Storm Financial Group

[Solly]

"Bank of Queensland defiant in wake of collapse"

"The Bank of Queensland has broken its silence about its involvement in the Storm Financial collapse standing by its lending practices as 'correct' and above board."

Read more by Emma Chalmers and Stefanie Balogh in The Courier Mail.

The link is now available here;

http://www.news.com.au/couriermail/story/0,23739,26084160-3122,00.html

 

[Judd]

Thanks for that link, Judd. I've only skimmed through it but it certainly appears that the Committee are being most diligent.
Some very interesting stuff there, especially the part you've outlined above. [Closure of funds due to lack of viability - Judd]

Know in some small way how people would feel about this.

We had a position in a small unlisted fund. When a cornerstone investor (51% of fund) pulled out, us muggins were left hanging out in the breeze. Fund manager advised that without the investor the fund was no longer viable, ceased redemptions and commenced to wind up the fund. Took about 10 months to get money back at 83c in the $1.00. Fortunately, the fund was not subject to a margin loan and we had other investments so while we took a bit of a haircut, it was more like a light trim really.

Still, it was annoying that they could do that without consulting remaining investors but I suppose there is something deep in any prospectus to allow the manager and/or trustee, if there is one, to close a fund for a variety of reasons including legal obligations on the managers.

 

[Solly]

"Macbank questions go unanswered in Storm fiasco"

By Stuart Washington in The Age

"Macquarie Group made margin loans to an estimated 600 Storm Financial clients, some of whom were sold out at disastrous loan-to-value ratios.

Unlike Commonwealth Bank, Macquarie Group has not talked about any form of compensation after its margin loan system appeared to break down badly.


Did you receive a Macquarie Group loan through Storm?
E-mail swashington@smh.com.au "

More here;

http://www.theage.com.au/business/macbank-questions-go-unanswered-in-storm-fiasco-20090921-fxpg.html

 

[Mindstorm]

Thanks for the link Solly, interesting reading.

I had wondered why their previously published figures were so low.

Hopefully, they will give us some answers soon.

Mindstorm

"Macbank questions go unanswered in Storm fiasco"

By Stuart Washington in The Age

"Macquarie Group made margin loans to an estimated 600 Storm Financial clients, some of whom were sold out at disastrous loan-to-value ratios.

Unlike Commonwealth Bank, Macquarie Group has not talked about any form of compensation after its margin loan system appeared to break down badly.


Did you receive a Macquarie Group loan through Storm?
E-mail swashington@smh.com.au "

More here;

http://www.theage.com.au/business/macbank-questions-go-unanswered-in-storm-fiasco-20090921-fxpg.html

 

[Solly]

"Storm victims insist they were dudded"

"MACQUARIE Group has no public plans to compensate an estimated 600 Storm Financial clients despite evidence of failed systems in margin loans it made to retirees and pensioners.

Macquarie Group maintains it has ''settled'' with its Storm Financial clients."

More by Stuart Washington in The Age here;

http://www.theage.com.au/business/storm-victims-insist-they-were-dudded-20090921-fyns.html

 

[bunyip]

Sharon Lisch, of Deception Bay, Queensland, said she was a retiree with four investment properties when she and her husband Erich first took out margin loans with Macquarie through Storm Financial.

The above extract is from one of the links provided by Solly.
As always, I'm perplexed as to why a relatively wealthy retiree with four investment properties producing a passive income of probably around $1200 per week, and presumably owning their own home, would feel the need to risk it all by using a margin loan to invest in the stock market.

 

[Judd]

Convince people that, no matter how financially comfortable they maybe now, they will never have sufficient to live a comfortable life in the future unless it is through our magnificent plan which has worked for xx number of years, as backed up by wonderful testimonials from clients and possibly friends of the investors, and you will get them to dance on hot coals.

Mississippi madness scheme in 1791, South Sea bubble 1720, Tulipmania 1637. Nothing much new under the Sun, really.

Heck, people who took out variable interest rate mortgages complain when the raise increases, as do those who take out fixed interest loans and the rates go down below their fixed rate.

The majority of people always want to be on the winning side where money is concerned.

Buggered if I know why they don't think of the downside and why they should need any more if they are happy and contented with their present lot in life but they do. I cannot figure it out and I have ceased trying to.

 

[Solly]

"Don't prolong Storm legal action: investors"

"An investment group says a decision should be made quickly on whether to take legal action over the collapse of Townsville-based Storm Financial.

The Australian Investors Association (ASA) says a statement by the Australian Securities and Investment Commission (ASIC) suggests it should be known by Christmas if action will be taken."

More from Penny Timms from the ABC;

http://www.abc.net.au/news/stories/2009/09/22/2692625.htm

 

[Quincy]

Sharon Lisch, of Deception Bay, Queensland, said she was a retiree with four investment properties when she and her husband Erich first took out margin loans with Macquarie through Storm Financial.

