The ASX-listed parent company of the now defunct Dixon Advisory will seek to delist from the ASX less than a week after a Parliamentary inquiry into Dixon was announced.
Evans and Partners (E&P) announced it submitted the formal request to delist on Tuesday morning, citing “a sustained negative impact” that regulatory proceedings and class actions have had on the company’s share price, despite previously telling shareholders it had resolved “legacy issues”.
Dixon Advisory went into voluntary administration in January 2022 after mounting liabilities – including regulatory intervention from ASIC and a class action from Shine Lawyers – meant clients who had made a claim to AFCA would be forwarded to the Compensation Scheme of Last Resort, after AFCA ruled that Dixon was an advice failure.
This has left professional advisers paying for the cost of remediating affected Dixon clients through the CSLR, and the delist of the company will come as schadenfreude for the advice profession, which last week scored a win with the announcement of an inquiry into the collapse of Dixon.
E&P also cited poor liquidity in its shares making it “challenging for new investors to join” and for existing shareholders to sell; having no prospects of index inclusion or sell-side broker coverage; and $2.5 million in annual direct costs for being listed.
The company listed on the ASX on 18 May 2018 at $2.50 a share, but in the aftermath of ASIC commencing civil penalty proceedings in September 2020, the share price dropped to 41 cents. E&P shares were placed in a trading halt on Friday.
The delisting is contingent on shareholder approval at an extraordinary general meeting (EGM) to be held on 24 October. If the vote passes, the final day of trading will be 9 December 2024.
To facilitate pre-delisting liquidity to suit an unlisted environment and provide liquidity for shareholders wishing to exit, E&P will seek further shareholder approval at the EGM to conduct an equal-access share buy-back at 52 cents per share.
In a member webinar on Tuesday, Financial Advice Association general manager for policy Phil Anderson showed little sympathy.
“Their message seems to be their share price has gone south and they don’t think it’s got prospects of going up any time soon and no one likes them, and they carry too much of the glare of the regulatory action and class action,” Anderson said.
“I don’t think they’ll avoid scrutiny. I think there will be less scrutiny going forward if they’re not required to report to the ASX, but in terms of this parliamentary inquiry it doesn’t matter if they’re listed or not.”
But outside of the Dixon fiasco, Anderson wants to know why the regulatory regime seems to place all the responsibility for failure on the advice profession. He says changes should be made so parent companies can’t wash their hands clean of liabilities and leave them to be picked up by other parties.
Anderson said legislation should be introduced to allow action to be taken through “the levying of parent companies who walk away from subsidiaries”.
The association met with Minister for Financial Services Stephen Jones in August to express concern about the sustainability of the CSLR and he agreed to the establishment of a working group with Treasury that includes the FAAA.
“The minister was open with us, he accepted there was a problem, he knew it needed to be addressed, he just made it clear that he had no immediate lever to pull,” Anderson said.
He added that he spoke to Jones about a public inquiry and received the minister’s “broad support”.
“We needed to get the bottom of what happened in Dixon Advisory, to highlight that this wasn’t just an advice issue, there were very significant product issues here, and how is it even possible that the law allows parent entities to walk away from subsidiaries and leave it to the rest of the profession to pay,” Anderson said.
The role ASIC played in the process will also be scrutinized in the inquiry. ASIC told a parliamentary hearing in June it decided to pursue proceedings against Dixon and not individual advisers, but that it also had no legal avenues to hold E&P to account after it put Dixon into voluntary administration.
However, the regulator announced in August 2023 it was pursuing criminal charges against one director, Paul Ryan, for alleged breaches of directors’ duties.
“We also wanted to look at what role ASIC played and what more could they have done to eliminate client losses,” Anderson said.
“We want to make it really clear how unjust it is for this to be charged to the advice profession and we want to ultimately have this inquiry identify the changes that are needed to fix the problem,” Anderson said.
In the meantime, Anderson noted that advisers will be stuck with the current CSLR and that Dixon claims will take three to four years to process.
When it comes to coverage of Dixon claims so far, about $203 million of a $241 million pre-CSLR levy on the largest 10 institutions will be allocated to Dixon claims, while the financial advice profession will pay $136 million, with a much smaller contribution from the government.
“The government [is] coughing up a very generous $100,000,” Anderson said.
In total, this would put CSLR coverage of Dixon Advisory at $339 million.
“That would [make it] one of the most significant financial services scandals of all time,” Anderson said.
Anderson said this also set a precedent for Libertas and the United Global Capital fund, the latter of which ASIC has alleged gave conflicted personal advice to clients.
UGC, which went into voluntary administration on 5 July 2024, is accused of having encouraged clients to establish an SMSF to invest in highly speculative investments related to the company’s sole director, Joel Hewish.
