clients who follow the rules have to pay!
This country is cooked!
ASIC do nothing from multiple warnings of dodgy Dixon’s for many years.
ASIC finally turn up years too late as Dixon’s and it’s dodgy vertical MIS’s all collapse.
ASIC tells Dixon’s clients to complain to AFCA and then tells AFCA to await CSLR.
Now because ASIC did nothing they want good Advisers to bail out Dixon’s clients via CSLR levies.
2,000 Dixon clients ripped off x $150k each means $300,000,000 in AFCA / CSLR payments.
Great job ASIC = NOT !!!!
Real Advisers cannot be blamed and forced to pay for this utter rubbish.
Does this mean that honest, ethical, self licensed advisers are going to have to pay compensation to former Dixons clients, via the CSLR?
Lost for words. ASIC knew Dixons were diverting all their clients into products they owned, yet no-one at ASIC thought they should amke sure there were safeguards for the clients – or that the advice was even good advice.
Dixons have run off with the loot and their clients have been left to pick up the pieces – they may be able to claim against the Scheme of Last Resort that Dixons have not put one cent into.
$368 million and 1,800 complaints for a company that was running full page advertisements in the AFR on a weekly basis that were obviously dodgy. ASIC obviously don’t have a subscription to the AFR or Google.
“We don’t as a matter of course in our civil proceedings seek compensation for individuals impacted. We do from time to time, but we don’t as a matter of course, we’re not resourced to do so. Our role as a public enforcement agency is to take enforcement action.”
We don’t, mostly, but sometimes we do, but mostly we done because we don’t get paid enough to care? We need more money, then we might care about the poor retail client – might?
Someone remind me, what % of complaints received does ASIC bother to investigate?