Storm Financial Group

[Solly]

Proof Committee Hansard
JOINT COMMITTEE ON CORPORATIONS AND FINANCIAL
SERVICES
Reference: Financial products and services in Australia
THURSDAY, 3 SEPTEMBER 2009
BRISBANE

Here's the transcript

http://www.aph.gov.au/hansard/joint/commttee/J12136.pdf


WITNESSES
ANDERSON, Mr Graham John, Secretary/Treasurer, Storm Investors Consumer Action Group
CASSIMATIS, Mr Emmanuel, Private capacity
FORSYTH, Mr Jolyon, President, Australian Investors Association
HANCOCK, Mr Benjamin William, Partner/Senior Adviser, Stonehouse Wealth Management
JELICH, Mr Radomir (Ron), Private capacity
KING, Ms Sharron, Private capacity.
McARDLE, Mr Sean, Private capacity
McKENZIE, Mr Scott, Vice-President, Australian Investors Association
O’BRIEN, Mr Noel Terence, Co-Chairman, Storm Investors Consumer Action Group.
WEIR, Mr Mark Robert, Co-Chairman, Storm Investors Consumer Action Group .

 

[GumbyLearner]

Proof Committee Hansard
JOINT COMMITTEE ON CORPORATIONS AND FINANCIAL
SERVICES
Reference: Financial products and services in Australia
THURSDAY, 3 SEPTEMBER 2009
BRISBANE

Here's the transcript

http://www.aph.gov.au/hansard/joint/commttee/J12136.pdf


WITNESSES
ANDERSON, Mr Graham John, Secretary/Treasurer, Storm Investors Consumer Action Group
CASSIMATIS, Mr Emmanuel, Private capacity
FORSYTH, Mr Jolyon, President, Australian Investors Association
HANCOCK, Mr Benjamin William, Partner/Senior Adviser, Stonehouse Wealth Management
JELICH, Mr Radomir (Ron), Private capacity
KING, Ms Sharron, Private capacity.
McARDLE, Mr Sean, Private capacity
McKENZIE, Mr Scott, Vice-President, Australian Investors Association
O’BRIEN, Mr Noel Terence, Co-Chairman, Storm Investors Consumer Action Group.
WEIR, Mr Mark Robert, Co-Chairman, Storm Investors Consumer Action Group .

http://www.holidayhypermarket.co.uk/Majorca

 

[Solly]

"CBA in nationwide probe of valuation system"

"Commonwealth Bank of Australia's investigation into the possible misuse of its controversial desk-top property valuation system, known as VAS, was much wider than originally revealed, leaked documents show."

Read more by Duncan Hughes in he Australian Financial Review Friday, 11 September 2009.

 

[Solly]

"Storm clients unaware of risks"

"THE company which has taken over the client base of Storm Financial has found many of the victims did not understand the risks they were taking.

They also found that while Storm claimed to have a client base of 14,500 people, the reality was a core of only 5000 or so people who were geared up with investment strategies."

More from Tony Raggatt in The Townsville Bulletin here;

http://www.townsvillebulletin.com.au/article/2009/09/11/78551_business.html

 

[sginrocky]

Long time lurker....first time poster!

Thanks for the link to the transcipt from the JPC solly, it is simply amazing just how deluded one man can be. After reading some of the responses provided by EC it is clear that he is simply not in touch with the reality of the situation. Amongst other things, he acknowledges that all other planning firms appear to have been able to manage their clients LVR's and respond to Margin Calls in a timely manner, but for some imaginary reason Storm have been singled out and their communication lines frozen. What crap.

perhaps setting himself up for an insanity plea?

On a positive note, it would appear that those sitting on the JPC would appear to have a reasonable grasp on the topic at hand. Judging by some of the questions that have been raised, and taking into account some of the information provided, I would hope to see EC and a few of his ex Storm pals front up again in the JPC soon....although i am sure that most people would prefer they skip this process and just line them up at the gallows instead!

