Storm Financial Group

[cuttlefish]

Blame is something we are all doing to ourselves more than any of you realise. We blame ourselves for trusting, for not looking into this strategy and understanding it more, for agreeing to let them monitor our investment instead of doing it ourselves, for not demanding to be cashed up when they said not to follow the herd, you name it we blame ourselves for it, but at the end of the day we should be able to trust a licensed financial planner and the banks.

For any Storm victims out there that do blame themselves - please don't forget to forgive yourselves as well - and if you feel others have let you down - try to forgive them as well - especially close friends and loved ones. Accepting responsibility for ones part in an event or circumstance, and forgiving oneself or receiving forgiveness from others can be a very powerful step in moving on emotionally from a traumatic experience.

 

[Harleyquin]

I agree that the bank appears to have failed in some of its duties in relation to responsible lending and possibly bears partial responsibility in some of the situations that occurred. But they certainly weren't the primary cause of the situation that led to people losing their investments and wealth.

Cuttle I would agree with you that storm and their crap advice are the one of the causes of this tragic situation. Where I disagree with you is the banks ''have failed in some of their duties in responsible lending'', they have already admitted to flaws in their lending practices and they also need to acknowledge their other faults. Storm offered the advice but the banks supported that advice financially and if that advice was so terrible, which it was, why did the banks knowingly support it?

Does it then follow that if a financial planner says 'ok that's fine we'll just borrow three million dollars for you' that they can? They shouldn't be able to but they did just that because the banks agreed to lend many storm clients these amounts of money - it was just crazy. Surely the banks have to lend responsibly otherwise they know they are putting not only their borrowers at risk but those who are bank shareholders as well.

I feel for those who have shares in the banks involved but the banks are at fault not just because they are the only ones with any money but because they supported storm and their crap advice. Storm could offer all the crap advice they wanted - the banks all knew it was crap advice, did they care, you bet they didn't they sat back lent the money and enjoyed the profits. It's time for the banks to stop blaming it all on storm and the investors.

We, the investors, can now see where our faults lie, we can see where storms faults lie and now it's the banks turn they need to see and acknowledge where their faults lie as well. We have already paid the price, storm should pay the price and so should the banks.

 

[GumbyLearner]

Ah Cuttlefish, thank heaven for your realistic summary amongst all the repetitive accusations implying the banks had a responsibility for the validity or otherwise of Storm clients' investment strategies.

Nice one Julia

Ever heard of Pyramid Building Society based in Geelong, Victoria.

Well the circumstances here are a little different to say the least.

Under the Corps Law of Australia BANKS have a responsibility as to who they
lend money. Have no idea how it works in EnZed, but hey we are all Commonwealth jurisdictions so that should suffice!

 

[Solly]

"Senator at a loss over blame for Storm"

"More than 400 written submissions and seven public hearings have failed to answer what caused thousands of clients heavy losses in the collapse of Storm Financial, a member of the federal parliamentary inquiry into the company has conceded."

Read more by Duncan Hughes in The Australian Financial Review of Tuesday, 08 September 2009.

 

[Solly]

"Ex-Storm adviser's theory on downfall"

..believes "that Storm directors decided that the negative equity issue of their clients was getting too hot to handle and pulled back from acting upon the 'switch to cash' letters that their clients had entrusted them with."

More here from Tony Raggatt in the Townsville Bulletin of 2/9/09;

http://www.townsvillebulletin.com.au/article/2009/09/02/76065_business_desk.html

 

[Judd]

"Senator at a loss over blame for Storm"

"More than 400 written submissions and seven public hearings have failed to answer what caused thousands of clients heavy losses in the collapse of Storm Financial, a member of the federal parliamentary inquiry into the company has conceded."

Read more by Duncan Hughes in The Australian Financial Review of Tuesday, 08 September 2009.

Maybe the fact that the market tanked by over 50% and there was a bucket load of debt hanging out there could have had something to do with stormers being cooked. :microwave

It will take ages, if at all, to get an answer as to why action was not taken to manage the debt and specifically who should have taken that action and not just sit until it was too late. I don't see any George Washington's on the horizon ready to say "It was me who dun it sir." Too many lawyers around ready and waiting for that to happen.

