Dixon Advisory to pay $7.2m for breaching Corporations Act

The Australian Securities and Investments Commissions (ASIC) has announced it has entered a conditional agreement with Dixon Advisory which will see the advisory pay a $7.2 million penalty for breaches of the Corporations Act as well as $1 million to pay ASIC’s costs of its investigation and legal proceedings. 

The heads of agreement followed court-ordered mediation to resolve civil penalty proceedings commenced by ASIC against Dixon Advisory in the Federal Court in September 2020.

ASIC said its proceedings related to best interests duties under the Corporations Act, including allegations that Dixon Advisory representatives failed to act in their clients’ best interests to provide financial advice appropriate to the clients’ circumstances.

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The in-principle resolution between the two parties would be subject to approval from the court.

In the announcement made to the Australian Securities Exchange (ASX), E&P Financial Group Limited, which wholly owns Dixon Advisory and Superannuation Services (DASS), said that under the heads of agreement:

  • DASS agrees to pay to the Commonwealth a pecuniary penalty of $7.2 million which may be paid in two equal instalments on 31 December 2021 and 31 March 2022 if the court makes final orders in the legal proceedings before 1 November 2021
  • DASS agrees to pay ASIC’s legal costs of its investigation and the legal proceedings agreed at $1 million, which may also be paid in two equal instalments on 31 December 2021 and 31 March 2022
  • The parties consent to the making of declarations by the court to the effect that DASS contravened section 961k(2) of the Corporations Act in the period 6October 2015 to 31 May 2019 on a total of 53 occasions in relation to personal advice provided by its representatives in contravention of:
- Section 961B of the Corporations Act by not acting in the best interests of the clients in relation to the advice; and/or
- Sections 961G of the Corporations Act, by providing advice in circumstances where it was not reasonable to conclude that the advice was appropriate to the client, had the representative satisfied the duty undersection 961B to act in the best interests of the client,
  • ASIC agrees to seek no further declarations of contravention in the proceedings,
  • The parties consent to the making of orders by the court pursuant to section 1101B(1) of the Corporations Act requiring DASS, within such time and in such manner as the court thinks fit
Additionally, the EP1 board said it “wishes to make it clear that extensive management and governance changes have occurred across the group over the last two years to ensure DASS acts in its clients’ best interests at all times”.
The company also said it had commissioned its own external independent review of governance practices and implemented all resulting recommendations.

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I was recently engaged by a client to review his Dixon advised SMSF portfolio.

I cannot believe the cost to the client of fees, costs, profit shares, actual and unrealised losses, and the investment opportunity cost to the client associated with their 'advice'.

4% upfront investment fees and layers upon layers of underlying MEC's, ICR's 'performance fees' were just the start. Then there was the asset based SMSF management fee for accounting auditing and 'portfolio management'.

Although the conflicts of interest were duly disclosed in the SOA, and the pricipals may have even believed their own hubris around their inhouse products - the client had no idea.

Advice to clients. Avoid large, one stop shop, pure profit firms (listed or unlisted) at all costs.

Agree with you Commercial.

Also, perhaps I am slow but can you or anyone explain the difference in why ASIC view vertical integration as amazingly positive for union industry funds, but utter taboo for any retail/IFA group?

Not saying that the Dixon group are wonderful and fees you mention appear high, however we've done numerous in depth analysis against union/industry funds using their pet IFM and their fees on balances $800k upward are also outlandish when you delve past the headline fees they advertise. In one situation for a $2mill client we beat their cumulative charges by over $7k!

I am not being precocious or starting a tit-for-tat debate, just have to admit that aspect really has me confused - conflicts are conflicts regardless if you are a commercial group or advertise 'not for profit' which doesn't mean they don't fee gouge at numerous levels.

What do you mean by delve past the headline fees? Can you provide examples?

That $8.2M paid by Dixons will go straight to consolidated revenue, and ASIC's costs associated with this action will be billed to honest licensed advisers as part of an increased ASIC levy. Which will further push up the price of honest professional advice.

Meanwhile unlicensed providers can continue giving as much dodgy advice as they like, with no regulatory fees and no regulatory intervention.

How does such a ridiculous system benefit consumers? If Australia had any legitimate consumer associations they would screaming their heads off about this. If Hayne's pompous assistant thought Dover's "client protection" document was Orwellian, he should be apoplectic about this much bigger consumer protection fraud perpetrated by our regulatory system on the whole of society.

Barney is not the only one confused over this report. Dixon Advisory to pay ASIC costs??? What's the betting my levy is not reduced to reconise this. ASIC double-dipping??? Why am I being regulated and robbed by ASIC to the extent that I won't be in business for much longer. I'll be broke.

Does anyone know how much Dover had to pay?....oh wait they were banned.... Does anyone know how much AwareSuper/Stateplus had to pay when there advisers sold those corporate debt instruments to buy StatePlus that were later written off (members lost money) ?.....oh wait nothing. So the message is, if you're a Superfund that not only caused member losses but also contributed to Adviser suicides, FASEA and over regulation due to fees for no service.....then you can do whatever you like... if you suck up to ASIC (Dixon) you'll just get a fine and finally if you're a troublemaker (Dover) you'll get banned...is that the message.

yes, Terry was personally fined $200k(he probably has no assets anyway :-)), and Dover $1.2m. one of the funniest things about Terry is he is a dogged person. yes, he is rough around the edges (rough as, he is a lawyer, after all, and I have told both my children in no uncertain terms that they are not to become lawyers and bring shame to the family, anyways, let's get past that).

so the funny story about terry is that after the royal commission he complained about his treatment from ASIC and particular persons within.

the complaints and the follow-up correspondence were conducted via email to ASIC.

one of the most hilarious things about that is that he would email ASIC with follow-ups on his complaints about the persons and cc the person (about whom) he was making the complaint.

so funny. so for all and sundry, this is Friday's fun fact. and if you ever make a complaint about anyone, do the same, email the complaints department and cc the person about whom you are making the complaint. might as well stress them out too.

hope you enjoyed today's Friday fun fact I will be back next week.

have a good weekend everyone.

In "unrelated" news Nerida Cole left Dixon on 25th June...

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