 

[Farencue]

Yes, thanks Solly for the link, I have just finished reading the transcript.

Hi sginrocky - I actually laughed when I read some of the responses put forward by Cassimatis et al when asked direct questions. Slippery bunch of eels I would say.
Mr Ripoll seems to be doing a good job as Chairman, very entertaining.

 

[Ironhalo]

I love his continual:
Mr Cassimatis: 'If you'll just let me refer to these documents/evidence....'
CHAIRMAN: 'No.'

 

[Garpal Gumnut]

"Storm clients unaware of risks"

"THE company which has taken over the client base of Storm Financial has found many of the victims did not understand the risks they were taking.

They also found that while Storm claimed to have a client base of 14,500 people, the reality was a core of only 5000 or so people who were geared up with investment strategies."

More from Tony Raggatt in The Townsville Bulletin here;

http://www.townsvillebulletin.com.au/article/2009/09/11/78551_business.html

Long time lurker....first time poster!

Thanks for the link to the transcipt from the JPC solly, it is simply amazing just how deluded one man can be. After reading some of the responses provided by EC it is clear that he is simply not in touch with the reality of the situation. Amongst other things, he acknowledges that all other planning firms appear to have been able to manage their clients LVR's and respond to Margin Calls in a timely manner, but for some imaginary reason Storm have been singled out and their communication lines frozen. What crap.

perhaps setting himself up for an insanity plea?

On a positive note, it would appear that those sitting on the JPC would appear to have a reasonable grasp on the topic at hand. Judging by some of the questions that have been raised, and taking into account some of the information provided, I would hope to see EC and a few of his ex Storm pals front up again in the JPC soon....although i am sure that most people would prefer they skip this process and just line them up at the gallows instead!

It would appear that from what has gone down in the evidence to the Inquiry that Manny should have kept to flogging MLC products from an old Ford Cortina around the Tablelands.

Surely with the answers he has given he was not in charge of millions of hardworking battlers money over the last 15 or 20 years.

Sadly he was.

And the moneyspidercentral aka SICAG.INFO still have not a peep out of themselves about Storm's culpability.

I wonder how many of them were invited in to the Cave for the "Secret Meeting".

gg

 

[Judd]

I love his continual:
Mr Cassimatis: 'If you'll just let me refer to these documents/evidence....'
CHAIRMAN: 'No.'

Ah yes. No matter what one thinks of politicians you can be reasonably sure of two things:

(a) they live and breathe bulldust and usually know it when they hear it; and

(b) they also know of, and receive sound advice on, the process applicable to parliamentary committees.

Possibly the witness in question did not fully appreciate those aspects.

Attempting to table documents in order that they have parliamentary privilege and so unable to be used elsewhere, indeed!

 

[Garpal Gumnut]

Bernie and his band are unreal. The best committee for many a year.

gg

 

[cuttlefish]

Proof Committee Hansard
JOINT COMMITTEE ON CORPORATIONS AND FINANCIAL
SERVICES
Reference: Financial products and services in Australia
THURSDAY, 3 SEPTEMBER 2009
BRISBANE

Here's the transcript

Its an interesting read - I think that the committee asked good questions and that Cassimatis actually cooperated pretty well. It does give some insight into the technicalities and problems that occured late last year as it unravelled.

One thing they didn't seem to focus on when questioning Cassimatis was why so many people appeared to have misrepresented incomes/assets and thus much larger loans than they were capable of servicing. To me this is a key reason many people have ended up losing the lot - and as a financial advisor, under the 'know your client' rule it is inexcusable for a financial advice firm to not be reviewing the material submitted or putting in incorrect material for submission for loans. This behaviour would seem to go directly against the 'know your client' requirement.