And in a few years time when all is forgotten by those not affected, it will all happen again. Hehe, to overcome that possibly on the front cover of every every financial product should be a picture of a person sitting in the gutter, head in hands, crying ,with the numbers 1929-1939, 1960-64, 1970-73, 1987, 1994, 2001, 2007 -onwards in the background with the warning "This could happen to you!"

 

[specialed]

If I had the banks chasing me everyday for my house, first and foremost I'd be going where the money is. That would be my priority and should be for SICAG. If three investigations, Senate, ASIC and Liquidators cant get to the bottom of who is at fault with their combined resources, (500 million just for the liquidators wasn't it) and the power to compel witnesses and documents, what chance has a volunteer commitee got. They (SICAG) need to put all their focus, and the hundreds of hours a week that they are already spending, on ensuring a financial outcome for their members. Only this will help to save their homes and give them back some dignity and some hope. And like anyone else chasing justice and in particular a monetary outcome, they should seek to use what ever resources are available to them in order to obtain that outcome. What better resource could their be then access to information from those within the companies (banks and Storm) who are at fault. Blame where ever it lies will be attributed at the closure of this process. In the meantime if whistleblowers (whether ex storm, or ex CBA) continue to help in the SICAG cause then great. And to be quite honest if Manny and co are also trying to save their butts I couldn't care less as long as my parents and those of everyone else get some money back Even if the have to live off the pension, at least they can sleep knowing their home is safe from the banks who in many cases appear and by the own confessions have played a large part in this mess yet continue to try to take them....

 

[bunyip]

If I had the banks chasing me everyday for my house, first and foremost I'd be going where the money is. That would be my priority and should be for SICAG. If three investigations, Senate, ASIC and Liquidators cant get to the bottom of who is at fault with their combined resources, (500 million just for the liquidators wasn't it) and the power to compel witnesses and documents, what chance has a volunteer commitee got. They (SICAG) need to put all their focus, and the hundreds of hours a week that they are already spending, on ensuring a financial outcome for their members. Only this will help to save their homes and give them back some dignity and some hope. And like anyone else chasing justice and in particular a monetary outcome, they should seek to use what ever resources are available to them in order to obtain that outcome. What better resource could their be then access to information from those within the companies (banks and Storm) who are at fault. Blame where ever it lies will be attributed at the closure of this process. In the meantime if whistleblowers (whether ex storm, or ex CBA) continue to help in the SICAG cause then great. And to be quite honest if Manny and co are also trying to save their butts I couldn't care less as long as my parents and those of everyone else get some money back Even if the have to live off the pension, at least they can sleep knowing their home is safe from the banks who in many cases appear and by the own confessions have played a large part in this mess yet continue to try to take them....

Sure, the banks should be brought to account - they were, after all, 'partners in crime', so to speak.
But the main culprit, the unconscionable prick who hatched this grand scheme of deception and money-grabbing, should be brought to account as well - even if there's little chance of getting any financial compensation out of him.
If SICAG have decided, for whatever reason, that it's a better proposition to sool their lawyers on to the banks rather than target Storm itself, I still think that SICAG should, at the very least, try and give Storm as much negative publicity as possible by highlighting all the rotten things they did.
And at the very least, SICAG should have the decency to remove their endorsement of the Storm fees model from their website.
Most Stormers now realise that 7% up front fees was highway robbery, particularly in view of the quality (or lack of it) of the advice they were given.
How utterly offensive do you think it must be for these people to see an endorsement of the Storm fees model plastered across the front page of the SICAG website??
How utterly offensive do you think it will be for Storm victims if Cassamatis walks free and continues to live in his Brisbane mansion??
If SICAG want to avoid that outcome - and they should - then they need to bring as much public opinion as possible against Storm.

 

[Farencue]

Thankyou for the correction Maccka.

