An inquiry is due to probe the collapse of Dixon Advisory and its impact on the Compensation Scheme of Last Resort (CSLR).
The Senate Economics References Committee is due to scrutinise the collapse of Dixon Advisory, examining how this failure has influenced the development and ongoing viability of the CSLR.
The motion for the inquiry, moved in the Senate on 17 September by Pauline Hanson’s One Nation, was approved with an amendment – that the inquiry be handled by the Parliamentary Joint Committee on Corporations and Financial Services instead of the originally proposed Economics References Committee.
The Senate then recommitted the vote on the government amendment, ultimately deciding that the Economics References Committee would oversee the inquiry.
Scheduled to take place and report by the last sitting day in March 2025, the inquiry will address several issues recently highlighted by the advice community.
According to the motion, the following will be considered:
- The underlying cause of the collapse of wealth management companies such as Dixon Advisory.
- How the actions of directors of wealth management companies and related entities, senior management and the individual advisers contribute to the collapse of these companies.
- The role of the financial services regulatory regime in the context of how matters involving the collapse of an investment product promoted by a vertically integrated business are assessed and how fault is attributed.
- Evaluation of the placement of wealth management companies into administration and the related insolvency issues, including with respect to the appropriateness of actions by directors and senior management and the transfer of advisers and clients to a related party entity for no consideration.
- Assessment of the period for which wealth management companies can remain a member of the Australian Financial Complaints Authority.
- The role of Australian Securities and Investments Commission (ASIC), including providing consumer information to investors affected by corporate collapse and consideration of the most appropriate arrangements for future cases of insolvency.
- ASIC’s role in investigating corporate collapse and the appropriateness of any regulatory intervention that may reduce scale of loss for consumers.
- Options for enforcement action, including litigation, that ASIC has available to it in relation to wealth management companies following collapse.
- The implications of the collapse of wealth management companies on the establishment of the CSLR, including with respect to design considerations and the potential implications for future matters.
- And any other related matters.
Responding to the news from the Senate, the CEO of the Financial Advice Association Australia (FAAA), Sarah Abood, said: “Today marks a major step forward for our profession, and we want to thank Senator Hanson for her support in seeking transparency and for backing Australia’s small financial advice businesses in proposing this inquiry today.
“An inquiry is essential to understanding the full scope of what went wrong with Dixon Advisory – a scandal involving hundreds of millions in client losses – and to ensure it is not repeated.”
