Dixon's parent co seeks to delist from ASX days after inquiry into CSLR is announced

Although E&P Financial Group doesn’t elaborate on the regulatory proceedings that have contributed to its decision to exit the ASX, in a listing on Tuesday Dixon’s parent company said the benefits of being listed on the stock exchange are “materially outweighed” by the potential benefits of delivering the next phase of growth in an unlisted environment.

The firm’s shareholders are expected to make a decision on the delisting on 24 October, with the board said to be entirely behind the motion for several reasons, including a “consistently and materially” low trading price, hefty direct costs associated with being listed on the ASX, and having “no near or medium-term requirement to raise capital”.

“Part of the rationale for pursuing the delisting is the low level of trading liquidity in EP1 shares, with trading averaging approximately 33,000 shares per day in the 12 months to September 2024,” the firm said in the listing.

Last week, the Senate approved a motion moved by Pauline Hanson’s One Nation paving the way for an inquiry into the Dixon Advisory debacle, with the collapse of wealth management companies and the Australian Securities and Investments Commission’s (ASIC) response set to be placed under the microscope.

According to the terms of reference, the focus of the inquiry will more broadly examine the “reasons for the collapse of wealth management companies, and the implications for the establishment of the Compensation Scheme of Last Resort (CSLR) and challenges to its ongoing sustainability, with particular reference to Dixon Advisory & Superannuation Services Pty Limited (Dixon Advisory) as an example”.

E&P acknowledged the inquiry in its ASX filing, stating: “The motion is relevant to E&P as it references E&P subsidiary Dixon Advisory & Superannuation Services Pty Limited as an example”.

But it added that the company has “no further detail on the proposed inquiry and is unaware of the extent to which it may or may not be involved in the inquiry”.

The advice community widely considers E&P responsible for the Dixon mess, especially given the way it placed its subsidiary into administration to seemingly escape liability for the damage Dixon caused to clients.

Speaking on the matter last month, FAAA general manager of policy, advocacy and standards Phil Anderson said: “The fact that E&P Financial Group (E&P) simply put its subsidiary Dixon Advisory into administration in full knowledge of the consequence for clients and the rest of the financial advice profession, and in the context of the expected establishment of the CSLR, is very concerning”.

According to Anderson, E&P had previously said it would aim to arrange Dixon’s administration in a manner that would provide “equitable treatment of all DASS clients/creditors”.

Given the class action against E&P was settled in April for a grand total of $16 million - $12 million of which was covered by PI insurance – Anderson said Dixon clients would not view the receipt of “5 cents in the dollar” as an equitable settlement.

“The financial advice profession, facing a bill of as much as $135 million to compensate these clients, certainly does not think that anything about this is equitable,” he said.

“After all, why should financial advisers, who do the right thing, be paying for the misconduct of Dixon Advisory?”

ifa has previously covered the prospect of E&P benefiting from CSLR payments, with FAAA chief executive Sarah Abood raising concerns in May.

A large number of both Dixon advisers and clients moved across to a different E&P AFSL – ASIC recently detailed that about 3,280 of the 4,100 Dixon clients had moved to E&P, along with as many as 39 advisers.

“According to the administrator, this was all done at no cost to Evans & Partners and at no benefit to the creditors of Dixon Advisory,” Anderson said.

“Further, ASIC has taken action against a director of Dixon Advisory for allegedly changing the constitution of Dixon Advisory and executing a deed of acknowledgement of debt just prior to going into administration, seemingly for the reason of avoiding the repayment of a $19 million debt owed to Dixon Advisory by E&P Operations.”

ASIC commenced civil penalty proceedings against Paul Ryan in the Federal Court in August 2023. Hearings on the matter were held in June 2024, however a judgment is yet to be delivered.

“This alleged conduct is hardly consistent with an entity seeking to achieve an equitable settlement,” Anderson said.

He also pointed to the roughly $134 million in fees that Dixon Advisory and related entities “extracted” from the US Masters Residential Property Fund (URF) from 1 January 2015 and 30 June 2018.

“There is no suggestion that any of this will be returned to the benefit of Dixon Advisory clients who lost so much money on the URF Fund. The $4 million that E&P contributed to the class action settlement is a tiny fraction of the fees that this business received from this fund,” Anderson said.

However, what will “infuriate the advice profession even more” is how much E&P is set to gain from the CSLR.

“Given the high percentage of Dixon Advisory clients who moved over to Evans & Partners, it will be E&P that stands to benefit from the receipt of additional funds under advice, when the compensation is paid by the CSLR into the predominantly SMSFs of the former Dixon Advisory, now Evans & Partners, clients,” he said.

“Going forward, it will be E&P who will be the ones earning fees on this money.”