Harleyquin, again I ask you, where have you seen it written that you should "see a financial planner and take their advice"?

 

[Anastasia]

Thought I would post an extraction from one of my Storm Statements of Advice where it explains what margin loans are, what a margin call is, and who is responsible for making the call.

A Margin Loan is a loan that uses securities as assets which can provide collateral. As these assets are liquid and are readily valued, the loan to valuation ratio can be monitored constantly.

This allows your lender to call in amounts of borrowings when the “loan to valuation ratio” is exceeded. This is called a margin call. Protection measures that are put in place and will allow you to use a margin loan are that it is only
recommended when:
· the economy is in the phase of its cycle that is accompanied by a rising sharemarket so that the value of the assets underlying the securities is rising overall. Of course volatility will still mean that there will be downward movements in the market, however the general momentum is up;

· your loan facility will include a buffer so that a margin call is made only when the fall in the asset valuation exceeds a certain amount. The recommended facility exceeds our minimum requirements for the amount of buffer of 5%. It has a buffer of 10%.

· Where practical and especially for larger amounts additional buffer should be included.

· we recommend you maintain cash reserves to meet contingencies such as higher interest rates, loss of income and margin calls.

A margin call would be advised to you by the institution when your loan to valuation ratio exceeds the limit set. Margin calls can also play an important part in signalling when asset prices have gone down and represent good buying.

We recommend that in the event of a margin call, funds be used to purchase more assets that can be used as collateral to bring the loan to valuation ratio back to within allowable limits rather than paying out some of the loan.​

 

[cuttlefish]

Thought I would post an extraction from one of my Storm Statements of Advice where it explains what margin loans are, what a margin call is, and who is responsible for making the call.

A Margin Loan is a loan that uses securities as assets which can provide collateral. As these assets are liquid and are readily valued, the loan to valuation ratio can be monitored constantly.

This allows your lender to call in amounts of borrowings when the “loan to valuation ratio” is exceeded. This is called a margin call. Protection measures that are put in place and will allow you to use a margin loan are that it is only
recommended when:
· the economy is in the phase of its cycle that is accompanied by a rising sharemarket so that the value of the assets underlying the securities is rising overall. Of course volatility will still mean that there will be downward movements in the market, however the general momentum is up;

· your loan facility will include a buffer so that a margin call is made only when the fall in the asset valuation exceeds a certain amount. The recommended facility exceeds our minimum requirements for the amount of buffer of 5%. It has a buffer of 10%.

· Where practical and especially for larger amounts additional buffer should be included.

· we recommend you maintain cash reserves to meet contingencies such as higher interest rates, loss of income and margin calls.

A margin call would be advised to you by the institution when your loan to valuation ratio exceeds the limit set. Margin calls can also play an important part in signalling when asset prices have gone down and represent good buying.

We recommend that in the event of a margin call, funds be used to purchase more assets that can be used as collateral to bring the loan to valuation ratio back to within allowable limits rather than paying out some of the loan.​

hahahaha - thats a joke right? Thats not really what the document said is it?

 

[Julia]

The risk only becomes a huge problem when not monitored correctly and when we are given massive loans, and margin loans should never be given to retirees.

No reason at all why 'retirees' should not use margin loans. Some retirees are more affluent and financially literate than many working people.

Cuttle I would agree with you that storm and their crap advice are the one of the causes of this tragic situation. Where I disagree with you is the banks ''have failed in some of their duties in responsible lending'', they have already admitted to flaws in their lending practices and they also need to acknowledge their other faults. Storm offered the advice but the banks supported that advice financially and if that advice was so terrible, which it was, why did the banks knowingly support it?

It is not the bank's responsibility to vet the validity of Storm's investment model.

Yes, it is the bank's responsibility to check the capacity of the borrower to service the loan, but if - as appears has occurred in many cases - Storm inflated the documentation they submitted to the banks, their responsibility in such instances seems to constitute not checking with the client re this documentation.

So the majority of the blame (outside of that due the clients themselves) would appear to be with Storm, and SICAG should be acknowledging that.

