Dixon administrator to declare dividend to former clients

Some of the clients impacted by the collapse of Dixon Advisory are set to receive a dividend payment, though the Australian Financial Complaints Authority (AFCA) said this is separate from its work on “investigating and resolving open Dixon complaints”.

“The action of declaring and distributing a dividend will not impact AFCA’s consideration of open complaints,” the complaints authority noted in an update on the Dixon page on its website.

“However, if AFCA determines that there was inappropriate personal finance product advice by a former advisor of Dixon which resulted in loss to the consumer, the award of any compensation will consider any distribution received from the administration.”

The news follows AFCA officially expelling Dixon from the scheme at the end of June 2024, which marked an end to the ability of clients that lost money to lodge complaints, with a final tally of 2,773 complaints.

ifa understands that dividend payments would likely be made in 2025, however there has been no confirmation on the date or the scope of funds available to former client creditors.

Could this reduce the burden on the CSLR?

While it is possible that the dividend payments would reduce the amount that would be levied against the advice subsector through the Compensation Scheme of Last Resort (CSLR), there is no guarantee that this reduction will be large enough to make a substantial difference.

While an exact figure is not yet clear, it will certainly be a far cry from the estimated $135 million that will be apportioned to advisers to cover just the Dixon-related CSLR payments.

Speaking with ifa, Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards, Phil Anderson said that the dividend payments have the potential to reduce some CSLR payouts.

“The intent of the legislation is that a benefit that was paid as a result of a payment from the licensee that was in administration would be offset against the benefit paid by the CSLR,” Anderson said.

“It hasn’t been tested yet in terms of all those situations, so receipt of proceeds from a class order, it still needs to be tested as to whether that would fit within the intent of the law.”

Given the CSLR has only been in operation since April and, as Anderson noted, many scenarios have yet to be practically applied, all that parties involved can rely on is the legislation – in this case, section 1067 of the Corporations Act.

This section of the act breaks down the amount of compensation that an individual can be paid through the CSLR.

Specifically, the compensation must be “equal to the lower” of $150,000 or the “amount payable to the person in accordance with the relevant AFCA determination, less:

(i) any amount paid to the person in accordance with the relevant AFCA determination, including any partial payments or any payments made to the person as an unsecured creditor of a Chapter 5 body corporate for the matters covered by the determination; and

(ii) any compensation to which the person is eligible under any other statutory compensation scheme for the matters covered by the determination; and

(iii) any other payments made to the person of a kind prescribed by regulations made for the purposes of this subparagraph.”

Anderson added that, essentially, this means any payments should come off the AFCA determination amount, but would only reduce the CSLR payment if it brought the amount owed under the $150,000 cap.

“If someone had an AFCA determination where they were owed $300,000 and they got $100,000 from the company in liquidation, they would still have a debt of $200,000 and under section 1067, they would get the $150,000,” he said.

“So, the proceeds don’t come off the $150,000, the proceeds come off the total amount that’s owed, and then they get the first $150,000.”