The questioning also highlighted a lot of other significant problems with the way that Storm was being managed, though they are not atypical of the sorts of problems faced by businesses that grow rapidly - Poor procedures, lack of documentation and process (e.g. no documented procedures with the banks etc. in relation to margin calls, no formal training processes, no formal advisor competence review, no formal process for assessing the suitability of a client for the Storm model etc. etc.) and lack of visibility by management of what is occurring on the ground.

In spite of all of those things, I can see how the failure of the margin calls to occur is a significant factor in the resultant loss of assets and bankruptcies - even for people that were appropriately geared and comfortably capable of servicing their debt levels the failure of the margin calls to occcur in a timely manner can easily have put them underwater.

The issue of handling fund redemptions and knowing the value of the fund units - when the market is moving quickly and a large volume of redemptions are also occuring simultaneously is one I hadn't really been aware of or thought through - but I can see how systems could have been inadequate in this regard given that it was an unusual set of circumstances.

The obvious solution of course is to have moved people out of the funds much earlier rather than at the 11th hour, and rather than relying on margin calls they should have been monitoring the investments proactively (all points I've harped on enough about already).

Thanks for posting the link Solly - its certainly given me a bit more insight into it - and in spite of my criticisms of Storm, I can now also understand a lot of the reason that hostility is directed at the bank and why Cassimatis feels hostility towards them.

In the way it is described by him, it certainly sounds like the bank just wanted to wash its hands of it all to clear their books without regard to the humanity that was being affected by their actions.

If CGI was responsible for managing the funds but didn't have adequate procedures in place to manage bulk redemptions or to properly monitor the value of fund units then that could have had quite an impact on the severity of the outcome and on the failure to make timely margin calls. If this was the situation then for them to have just pulled the pin without regard for the people impacted seems callous.

 

[Garpal Gumnut]

Its an interesting read - I think that the committee asked good questions and that Cassimatis actually cooperated pretty well. It does give some insight into the technicalities and problems that occured late last year as it unravelled.

One thing they didn't seem to focus on when questioning Cassimatis was why so many people appeared to have misrepresented incomes/assets and thus much larger loans than they were capable of servicing. To me this is a key reason many people have ended up losing the lot - and as a financial advisor, under the 'know your client' rule it is inexcusable for a financial advice firm to not be reviewing the material submitted or putting in incorrect material for submission for loans. This behaviour would seem to go directly against the 'know your client' requirement.

The questioning also highlighted a lot of other significant problems with the way that Storm was being managed, though they are not atypical of the sorts of problems faced by businesses that grow rapidly - Poor procedures, lack of documentation and process (e.g. no documented procedures with the banks etc. in relation to margin calls, no formal training processes, no formal advisor competence review, no formal process for assessing the suitability of a client for the Storm model etc. etc.) and lack of visibility by management of what is occurring on the ground.

In spite of all of those things, I can see how the failure of the margin calls to occur is a significant factor in the resultant loss of assets and bankruptcies - even for people that were appropriately geared and comfortably capable of servicing their debt levels the failure of the margin calls to occcur in a timely manner can easily have put them underwater.

The issue of handling fund redemptions and knowing the value of the fund units - when the market is moving quickly and a large volume of redemptions are also occuring simultaneously is one I hadn't really been aware of or thought through - but I can see how systems could have been inadequate in this regard given that it was an unusual set of circumstances.

The obvious solution of course is to have moved people out of the funds much earlier rather than at the 11th hour, and rather than relying on margin calls they should have been monitoring the investments proactively (all points I've harped on enough about already).

Thanks for posting the link Solly - its certainly given me a bit more insight into it - and in spite of my criticisms of Storm, I can now also understand a lot of the reason that hostility is directed at the bank and why Cassimatis feels hostility towards them.

In the way it is described by him, it certainly sounds like the bank just wanted to wash its hands of it all to clear their books without regard to the humanity that was being affected by their actions.

