Andrew Bragg

The corporate regulator has conceded it has no legal avenue to hold the parent company of Dixon Advisory, Evans and Partners, accountable for the failings of its subsidiary.

The admission during a Senate Economics Committee hearing by ASIC deputy chair Sarah Court comes amid criticism from the advice sector, which has been left to cover the costs of remediating Dixon victims via the Compensation Scheme of Last Resort.

“Unfortunately, the way that our laws work is that we have to deal with the company or entity that is actually engaged in the conduct and there was no evidence that we could ascertain that Evans and Partners was involved in the conduct that was done by Dixon and its advisers,” Court said.

When the CSLR legislation passed parliament, the government was due to cover the first year of the scheme but instead will only cover the final three months of the first financial year.

However, the slow process of making determinations on Dixon claims means it will take years to address all clients eligible for compensation, meaning the advice sector was due to carry a heavy levy regardless of government input.

ASIC investigated the advice received by a subset of Dixon clients between 2015 and 2019 over concerns the advisers employed by the firm were not providing advice in clients’ best interest.

Asked by Senate committee deputy chair Andrew Bragg why ASIC elected not to take individual action against advisers at the time, Court noted she joined the regulator in June 2021, after the investigation of Dixon commenced in September 2020, and was unable to provide context.

However, Court said the regulator focused on the entity Dixon, as opposed to investigating and acting on individual advisers, because Dixon held the AFSL.

“Dixon has the responsibility for ensuring that those that are operating under its licence are doing so in full compliance with corporations law,” Court said.

Dixon Advisory was handed a $7.2 million fine along with $800,000 in court costs but has not paid any of the penalty after entering voluntary administration in January 2022.

While Bragg had described the amount as “paltry”, Court said it was a significant amount at the time for the conduct involved.

“Off the top of my head it might have been one of the highest penalties for failures to supervise [the provision of advice],” Court said.

Fungible numbers

Only 47 matters related to Dixon have received determinations from the Australian Financial Complaints Authority (AFCA) so far, while another 544 complaints were added in recent months bringing the total to around 2500.

AFCA said the recent growth of complaints was due to the 8 April deadline ASIC set for Dixon to remain an AFCA member.

The top 10 largest financial institutions are due to cover the pre-CSLR levy which was capped at $241 million, butAFCA chief operating officer Justin Untersteiner said the claims lodged during this window, which was up to the time the CLSR legislation passed, were worth $312 million.

After the legislation was introduced, there was another $146 million worth of claims, while $5.7 million has been awarded by the scheme to Dixon clients.

“It’s important to give some context here, the claim amounts I’m providing are purely the claims that have been lodged by consumers, they are yet to be vetted by AFCA,” Untersteiner said.

“Some of these will be lower, some may not be in at all and there’s a cap of the scheme that hasn’t been taken into account. This is pre the $150,000 [compensation] cap. I’d be careful how you use these figures, is my caution.”