FAAA’s Anderson questions Dixon Advisory secrecy

The FAAA’s Phil Anderson has openly called for a public inquiry to uncover why the case of Dixon Advisory has been so guarded and to avoid future scandals.

ASIC took court action against Dixon Advisory for breaches of the Corporations Act, and the Federal Court awarded a penalty of $7.2 million against Dixon Advisory plus $800,000 in costs in September 2022. 

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This was far smaller than the potential maximum penalty that could be enforced of $110 million as it was based on the eight clients mentioned in the case rather than thousands affected.

ASIC has since stated this is unlikely to be repaid as Dixon has gone into voluntary administration. The effect of the Dixon Advisory matter has had an undue influence on the Compensation Scheme of Last Resort (CSLR) and the levy paid by the financial advice sector.

Dixon Advisory has since been expelled from the Australian Financial Complaints Authority (AFCA) but at the time of its expulsion, some 2,773 complaints had been made by affected consumers. This is estimated to lead to alleged losses of more than $458 million, AFCA said.

Anderson, who is the body’s general manager for policy, advocacy and standards, said the financial advice profession deserved to know the details of what happened.

In an open letter, he wrote: “What really happened at Dixon Advisory and why so many Australians lost so much money (hundreds of millions) has so far remained a tightly held secret. ASIC has pursued its action, seemingly agreeing to place virtually the entire focus on a group of financial advisers, although they later agreed they would not pursue them further. A resulting class action from Shine (and more about that below) also provided little insight.

“The clients of Dixon Advisory deserve better. This has undoubtedly come at a big cost to them, both financially and through the stress that it has caused. The financial advice profession, who will seemingly need to pay as much as $135 million as a result of this scandal, also deserves to know what really happened and to have confidence that everything was done to minimise the cost to them, as well as ensuring that it could not happen again.”

The five topics a potential inquiry should address are:

• The judgment in the Dixon Advisory case.
• The original action and what changed.
• The decision by ASIC to settle.
• What the judgment said.
• Class actions against Dixon Advisory and others.

These would cover questions such as: 

• Why did ASIC proceed with the case if they did not expect the fine to be paid?
• Why was the penalty not enforced?
• Why Dixon Advisory operate in the way it did?
• Why was the interest of the clients not prioritised?
• Why no action was taken against those in charge of Dixon Advisory?
• Why was a change in senior personnel at Dixon Advisory necessary?

He concluded: “There is no reason why what really happened at Dixon Advisory and why so many Australians lost so much money should remain such a tightly held secret. It is not clear why ASIC pursued an action that placed virtually the entire focus on a group of financial advisers, who it also agreed never to pursue further. Unfortunately, after showing some real promise, the class actions provided little insight either. This can’t be left here. A public inquiry is essential to get to the bottom of this.”