If CGI was responsible for managing the funds but didn't have adequate procedures in place to manage bulk redemptions or to properly monitor the value of fund units then that could have had quite an impact on the severity of the outcome and on the failure to make timely margin calls. If this was the situation then for them to have just pulled the pin without regard for the people impacted seems callous.

You are selling yourself short as being seafood mate.

This is the nexus of the whole Storm debacle.

It was style over substance and greed over fear.

gg

 

[Steve Borden]

If you want a good laugh on a Friday afternoon check out the BoQ submission.

 

[Garpal Gumnut]

I should point out that this thread is about to overtake Octaviar MFS Premium Income Fund PIF thread, for number of views, another poor mob of investors who were led by pillocks.

Not that it is a matter about which to boast.

Rather it is opportune to reflect on the great job that Bernie Ripoll and other Financial Inquiry committee members are doing on behalf of unsophisticated investors.

Let us have no more Storms or MFS Premiums.

gg

 

[Solly]

"CommBank to help 3000 Storm investors"

"ABOUT 3000 Storm Financial customers are likely to receive substantial compensation for their market losses after damning evidence about how Commonwealth Bank's processes failed last year.

Compensation for Storm's margin loan investors, which could run into hundreds of millions of dollars, would effectively ''turn back time'' to a point before the worst of last year's sharemarket collapse."

More by Stuart Washington in the SMH here;

http://business.smh.com.au/business/commbank-to-help-3000-storm-investors-20090911-fkri.html

 

[Solly]

"Storm Financial found fast track to degrees"

"FOR many investors with Storm Financial, it was a source of some comfort that the principals of the North Queensland company and its senior staff all had masters degrees in finance.

But what they weren't told about the course, undertaken through the University of Western Sydney, was that normal entry requirements were waived for Storm personnel.

Furthermore, Storm staff did a maximum of four years' part-time study to get a qualification that normally takes at least five years of full-time study."


More by Andrew Fraser in The Australian here;

http://www.theaustralian.news.com.au/business/story/0,28124,26061644-5017996,00.html

 

[Solly]

"Commonwealth Bank finally owns up to Storm Financial 'mistakes'

"MONTHS after the Commonwealth Bank admitted it had "done wrong" to customers who invested with Storm Financial, the Bank of Queensland has conceded it made mistakes and could have done more for its clients who borrowed to join the rush for Storm investment products.

In a submission to the federal parliamentary inquiry into Storm Financial, BoQ shifted in its stance against mounting criticism, saying that although its branches had done nothing "dishonest or illegal", an internal review had found deficiencies in the way it did business."

More by Michael McKenna in The Australian here;

http://www.theaustralian.news.com.au/business/story/0,28124,26061643-36418,00.html

 

[Solly]

"Bank of Queensland admissions over Storm Financial"

"THE Bank of Queensland has for the first time admitted it failed to deal directly with customers who invested with now-defunct Storm Financial.

It has also revealed that it approved loans to clients with few assets or little income, based on the expected returns they would get from Storm."

More by Anthony Marx in The Courier Mail here;

http://www.news.com.au/couriermail/story/0,23739,26060127-3122,00.html

 

[Solly]

"BoQ to review its practices"

"THE BANK OF QUEENSLAND says it will reform some of its practices in light of the Storm Financial collapse, including abandoning ''low-doc'' loans for retirees. But the bank, which has been accused of granting excessive loans to out-of-pocket Storm investors, has denied it took part in any dishonest or illegal activity linked to the failed financial planning company."

More by Ruth Williams and Eric Johnston in the SMH;

http://business.smh.com.au/business/boq-to-review-its-practices-20090911-fkra.html

 

[Solly]

"BoQ denies dishonesty in Storm debacle"

"Bank of Queensland chief executive David Liddy yesterday declared his bank had done nothing dishonest or illegal in its involvement with collapsed planner Storm Financial but left open the possibility of major changes to its internal procedures."

Read more by Duncan Hughes in The Australian Financial Review of Saturday, 12 September 2009