Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I rise to set out some facts in relation to a very curious case indeed in relation to Dixon Advisory, the non-enforcement of the law and the potential for taxpayers to be funding a huge moral hazard in relation to this particular business now and into the future, given the existence of the compensation scheme of last resort. In relation to Dixon Advisory they saw $357 million of losses of money from consumers who had decided to invest in their fund through their advisers. There are now 2,000 AFCA cases before the tribunal in relation to the Dixon matter. In 2020 ASIC started to take some action in relation to Dixon, and by the beginning of 2022 Dixon was in voluntary administration. The core of the issue is the allegation that there was deeply conflicted advice given to retail customers who were invested in New York property funds, and the promoters of the scheme collected huge commissions. The promoters were able to get away with this but inflicted huge losses on consumers because of the conflicted advice whereby the promoters of the scheme, Dixon Advisory, put their own interests ahead of those of their investors, which is against the laws of Australia.

ASIC released a statement in September 2020 setting out that it proposed to take action against Dixon Advisory in relation to conflicts of interest, in relation to contravention of the best interest duty and in relation to the requirement for Dixon to have given appropriate advice. But ASIC only pursued some of those matters in the courts, and then later in 2021 there was a shock to many people who were watching this that ASIC decided to settle for $7.2 million—that's it. That was the end of civil proceedings, for seven million bucks, after there had been losses of over $300 million, and no pursuit of criminal matters. Now, we should not be surprised here, because we're talking about ASIC, an agency that has made fewer referrals to the Commonwealth Director of Public Prosecutions in relation to criminal matters than the Great Barrier Reef Marine Authority. And over the last five years ASIC has made half as many referrals to the Commonwealth Director of Public Prosecutions than they made five years ago, despite a huge increase in resources.

The maximum penalties here—dollars, on a civil basis—could have been well in excess of $100 million, but ASIC decided to pursue and settle for just $7 million. There is a fly in the ointment here. In October this year I asked the ASIC deputy chair about this matter. I said:

ASIC agreed to a $7.2 million fine with Dixon Advisory. Did they pay that fine?

And ASIC's deputy chair said:

No. As I understand it, that fine was not paid. Dixon is in voluntary administration. There was a penalty imposed by the Federal Court of $7.2 million plus $800,000 in costs, but, given that Dixon is in voluntary administration, those amounts are unlikely to be paid.

Let me repeat that: those amounts are unlikely to be paid. So, there's no criminal prosecution. There's no civil process, other than a small fine, which is now not going to be paid.

A further fly in the ointment here is that Dixon Advisory has now phoenixed itself into Evans & Partners, which, according to their recent financial reports, as at June 2023, has 3½ thousand clients that they're advising, up from 3,000 last year, and they are increasing their revenue. In the last year their revenue was $167 million. So, it doesn't sound like the Evans & Partners business and the Dixon Advisory business is short of cash, but apparently they can't even pay their regulatory fine of $7 million—which is only a fraction of what should have been sought through civil penalties if ASIC had been doing its job.

The thing I'm really concerned about here, though, is what is happening behind the scenes. There was a statement from ASIC on 3 August 2022 which said:

Former clients of Dixon Advisory and Superannuation Services Pty Limited (in administration, 'Dixon Advisory') may be eligible for compensation under a potential future Compensation Scheme of Last Resort (CSLR) but they will need to take action as soon as possible.

That's what ASIC said in August last year. Then AFCA put out a similar statement, after the legislation had passed, saying:

Now that legislation has passed to establish a CSLR, we have commenced early work to investigate these complaints and assess if they may be eligible to raise a CSLR claim.

It also said:

To ensure our case workers can efficiently deal with your complaint, you can start gathering relevant information in preparation for our contact.

This is solely about Dixon Advisory. So, AFCA put out a release just about Dixon Advisory.

Then we get to the budget, in May this year—9 May 2023. Budget Paper No. 1 says:

The value of the Australian Government's liabilities under the CSLR is unquantifiable.

The collapse of Dixon Advisory and Superannuation Services Pty Ltd may increase the liabilities for the Australian Government.

Now, I can't remember many times when the budget papers have specifically set out one particular organisation that would be part of a new scheme. I should say at this juncture that the idea of the compensation scheme of last resort is a very risky concept, because it introduces the concept of moral hazard, whereby the regulators, in particular, may not be incentivised to enforce the law to protect consumers, because they know there's a great big bucket of taxpayer funds sitting behind them that can come and bail them out if they fail to enforce the law. When you have the worst corporate law enforcement agency in the OECD and the G20 on the case, you're going to need a lot of CSLR remediation, I would predict.

But the curious piece here is: why did ASIC, AFCA and the Treasurer, Jim Chalmers, put these statements about Dixon Advisory into their budget papers? It seems very curious indeed. There have been huge losses. Over $300 million of people's money has been lost because of conflicted, bad, illegal advice. There is no law enforcement here—nothing on conflicted advice, nothing on appropriate advice and nothing on conflict of interest. No fine has been collected. The piddling fine of $7 million that ASIC agreed with Dixon—$7 million, after a loss of $300 million—is not even going to be collected. We shouldn't be surprised, because the ASIC inquiry has revealed that the anti-phoenixing laws in Australia are not enforced. What we see here is effectively the phoenixing of Dixon Advisory into Evans and Partners, where we see a profitable ongoing business which somehow doesn't have the ability to pay its fine. Therefore, who's left with the bucket? It's the taxpayer. The taxpayer will now have to fork out and provide reparations to people who lost their money and were not able to be compensated because ASIC didn't do its job.

Why has Dixon been singled out here? That is the question. In all the dreadful financial scandals going back to Storm Financial 10 or 12 years ago, no-one has ever been bailed out. So many consumers have been wronged, by an industry that has too often put itself ahead of its clients' interests but also by a weak, pathetic regulator that has not enforced the law. So the question is: why has Dixon been singled out? We need to know why, and I will be pursuing this.