In suggesting that the majority of the blame lies with the banks, simply because that is the only obvious source of money at this stage, seems to have its own level of amorality imo.

I feel for those who have shares in the banks involved but the banks are at fault not just because they are the only ones with any money but because they supported storm and their crap advice. Storm could offer all the crap advice they wanted - the banks all knew it was crap advice, did they care, you bet they didn't they sat back lent the money and enjoyed the profits. It's time for the banks to stop blaming it all on storm and the investors.

As above, it was the bank's job to check the details provided by Storm but it was NOT the bank's job to investigate and/or validate the strategy Storm offered its clients.

Nice one Julia

Ever heard of Pyramid Building Society based in Geelong, Victoria.

Well the circumstances here are a little different to say the least.

Under the Corps Law of Australia BANKS have a responsibility as to who they
lend money. Have no idea how it works in EnZed, but hey we are all Commonwealth jurisdictions so that should suffice!

See my comments above, Gumby Learner.
Of course the banks have a level of responsibility which the CBA, at least, has acknowledged. They are not, however, the sole culprits by any means.

 

[Ironhalo]

Specialed, I can understand you wanting to focus on the financial compensation rather then criminal blame.

But letting Manny/Julie off the hook for their role in this mess is like being hit by a drunk driver, but then only concentrating on getting money from his insurance fund because 'we couldn't be bothered taking him to court for DUI or negligent driving'. You wouldn't let a drunk driver get away with it, so why would you do so in this instance?

And that's what the Cassimatis' were, drunk at the wheel. Drunk on arrogance, drunk on greed. For SICAG to have a disclaimer on the front page of their website defending the Storm money-raking fee structure is unbelievable. I suppose it's no surprise when some of the ex-Storm employees close to SICAG's heart are now trying to re-establish the Storm model amongst vulnerable SICAG clients (again, my family has already been contacted by some of these grubs).

If SICAG were 100% committed to 'seeing justice done for their clients' they would be turning their energies to trying to get criminal charges laid against Manny/JC as well as some of the advisers who were changing margin loan applications to read ridiculous levels of income to fuel their profit machine. The lawyers were onto this very early on in the piece, and are more than equipped to take it from here. SICAG doesn't need to fight for financial compensation from the bank, it's been in the works since this happened...and the Banks knew it all along. SICAG would be better off now trying to bring the perpetrator of this to account.

Someone linked an old archived website of 3 or so Storm staff taking Manny for a V8 hotlap...if I remember correctly, some of those people that were so buddy buddy with Manny are now the same ones who are amongst the most vocal in/assocaited with SICAG calling for the Bank's blood.

The banks have blood on their hands over this, I have no doubt. But Manny is equally, if not more so to blame.....and he does deserve justice. The question is: are SICAG going to see justice done, or are they going to abandon the quest once the bank starts paying up; leaving Cassimatis and Co free to slink back to their mansion(s) and off-shore bank accounts?

 

[Anastasia]

hahahaha - thats a joke right? Thats not really what the document said is it?

I copied it straight off the SOA....girl guides honour!

 

[cuttlefish]

Don't worry I believe you Anastasia - I just find it a remarkable statement!

This is a quote from the statement of advice that Anastasia posted:

· we recommend you maintain cash reserves to meet contingencies such as higher interest rates, loss of income and margin calls.

A margin call would be advised to you by the institution when your loan to valuation ratio exceeds the limit set. Margin calls can also play an important part in signalling when asset prices have gone down and represent good buying.

We recommend that in the event of a margin call, funds be used to purchase more assets that can be used as collateral to bring the loan to valuation ratio back to within allowable limits rather than paying out some of the loan.

LOOK AT THE LAST PARAGRAPH! In the event of a margin call - Storm recommends NOT PAYING the margin call.

QED imo.

To paraphrase:

"We recommend that you have a cash buffer as a safety reserve. In the event that your investments are going down the toilet we recommend you hang onto them and also take the cash out of your safety reserve and throw it down the toilet along with your other investments."

