ASIC blocks class action attempt to freeze $7.2m Dixon penalty

Filed by Piper Alderman earlier this month, a class action was brought against Dixon Advisory and Superannuation Services (DASS), its ASX-listed parent and wealth manager E&P Financial Planning (EP1) and former director Alan Dixon by self-managed super fund Kosen-Rufu on allegations of conflicting advice.

Following the class action lodgement, Kosen-Rufu then applied to activate an untested section in the Corporations Act 2001 to ring-fence a $7.2 million penalty agreed to by DASS and the corporate regulator in July, settling civil penalty proceedings that alleged DASS provided conflicted financial advice and engaged in misleading and deceptive conduct.

The reasoning for Kosen-Rufu’s move was to ensure DASS had funds for a possible future judgement debt.

However, in a statement issued on Thursday, Piper Alderman confirmed Kosen-Rufu’s attempt has now been stalled by ASIC. Namely, a hearing due to be held on 25 November was postponed at the request of the corporate regulator.

“The application has been deferred for determination at a later date, after ASIC requested further time to consider its position,” the statement reads.

According to Kosen-Rufu’s lawyers, the plaintiff was seeking to obtain “greater certainty” for itself and participants in the class action that it represents, at an early stage of the class action, around possible recoverability from DASS.

“The applicants are disappointed that the hearing of this important application did not proceed today,” said Martin del Gallego, leading class action lawyer and partner at Piper Alderman.

“The intent of the provision is to ensure that facilitating compensation for victims is given preference over the payment of penalties, if there is a risk that a defendant cannot do both.

“We will continue to work with ASIC and DASS to favourably resolve the application as quickly as possible, and set aside the funds for possible distribution to participants in its class action at a later date.”

The class action lodged against DASS and EP1 alleged that Dixon Advisory failed to act in the best interests of clients after its investment committee approved and recommended products to “be pushed on” to group members that Dixon Advisory stood to earn millions in fees from.

Interestingly, it came only weeks after Dixon Advisory was also sued by Maurice Blackburn on behalf of a couple for poor retirement advice that left them $900,000 worse off.

“Our clients placed their trust in Dixon Advisory as their professional advisers to help them plan for retirement in a balanced and measured way, and instead Dixon Advisory exposed our clients to a level of non-diversified and highly leveraged risk which they did not want nor need and invested them in products in which Dixon Advisory had a financial interest,” Maurice Blackburn principal lawyer Craig Parrish told ifa last month.

“Our evidence suggests that had Dixon recommended that our clients invest their super in a balanced portfolio over the same period, our clients would have been almost $900k better off today.”

In July, Dixon Advisory paid a $7.2 million penalty for breaches of the Corporations Act and $1 million to go towards an ASIC investigation.