A Senate inquiry into the Australian Securities and Investments Commission’s (ASIC) handling of corporate misconduct has found the regulator’s enforcement actions were inadequate in responding to the fallout from the Dixon Advisory case.
In its final report following the inquiry, the Senate Economics References Committee stated the regulator had often failed to address warnings of corporate misconduct and “does not use the full extent of its powers to achieve strong enforcement outcomes”.
The report made specific reference to the Dixon Advisory case – where SMSF trustees and investors suffered losses amounting to hundreds of millions of dollars as a result of inappropriate financial advice – as an example of ASIC’s flawed approach to corporate regulation.
“ASIC’s enforcement actions in response to the now-defunct Dixon Advisory and Superannuation Services Limited are illustrative of ASIC’s enforcement woes,” it stated.
“In September 2020, ASIC commenced civil proceedings against Dixon for, among other things, significant failures to act in its clients’ best interests. It took ASIC two years to settle its case against Dixon and the company was penalised $7.2 million. However, ASIC has said this fine is unlikely to ever be paid.
“Moreover, no criminal charges have been brought in relation to Dixon, despite total claims in the case exceeding $386 million. In September 2023, three years after its initial enforcement action, ASIC brought civil proceedings against a former director of Dixon for alleged breaches of directors’ duties. This trial had its first hearing on 17 June 2024 and is ongoing.”
The report noted the penalty imposed on the firm by the corporate watchdog paled in response to the penalty ordered by a court in a civil lawsuit and ASIC had failed to take action against several of the individuals involved in the firm’s collapse.
“ASIC instituted civil action against Dixon Advisory and a fine of $7.2 million was imposed. ASIC and Dixon Advisory agreed that the aggregate penalty of $7.2 million was appropriate in the circumstances,” it said.
“This outcome stands in contrast to the outcome of a class action against Dixon Advisory resulting in a settlement, where the court ordered that more than double this amount, no less than $16 million, be paid to claimants.
“The judge noted that the likely return for the claimants is ‘already very small compared to the losses which [they] have sustained’. Despite this, no criminal action was pursued against Dixon Advisory. Additionally, ASIC did not take action against numerous, previous directors of Dixon Advisory, who were ultimately subject to neither civil nor criminal prosecution.”
To address these issues, the committee made 11 recommendations, including a proposal to split ASIC’s functions into separate entities – one as a company regulator and another as a financial conduct authority – to better manage its broad range of responsibilities.
Among other recommendations, it also urged ASIC to improve its process for handling reports of alleged corporate misconduct and to establish clear standards for publicly reporting on these cases.
