The Australian Securities and Investments Commission (ASIC) has filed civil penalty proceedings in the Federal Court against Dixon Advisory and Superannuation Services director Paul Ryan for alleged breaches of directors’ duties.
According to a publicly available statement filed with the Federal Court, ASIC alleged that on 22 December 2021, Ryan amended Dixon Advisory’s constitution during a meeting of the board’s directors. The purpose of this change was to give Dixon’s directors authorisation to act in the best interests of a holding company, E&P Operations, in which Ryan was also a director.
Additionally, the corporate regulator alleged Ryan executed a deed of acknowledgement of debt on 24 December 2021 between Dixon Advisory and E&P Operations, which allegedly favoured E&P Operations at the expense of Dixon Advisory, and failed to properly consider the interests of Dixon Advisory’s creditors.
When the deed was made, E&P Operations owed Dixon Advisory more than $19 million, including over $8 million in penalties and legal costs that were agreed upon by the regulator and the financial services firm.
These penalties and costs were related to a previous Federal Court decision where Dixon Advisory’s representatives were found to have given advice to clients that was not in their best interest, specifically, acquiring, keeping or rolling over holdings in the US Masters Residential Property Fund.
The deed imposed conditions that adversely affected Dixon Advisory’s right to recover the $19 million debt and ASIC ruled that as the firm was approaching insolvency, its directors were obligated to consider the interests of creditors.
“Directors have responsibilities under the law to act in the best interests of their company and this includes considering the interests of creditors when the company is facing insolvency,” ASIC deputy chair Sarah Court said.
“The creditors included thousands of financial advice clients who had invested in the US Masters Residential Property Fund and financial products operated by entities related to Dixon Advisory. These creditors suffered significant losses.
“These proceedings underline our commitment to ensure directors meet their governance obligations, including where they serve on the boards of multiple companies in a corporate group.”
ASIC suspended the Australian financial services licence of Dixon Advisory and Superannuation Services in April 2022 after the firm was placed under external administration.