In the event that this investment strategy fails for some bizarre unexplainable reason ... blame the banks not us.

 

[Ironhalo]

My SOA says exactly the same thing.

 

[specialed]

Specialed, I can understand you wanting to focus on the financial compensation rather then criminal blame.

But letting Manny/Julie off the hook for their role in this mess is like being hit by a drunk driver, but then only concentrating on getting money from his insurance fund because 'we couldn't be bothered taking him to court for DUI or negligent driving'. You wouldn't let a drunk driver get away with it, so why would you do so in this instance?

And that's what the Cassimatis' were, drunk at the wheel. Drunk on arrogance, drunk on greed. For SICAG to have a disclaimer on the front page of their website defending the Storm money-raking fee structure is unbelievable. I suppose it's no surprise when some of the ex-Storm employees close to SICAG's heart are now trying to re-establish the Storm model amongst vulnerable SICAG clients (again, my family has already been contacted by some of these grubs).

If SICAG were 100% committed to 'seeing justice done for their clients' they would be turning their energies to trying to get criminal charges laid against Manny/JC as well as some of the advisers who were changing margin loan applications to read ridiculous levels of income to fuel their profit machine. The lawyers were onto this very early on in the piece, and are more than equipped to take it from here. SICAG doesn't need to fight for financial compensation from the bank, it's been in the works since this happened...and the Banks knew it all along. SICAG would be better off now trying to bring the perpetrator of this to account.

Someone linked an old archived website of 3 or so Storm staff taking Manny for a V8 hotlap...if I remember correctly, some of those people that were so buddy buddy with Manny are now the same ones who are amongst the most vocal in/assocaited with SICAG calling for the Bank's blood.

The banks have blood on their hands over this, I have no doubt. But Manny is equally, if not more so to blame.....and he does deserve justice. The question is: are SICAG going to see justice done, or are they going to abandon the quest once the bank starts paying up; leaving Cassimatis and Co free to slink back to their mansion(s) and off-shore bank accounts?

Surely no one would believe that the banks efforts so far are anything more than harm and payout minimisation. Once this part is done with then sure, continue to go after whoever. Which at the same time the three investigations will also be doing. SICAG is a volunteer committee attempting to support investors while also trying to salvage their own lives. Surely Its not SICAG's role to seek criminal charges at this point. Criminal charges will do nothing to help those investors currently living out of caravans on their children’s back yard. Are you for real ! I'm sure they have enough to do already. If ASIC, the senate etc cant work out whether criminal charges should be laid, what chance have a SICAG got. This has already been to court once and the judge could only make a limited determination. Of course you wouldn’t let a drunk driver get away with it....but first you need to get yourself out of hospital and recover from the injuries you have suffered. For many investors, their focus needs to be on saving themselves before they worry about the criminality of the perpetrators.

 

[Sir Osisofliver]

Thought I would post an extraction from one of my Storm Statements of Advice where it explains what margin loans are, what a margin call is, and who is responsible for making the call.

A Margin Loan is a loan that uses securities as assets which can provide collateral. As these assets are liquid and are readily valued, the loan to valuation ratio can be monitored constantly.

This allows your lender to call in amounts of borrowings when the “loan to valuation ratio” is exceeded. This is called a margin call. Protection measures that are put in place and will allow you to use a margin loan are that it is only
recommended when:
· the economy is in the phase of its cycle that is accompanied by a rising sharemarket so that the value of the assets underlying the securities is rising overall. Of course volatility will still mean that there will be downward movements in the market, however the general momentum is up;​

Sooo based upon this...why did clients have margin loans in December 08? Mar 08? Yeah I know why....because if Storm had no money in these products...then they don't get a trail. Sheesh

· your loan facility will include a buffer so that a margin call is made only when the fall in the asset valuation exceeds a certain amount. The recommended facility exceeds our minimum requirements for the amount of buffer of 5%. It has a buffer of 10%.

· Where practical and especially for larger amounts additional buffer should be included.

