The Senate will launch an inquiry into Dixon Advisory, reviewing the faults of a system that has left the advice profession on the hook for hundreds of millions of dollars in compensation following a successful campaign by practising advisers and their representatives.
On late Tuesday afternoon, One Nation Senator Pauline Hanson secured a motion that would launch an inquiry into the collapse of Dixon Advisory through the Senate Economic Committee.
The inquiry will focus on the cause of the collapse of Dixon, the effect of the US Masters Residential Property Fund, the actions of the regulator, and the impact of the administration and insolvency issues. Most importantly, the inquiry will assess the potential implications for future matters.
Vertical integration will return to the spotlight with the inquiry to assess the scenario when an internally promoted investment product fails. The Australian Financial Complaints Authority ultimately ruled Dixon an advice failure which meant victims were eligible for remediation through the Compensation Scheme of Last Resort, as opposed to an investment- or product-related failure, which are not included in the scope of the CSLR.
The inquiry will evaluate how wealth management companies can be put into administration to mitigate the liabilities of directors and senior managers, while clients are transferred to a related party.
While clients were transferred to other subsidiaries after Dixon went into voluntary administration, its parent company Evans and Partners was able to avoid any further liabilities including regulatory fines and class action lawsuits. Evans and Partners told shareholders in August “there are no remaining contingent liabilities related to” it’s former subsidiary.
The inquiry will also assess ASIC’s culpability in investigating corporate collapses and the options for enforcement action, including litigation, the regulator has available to it.
The scrutiny of the regulator’s involvement comes as ASIC deputy chair Sarah Court told a Parliamentary hearing in early June it had no recourse to hold Evans and Partners liable.
The report will be due by the last Parliamentary sitting day in March 2025.
The Dixon collapse had drawn further ire from the advice profession after it was revealed earlier this year that advisers would be levied to pay a significant proportion of the compensation, after the government sidestepped funding obligations. The unfairness of the CSLR, and other advice regulatory costs, even drove one adviser, James Walker-Powell, to launch a campaign for the next federal election.
The Financial Advice Association had announced in June it would pursue a public inquiry into Dixon Advisory and it has since become a core part of its advocacy agenda.
The association had met with Treasury last week, and with Minister Stephen Jones in August, to raise concerns about Dixon Advisory and the CSLR and the push for the inquiry.
The FAAA said the inquiry will be based on terms of reference the association had advocated for which will address “key concerns” about the collapse of Dixon and the impact it had on the CSLR.
FAAA general manager for policy Phil Anderson claimed victory on LinkedIn, arguing a strong member advocacy campaign has solidified political attention to the issue.
“Shining a spotlight on what has happened is a critically important step,” Anderson said.
“There will be a lot more work to put our case forward, highlighting the issues with what Dixon Advisory did and the design and implementation of the CSLR, however today is a great start.”
Similarly, FAAA chair David Sharpe added on LinkedIn this action happened off the back of months of “relentless advocacy”, countless parliamentarian meetings as well as letters to every parliamentarian.
“I, like many other small other business owners, paid my CSLR bill and I am outraged by it,” Sharpe said.
“The FAAA is not letting this go and we hope this Inquiry goes a long [way] to ensuring what happened at Dixon’s doesn’t happen again.”
FAAA chief executive Sarah Abood said in a media statement that the inquiry was essential in understanding the full scope of what went wrong with Dixon and to ensure it’s not repeated.
“The financial advice profession is made up of thousands of small businesses right across the country, helping Australians achieve their financial goals,” Abood said.
“We do not have the financial capacity to underwrite the misconduct of large companies, and nor should we.”