The above extract is from one of the links provided by Solly.
As always, I'm perplexed as to why a relatively wealthy retiree with four investment properties producing a passive income of probably around $1200 per week, and presumably owning their own home, would feel the need to risk it all by using a margin loan to invest in the stock market.

From the quoted article (http://www.theage.com.au/business/st...0921-fyns.html) : -

Since then she said Macquarie Group had made no concessions for the situation in which she found herself.

''Their way of settling was 'You will pay out our loan','' she said yesterday. ''No compassion or consideration was shown.''

Interesting that she was looking for compassion from the Lender with regard to the paying out of her loan.

 

[Quincy]

"BoQ 'has Storm case to answer' "

"Bank of Queensland "has a case to answer" over its lending practices to clients of Storm Financial, the chairman of the federal parliamentary committee investigating the adviser's collapse, Bernie Ripoll, said yesterday."

Read more by Duncan Hughes in The Australian Financial Review of Sept 18 2009.

A few days late but here's the article : - View attachment 2009_09_18_AFR.pdf

 

[Solly]

"Inquiry fumes at Storm loans deal"

"MACQUARIE Group's failure to disclose a special deal it is alleged to have made with Storm Financial has been attacked by the head of a parliamentary inquiry investigating Storm's collapse.

The inquiry has heard evidence from former senior Storm staffer David McCulloch in Townsville that ''Macquarie Bank entered into an agreement with Storm'' on margin loans"

More by Stuart Washington in The Age here;

http://www.theage.com.au/business/inquiry-fumes-at-storm-loans-deal-20090922-g0lk.html

 

[DocK]

From the above linked article...

Part of the agreement Mr McCulloch detailed was to lift the maximum loan-to-value ratio to 85 per cent for Storm clients with margin loans from Macquarie - increasing the maximum that Storm's clients could lose if they were sold out at that level.

BusinessDay believes the usual loan-to-value ratio Macquarie Group offered to almost all other financial planners was a more conservative maximum of 80 per cent.

A Macquarie spokeswoman refused to answer BusinessDay's questions on the issue.

BusinessDay has also seen correspondence from a former Storm Financial adviser that suggests Storm's arrangement with Macquarie's margin lending business included Storm dictating the timing of margin calls to Storm clients.

''Our agreements and ongoing communication (hour to hour) with MML (Macquarie Margin Lending) has ensured that either no margin calls are being actioned or we have significant control over the relationship [so] that MML is taking directions from us,'' a Brisbane Storm staffer, Stephen Halsall, wrote to a client on October 24 last year.

The lack of margin calls proved disastrous to many former Macquarie margin-loan customers. BusinessDay is aware of nearly 40 former customers, almost all of whom say they received no margin call when markets fell last year


My margin loan was with Macquarie and I can confirm that my statements confirm a "maximum gearing level" of 80% plus an additional "buffer" of 5%. I always thought that was way too high, but my adviser used to talk about it as a positive thing as it allowed storm clients to withstand more volatility and the ability to take advantage of "dips" (read crashing sharemarket).

I cannot verify the statement in the article re people not receiving margin calls until they were up to 95% lvr as my loan never got as high as 80%, but would be very interested to hear from any other stormers who were with Macquarie - I was always under the impression that any matters pertaining to the loan were between the lender and I, and had nothing to do with storm once it was set up. I would have been beating down Challenger's door demanding they sell my investments to repay Macquarie had I reached 80% lvr - never mind whether storm gave the go-ahead or not! It seems amazing to me that a lender would need the approval of a financial planner if their own client was giving them instructions about their own loan????

 

[Judd]

It is my view that these "third party" arrangements, unless there are special documented reasons on a case-by-case basis for having them, must cease to exist. It is the instructions of end beneficiary which is important not the financial adviser or lender (apart from them wanting their money back.)

Apparently a similar situation occurs with wrap accounts where only the FP can sell/buy although it is supposed to be on the client's instructions. The entire industry appears, and I stress appears as it may not be the case, to move towards taking authority away from the client and leaving it in the hands of "experts."

Be almost black humour if the real solution was to eliminate the FP industry, hand all authority back to investors and just say "You're on your own, son. Your money, your decision, your risk, your responsibility." A bit tongue in cheek there.

 

[DocK]

Be almost black humour if the real solution was to eliminate the FP industry, hand all authority back to investors and just say "You're on your own, son. Your money, your decision, your risk, your responsibility." A bit tongue in cheek there.

Humourous perhaps, but in truth I'd bet a lot of people would be a hell of a lot better off if that were the case!

 

[Judd]

I have been reading the transcript of 16 September public hearing by the Committee.

http://www.aph.gov.au/hansard/joint/commttee/J12399.pdf

Some very good issues canvassed but I had a good laugh at the exchange (page 41) between Senator Mason and David Liddy over margin loans:

Senator MASON””The contractual obligations may be adhered to but that does not mean something is ethical, responsible or principled. Can you answer that question? Let me ask you this question: do you support then the new amendments to the Corporations Act regarding margin lending?

