Dixon Advisory consumer losses totalling $357 million: AFCA
If all Dixon Advisory complaints to the Australian Financial Complaints Authority (AFCA) were paid out, they would total $357 million, the organisation said.
Appearing at the Senate Economics Reference Committee’s ASIC inquiry, chief ombudsman and chief executive David Locke was asked by Senator Andrew Bragg about the Dixon Advisory complaints and whether AFCA had a quantifiable figure of the monetary sum involved.
AFCA previously stated it has received more than 1,700 investment and advice complaints related to the collapse of Dixon Advisory, representing three-quarters of total sector complaints.
Locke confirmed that the full number is 1,851, although many have been on pause due to insolvency as AFCA was unsure if a Compensation Scheme of Last Resort (CSLR) would be launched. CSLR legislation has since passed in Parliament and is set to be launched in April 2024.
In response to Senator Bragg, Locke said: “If we look at all the consumer claims, there is a potential that we have before us, if they were all found to be in favour of the consumer and all the losses were justified, that’s a big if, that could total $357 million.
“There’s a cap of $150,000 on each claim so it will be significantly less than that, and they aren’t always awarded in favour of the consumer, and the full amount isn’t always awarded.
“But if we look only at what’s being claimed as the losses on those 1,851 cases, then that would be $357 million.”
He said there are around 2,027 paused complaints, including those from Dixon Advisory, and that the organisation expects to work through them all in the next 18 months.
“We are working through those and looking at those cases, at the facts and the circumstances, at what a fair resolution would look like, the nature of the advice, the conduct of Dixon with regard to that and the conduct of the individual consumers.
“We haven’t issued any determinations yet but we are working through them; it is a lot of cases to process – the team usually deals with 500 matters – so we think it will take a while to get through all the Dixon matters.”
Last week, ASIC deputy chair Sarah Court told the Senate estimates hearing that the $7.2 million penalty issued to Dixon Advisory for breaches of the Corporations Act is unlikely to ever be paid.
The company was fined $7.2 million in September 2022, with the Federal Court finding that six representatives of Dixon Advisory failed to act in the clients’ best interests and failed to provide advice appropriate to their clients’ circumstances.
The court found that on 53 occasions between October 2015 and May 2019, Dixon Advisory was the responsible licensee of six representatives who did not act in the best interests of eight clients when they advised these clients to acquire, rollover or retain interests in the US Masters Residential Property Fund (URF) and URF-related products.
“Given that Dixon is in voluntary administration, these amounts are unlikely to be paid,” Court said.
AUTHOR
Laura Dew
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Sure the Advisers did the wrong thing.
But let’s get real here, Dodgy Dixon owners and management were force feeding their US resi trust rubbish as a must sell product to its vertically owned Advisers.
So reality is the Dodgy Dixon owners and management should be chased, sued, banned and jailed.
ASIC were warned for 10 years about this Dodgy Dixon’s vertical fund flogging.
ASIC did NOTHING of course until Dixon’s was bankrupt.
The thing ASIC did was advertise widely for Dixon’s clients to lodge AFCA complaints so freaking Advisers get stung via CSLR to bail everyone out.
Jail Dixon’s owners and management and personally chase their floated company fortunes.
ASIC to be held accountable for yet another no show.
ASIC now says it is unlikely that the penalty will be paid. How unsurprising. For years Dixons has ensured that their clients invested in their own products. ASIC's actions were far too late. Dioxons worked with unsophisticated investors, usually public servants, Dixons claimed to get them larger investment returns and then charged lower fees than other advisers. This had to be a recipe for disaster that everyone other than ASIC saw coming. How much were the legal fees for the action that resulted in a $7.2m penalty that is unlikely to be paid?
Critical questions should be: (1) In relation to " ... advised these clients to acquire, rollover or retain interests in the US Masters Residential Property Fund (URF) and URF-related products", was appropriate due diligence by Dixon Advisory done before advice documents were issued? [2] Given the $357 million in losses, did ASIC form a conjoint investigation with the US Securities & Exchange Commission (SEC), because the losses occurred in the US Jurisdiction? BTW: ASIC and SEC are members of IOSCO in Switzerland as part of the G20. [3] This calendar year 2023, SEC has done 708 successful prosecutions that brought in US$5 billion in penalties. Was the "... interests in the US Masters Residential Property Fund (URF) and URF-related products" one of the prosecutions by the SEC under its Investment Advisers ACT (1940) in providing misleading or false information and any other forms of illegitimate conduct by its URF managers (product manufacturer) to Dixon Advisory's clients? [5] If the SEC investigation was able to claw back a high portion of in the US Masters Residential Property Fund (URF) and URF-related products (US property market is good), would that save a significant cost impost on a Compensation Scheme of Last Resort (CSLR)?