‘Too many unanswered questions’: Why a Dixon public inquiry is vital

A public inquiry into how the collapse of Dixon could happen and lead to advisers picking up the tab has been on the Financial Advice Association Australia (FAAA) agenda for months. Last month, the association stepped up its calls with the release of a paper detailing the action that the Australian Securities and Investments Commission (ASIC) has taken against Dixon.

On Friday, the FAAA announced it had met with Financial Services Minister Stephen Jones to explain the considerable concerns that financial advisers have with the construction and implementation of the Compensation Scheme of Last Resort (CSLR), including the need for a public inquiry.

Speaking with ifa, FAAA CEO Sarah Abood said that given it is a “major public scandal” in the realm of $350–$400 million, there is “huge public interest” in understanding exactly what happened.

“There’s just too many unanswered questions,” she said.

“They go from, why has no one been talking about the URF, why has no one looked at whether this product was managed in line with the PDS, for example? Did the investment manager do their job? What promises were made to the advisers and were they kept? None of that has even been addressed, and we don’t know why.”

Noting that the FAAA is “a bit stumped” as to why many of these questions have been ignored, she also pointed out that “many of the court documents been suppressed”.

“We can’t get any answers. We don’t know why. We don’t even know who did it, but things like an agreed statement of facts like that you go online, they’re not there, so we can’t imagine why that would be. It seems unusual to put it mildly,” Abood said.

“Certainly, our lawyers have advised us, but that’s curious, in their words, and they think it’s worth pursuing. There’s just so many questions like this. We think of public inquiry is the best way to get the answers that we all need.”

Attempts to get answers

There have been numerous attempts to get solid responses from the regulator and Treasury around exactly how the Dixon collapse was able to happen and whether the subsequent response was appropriate.

Senator Andrew Bragg in particular has continued to push ASIC on the investigation and regulatory response to Dixon, while also probing Treasury on the role the fallout of the debacle played in the construction of the CSLR.

Unfortunately, Bragg’s questions have not been answered with enough clarity to put the issue to bed.

Abood told ifa that while there has been a lot of questions asked in the Senate by “various people and in various contexts”, there seems to be a “little bit of a wall of science going on there and we don’t know why”.

“We can speculate, but the reality is, we don’t know why, and we’re not going to find out unless somebody with the authority to compel witnesses and documents is put in charge of an inquiry to find out. I think we’re all entitled to those answers, we’re footing the bill, after all,” she said.

“This is unjust, it needs to be fixed. I don’t want to live in a country where people are happy for wildly unjust things to continue. I’m not going to stand still for it.”

According to Abood, the FAAA made it extremely clear during its time in Canberra to meet with politicians that the association will keep pushing the issue.

“We’ve got to get those answers, and we’re not going to stop until we do,” she added.

Is this the next Dixon?

Highlighting the advice community’s fears that Dixon would not be the only instance of a firm going under and the CSLR picking up a considerable tab, recent weeks have seen a pair of firms in administration catch the eye of the Australian Financial Complaints Authority (AFCA) and the CSLR.

Melbourne financial advice firm United Global Capital (UGC) entered liquidation last week after ASIC cancelled its AFSL, though AFCA had already provided an update that it is considering whether complaints against UGC will be covered by the CSLR.

On Monday, a CSLR payment prompted ASIC to announce it had cancelled the AFSL of former national financial advice business Libertas Financial Planning.

Libertas, which was acquired by Sequoia Financial Group in August 2019, went into liquidation in May 2023. In a statement at the time, Sequoia said it planned to consolidate AFSLs, with management making the decision to transfer Libertas’ operations and customers to InterPrac Financial Planning and Sequoia Wealth Management.

An AFCA determination had previously been made against Libertas on 24 July 2023, but this was not paid by the firm. As a result, the CSLR paid compensation to the person on 24 July 2024 and notified ASIC, which prompted the cancellation.

This is the first time that ASIC has cancelled an AFSL following a payment of compensation by the CSLR.

Speaking on an FAAA webinar earlier this month, CSLR chief executive David Berry explained that if a firm still holds its AFSL and fails to pay an AFCA determination, it progresses to the CSLR.

The eventual outcome of the determination progressing to this point is that the CSLR is “required to let ASIC know that we’ve made the payment, and under that legislation, ASIC is then required to cancel the licence of that entity”.

“The legislation is really clear, the words in the legislation are ASIC must cancel the licence,” Berry said.

On LinkedIn, FAAA general manager policy, advocacy and standards Phil Anderson said the Libertas licence cancellation highlights the “ongoing issues with listed companies walking away from advice subsidiaries and placing them into administration”.

“Whilst at present, it is only one case that has been paid out by the CSLR, potentially there will be more. AFCA data demonstrates a history of complaints for this licensee over recent years,” Anderson said.

“Will the advice profession now be expected to pick up the cost of a bunch of these complaints? Why did Sequoia Financial Group put Libertas Financial Planning into liquidation and why did they avoid paying out on this AFCA determination? Does this suggest that we should expect a lot more CSLR payments to follow?

“This is not right and should not be allowed to be repeated. Listed companies should not just be allowed to walk away from their problems and leave it to everyone else to pay for. A public inquiry into the CSLR is necessary to ensure that the design of the scheme can be fixed to avoid a repeat of Dixon Advisory and more of these ’elective’ liquidations.”