· we recommend you maintain cash reserves to meet contingencies such as higher interest rates, loss of income and margin calls.

See this is what grates my cheese. You have CASH reserves and a Margin Lending Facility? WTF? So you'll pay a higher interest burden than necessary on your Margin Lending facility (which Storm gets a cut from), Receive a lower rate of interest from your cash product than you are paying on the ML rate (which a) means you're negatively gearing and b) means there is yet another product generating fees for Storm). And supposedly is meant to keep you safe from margin calls when the market tanks. Were there no alarm bells ringing from this?

A margin call would be advised to you by the institution when your loan to valuation ratio exceeds the limit set. Margin calls can also play an important part in signalling when asset prices have gone down and represent good buying.

Ok just went from small alarm bells to Fire station bells Awwooogah Awwooogah

We recommend that in the event of a margin call, funds be used to purchase more assets that can be used as collateral to bring the loan to valuation ratio back to within allowable limits rather than paying out some of the loan.

​

"Ch-ch BOOM" UN - BE - LEE - VA - BULL

Where's the smiley catching the falling sword???

Cheers

Sir O

 

[DocK]

In my humble opinion, SICAG originated with the sole aim of gaining compensation for its members. This compensation was most likely to come from the banks, as presumably Cassimatis will have signed a personal guarantee for Storm's debts (I certainly hope this is the case) and will be cleaned out by the bank in due course.

In my humble opinion, SICAG could not care less who is to blame, but is focussed purely on who can/will pay compensation for their portion of the blame. I think most of SICAG's members would agree that the majority of the blame lies with Storm, but as there is no monetary value in pursuing E & J etc they are focussed purely on their case against the banks involved at present. This is their charter, their goal, so it's understandable that they will not wish to focus on anything that may detract from the level of responsibility that can be attributed to the banks. I can understand their stance, as it is probably the best course of action for them to take in order to acheive their goal - compensation.

Do I agree with it? Well, I didn't join SICAG because I just can't stomach not laying the blame where I feel it justly lies - mostly with me, followed by storm, then bank. But I may indeed benefit in the long run from SICAG's unswerving determination to bring the banks to account for their part in the whole affair - and I do feel just a little hypocritical in that I'll gladly take whatever scaps the bank may send my way.

While I can appreciate why SICAG have taken the stance that they have, it is my fervent desire that the Cassimatisii be pursued with equal fervour by them once they are done with the resolution process underway with CBA and whatever other banks they can nail down. Same goes for advisers if it can be proven they were acting contrary to their advice to clients (in my case my adviser was a Cassimatis offspring - I wonder if he blindly followed his father's directions to clients)

As far as whether the banks involved bore responsibility to customers or shareholders, I think they were so involved and entangled in the whole storm process that they ceased to be a third party acting at arm's length.
Ordinarily I would agree that it is not the bank's responsibility to care whether you are going to use their loan funds to invest wisely or fly to the moon - but in this case they were so enmeshed in the process, and indeed approvals were all but automatic, that the bank's endorsement of storm's strategy was implicit - if not written into their loan approval docs. They worked hand-in-glove with storm to ramp up borrowings by providing inflated valuations for that express purpose, set up a distinct BSB no for storm borrowings etc. To apply the same criteria in this case to an individual applying for a loan off their own bat is misplaced imo. As the old saying goes "If you lie down with dogs, you'll wake up with fleas"!

I'm still itchy:bonk:

 

[Judd]

LOOK AT THE LAST PARAGRAPH! In the event of a margin call - Storm recommends NOT PAYING the margin call.

QED imo.

To paraphrase:

"We recommend that you have a cash buffer as a safety reserve. In the event that your investments are going down the toilet we recommend you hang onto them and also take the cash out of your safety reserve and throw it down the toilet along with your other investments."

In the event that this investment strategy fails for some bizarre unexplainable reason ... blame the banks not us.

I've seen a lot of odd things but this is the first time I have seen an attempt to classify a credit on the debit side of the ledger, ie a liability or debt (credit) as an asset (debit).