Mr Liddy””To be honest, I am not familiar with them.

Senator MASON””Mr Liddy, you are the CEO of the Bank of Queensland.

Mr Liddy””And, as I said, we have deliberately steered clear of margin loans as a product.

Senator MASON””I hate to think what your salary is but I would have thought that it would be fairly legitimate for someone of your seniority to be on top of amendments to the Corporations Act regarding margin lending whether you operate them or not.

I tend to agree with Mr Liddy on this. No matter how much I was paid, if my organisation was not offering the product and had no intention of doing so, why the hell would I want to stock up my In-Tray with junk information I don't need? Typical of some of the questions from pollies.

Have only sat in on one session of a parliamentary Inquiry and that was many moons ago. This one seems reasonably OK, the others are mainly grandstanding by talking heads trying to get their one and only policy idea implemented or their face on the evening news.

 

[Steve Borden]

Except they do offer margin loans via a white label distribution model through Leveraged Equities.

This is from the application:

"The Lender is Leveraged Equities Limited ABN 26 051 629 282 (“the Lender”) a subsidiary of Bendigo and Adelaide Bank Limited. The Bank of Queensland Limited ABN 32 009 656 740 (Bank of Queensland) does not guarantee or otherwise support the Lender’s obligations under the Loan and Security Agreement for the Bank of Queensland Margin Loan. Bank of Queensland distributes the Bank of Queensland Margin Loan under and agreement with the Lender. Accordingly reference in this brochure to “Margin Lending”, “we”, “us” and “our” may depend on the context, be reference to the Lender. Further details on the Lender’s role is set out in the Loan and Security Agreement for the Bank of Queensland Margin Loan."

Happy to distribute a product that they have deliberately steered clear of?

 

[Judd]

Ah ha, how disingenuous. Similar to JB Were which sold its margin loan business to Leveraged Equities. Gad, this stuff is fascinating. Wheels within wheels within wheels.

 

[Solly]

"Dozens to give evidence in Storm probe"

"About 40 people are expected to be quizzed over failed advisory firm Storm Financial at a public examination starting in the Federal Court in Brisbane tomorrow.

The examination will run from Thursday to September 29, adjourning until October 12 and continuing until October 30.

Storm founders Emmanuel and Julie Cassimatis are expected to give evidence."

More by Paul Osbourne from AAP and The Brisbane Times here;

http://www.brisbanetimes.com.au/queensland/dozens-to-give-evidence-in-storm-probe-20090923-g2dm.html

 

[Garpal Gumnut]

"Dozens to give evidence in Storm probe"

"About 40 people are expected to be quizzed over failed advisory firm Storm Financial at a public examination starting in the Federal Court in Brisbane tomorrow.

The examination will run from Thursday to September 29, adjourning until October 12 and continuing until October 30.

Storm founders Emmanuel and Julie Cassimatis are expected to give evidence."

More by Paul Osbourne from AAP and The Brisbane Times here;

http://www.brisbanetimes.com.au/queensland/dozens-to-give-evidence-in-storm-probe-20090923-g2dm.html

I notice the the SICAG model has no mention of this important Examination into the Storm model and losses, on their website, sicag.info.

Not an iota.

I wonder why?

Any ideas anybody?

At least the bloody moneyspiders have gone.

gg

 

[Big Max]

Max,

How many times do you want me to say it (in six different languages) that I applaud the work of SICAG? Have you not read my previous posts?

My biggest bug bear is that there are still people in SICAG who are EC sycophants who still adamantly believe that they were screwed by the big, bad evil banks (and don't get me wrong, a seperate level of hell is reserved for those involved at CBA/Colonial) but it's time to look at the whole picture.

You have repeatedly said 'well the banks were the only ones we could target really, so hence that was out strategy.' Wrong.

Now that we have the banks out of the way, how about we hold Manny/Julie over the barrel for their part in all this including:
1. Manny moaning about the banks, but then happily taking clients on bank subsidised jaunts around the world.
2. Taking millions of dollars as the company went under under dodgy pretenses (and signing a relative to the board of directors to do so), and
3. Why Storm was still signing on clients in Dec while insolvent.

I say it's time we turn on the advisers now as well, who were happily skimming percentage commissions off the top of investor step-investments as they drove their elderly clients just before Storm folded into financial ruin.

Guess there's no chance of that there with so many of them lurking in the SICAG membership/fan club eh? Re: Ron Jelich, Andrew O'Brien et al....I could go on?

I applaud what you've done, I just think some of the individuals who have suddenly 'seen the light' and who have aligned themselves with SICAG to be offensive to all five senses.

Still waiting for you and darkside to retract your incorrect claims about SICAG allegedly cleaning out its executive ranks. If you make the claim, you have to take the blame . . .