ASIC’s handling of Dixon scrutinised by Senator Bragg amid CSLR passage

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.