Login
ISCOVER
A Senate inquiry will probe the collapse of Dixon Advisory and its impact on the Compensation Scheme of Last Resort.
The parliamentary joint committee on corporations and financial services is set to scrutinise the collapse of Dixon Advisory and how its failure has influenced the development and ongoing viability of the Compensation Scheme of Last Resort (CSLR).
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
The CSLR aims to offer recompense to consumers who have received a favourable determination from the Australian Financial Complaints Authority (AFCA), but haven’t been paid by the financial firm in question because it has gone insolvent.
While the scheme was launched earlier this year, it has been drawing ire from the financial services industry.
As reported on our sister brand ifa, financial advisers wrote en masse to politicians and regulators outlining their frustration about having to pay high penalties for something they are not responsible for.
The anger largely stemmed from the fact that the financial advice industry would have to pay $5,709 per adviser to bear the financial burden for the transgressions of a major, defunct entity, such as Dixon Advisory.
Added to the gripes is the fact that the parent company of Dixon Advisory, Evans and Partners, earned over $174 million in revenue last financial year, yet advisers are being asked to foot the bill for its subsidiary’s failures. Plus, according to ifa, E&P’s licensee, Evans and Partners (where many of the Dixon clients and advisers migrated), continues to operate the US Masters Residential Property Fund (URF) – the very product that played a huge role in this scandal.
The letters seem to have done their work; on Tuesday (17 September), a motion for an inquiry into the matter was moved in the Senate by Pauline Hanson’s One Nation.
The inquiry was approved with an amendment – that the inquiry be handled by the parliamentary joint committee on corporations and financial services instead of the economics references committee (as originally proposed).
The Senate then recommitted the vote on the government amendment, ultimately deciding that the Economics References Committee would oversee the inquiry.
The inquiry is now scheduled to take place and report by the last sitting day in March 2025 and 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.
- Any other related matters.
[Related: Should brokers join the fight against CSLR?]
JOIN THE DISCUSSION