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Creditors of self-managed super fund provider Dixon Advisory have today voted in favour of a deed of company arrangement (DOCA) that could see them claw back as much as 4.4 cents on the dollar of money owed.
At today’s second creditors meeting of Dixon Advisory - the financial advice arm of E&P Financial Group (ASX: EP1, formerly know as Evans Dixon) - investors who are owed money by the firm chose to accept a DOCA put forward by administrators.
Under the DOCA, the investors - owed $368 million in total - will be able to claw back between $11.3 million and $16.2 million collectively.
This equates to an average return of between approximately $2,466 and $3,524 per investor claim, and represents a return of between 3.1 cents and 4.4 cents on the dollar.
The DOCA was recommended to creditors by Stephen Longley and Craig Crosby of PwC, who were appointed as administrators of the company in January due to mounting and potential liabilities from class action law suits, claims against the company by the Australian Financial Complaints Authority (AFCA) and $7.2 million in regulatory penalties agreed with the Australian Securities and Investments Commission (ASIC).
Dixon Advisory landed itself in this position after first coming under fire from ASIC for recommending clients invest in E&P’s US Masters Residential Property Fund (URF) and URF-related products between 2 September 2015 and 31 May 2019.
At the beginning of that window the URF share price was trading at around $2.25, but a string of poor results led it to fall to around the $1 mark by the end of May 2019 and just $0.28 today.
ASIC alleged this recommendation equated to Dixon Advisory representatives failing to act in their clients' best interests to provide financial advice appropriate to the clients' circumstances.
The situation also led Piper Alderman and Shine Lawyers to launch class action law suits filed in respect of the URF claims in November and December 2021 respectively, and largely comprised claims against the company for financial advisor contraventions, breaches of fiduciary duty obligations, misleading and deceptive conduct, and negligence.
Though the proceeding brought by Piper Alderman was stayed in June, the Shine Lawyers class action is ongoing.
It also resulted in the firm having its Australian Financial Services (AFS) licence suspended in April.
As such, the administrators will now act as agents of the company without personal responsibility for liabilities held by Dixon Advisory, and will attempt to claw back as much as possible for investors that lost out due to advice given to them about the URF.
Of today’s votes, 910 were in favour of the DOCA. A majority of votes by dollar value of liabilities was also in favour of the DOCA, meaning the resolution passed.
According to E&P, the net impact of the DOCA is expected to be a loss of about $1.1 million, which was already substantially recognised in the company’s balance sheet last year.
Shares in EP1 are up 4.76 per cent to $0.55 per share at the close of trade today.
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