Storm Financial Group

[Harleyquin]

gg you've asked the question 'May I ask you again, does Manny have any fans/believers left amongst the Storm investors, any who totally blame the GFC and Banks, and not the Cassimatis'. I'm not in a position to say what others think. I would imagine, from the interest that you've taken in this case. that you would know as much as we all do about the answer to your question.

Personally I closely follow the evidence which has and is still coming to light. I'm really only interested in the facts, and I think I.ve made my personal thoughts very clear, and that is the storm people have a lot of explaining to do, as do the banks who financed their dubious scheme. The illegal alliance between the banks and storm will be tested in court.

As Julia has said, in PMs passed between us she has given me the ASX educational site. Two years ago when she gave me this information, I was not in a good place, and learning about the stock market was not high on my agenda. She has been very generous with her advice regarding investments and recovering from such a shock and the depression that threatens to come with it and I'm very happy to thank her for that support.

Today I'm a different person, I've been very lucky to be a reader and to have had contact with a number of professionals who have helped enormously. I've also been lucky to have other PMs from members of this thread who have offered personal support and advice. I didn't come on this forum for emotional help as I know exactly who to go to for that.

Many of you have been taken for a ride previously and have been lucky enough to recover and move on, educating yourselves along the way. Thousands of stormies haven't been just ripped off they've been stripped of everything and still left in debt on the verge of retirement, or in retirement, by a allied team of licenced financial planners and bankers. Our crime has been to believe that we could place our trust in a licenced planner and the Australian banking system.

Then to add insult to injury they've been called greedy. On another ASF thread Julia has said something similar to this 'people are not stupid they are only educated or uneducated'. In the storm financial scenario the educated have destroyed the uneducated. Unless you've been destroyed to the level that we have you have no concept of the level of sheer hopelessness and devastation that we have felt.

This level of stress is now causing major health problems, such as cancer, heart attack and stroke, amongst stormies. I say this because we have personally been affected like this healthwise and left to flounder on a pension. Our trust in people and all financial institutions in particular,has been destroyed by this.

When we joined storm we had a computer but no internet connection, so searching for information on the net is something we've learnt since joining storm. It's been a great research tool and the information that I've gleaned from sites such as ASF among others have been invaluable.

I know that ASF is primarily a site for stock market information, however, the non investment threads are also of interest. I see the Storm thread as one where we can discuss all aspects of this case, not just investing side, there are many threads on this site where we can all go to, to further our education.

My concern today is that this never destroys so many again and until the storm directors, bankers, ASIC and the Australian government all acknowledge where the true guilt lies, this fiasco will occur again.

 

[SJG1974]

Every industry has been represented by some rotten apples. From doctors, to solicitors, to politicians, to accountants to financial advisers etc. Greedy people who look after their own interests in the name of making a quick buck rather than those of their clients.

This is not to say the industries are rotten, but unfortunately some practitioners in them are. As I have said, I use an adviser and really value the advice he has given me- he has saved me thousands in tax, helped protect family members when things have gone wrong and given me a plan to work with that I could never have done on my own. And he has not invested 1c of my money....thats my responsibility.

So I must admit, I find it to be a complete overreaction that some people think because Storm was crooked that the whole industry is.

There are people everywhere who prey on the vulnerable and gullible. And, without wanting to offend anyone, Storm clients were gullible.

Having read through the hundreds of submissions to the PJC, I remain staggered that warning bells didn't go off earlier for clients...particularly when it comes to the astronomical fees they paid up front for the most basic of investment advice (borrow and plonk it all into shares) and the risk they took in double gearing into the sharemarket which was at all time highs. If nothing else, I guess Storm clients have learned a very very harsh lesson out of all of this....if it seems too good to be true it probably is.

I wouldn't wish what has happened to Storm clients on my worst enemy, and I hope that Manny and his crew pay big time for the "advice" they have given...

 

[Harleyquin]

SJG1974, I don't know what your occupation is but I suspect that you're in the financial industry to be so 'knowledgeable' The storm / banking industry alliance was far far more than 'greedy people making a quick buck'

It was an alliance that has destroyed the lives of thousands of hard working Aussies who believed in the need to seek a financial plan from a legitimate financial planner. I consider that far more than a quick buck, it was in fact billions of dollars provided to storm by the banks to finance their scheme.

'Corporate Greed' by the banking industry is behind the fall of storm financial and other financial planning groups. We are now seeing riots against this greed starting in Wall St and escalating around the world. Without this greed SF was just a little shop in the back blocks selling rotten advice. The banks turned it into the major disaster that it was to become.

I would disagree most strongly that this is an over reaction from storm clients. Storm most certainly will be proved to have committed it's share of this crime, and so will their partners in crime if we all have anything to do with it.

'There are people everywhere who prey on the vulnerable and gullible and without wanting to offend anyone', were people seeking a financial plan from an ASIC / FPA backed financial planning group. I fail to see why we should be lumped together as gullible for seeking financial freedom in our retirement. It's a cop out by the finance industry to say that 'storm clients were gullible', our members included those who were very financially educated to those who were totally uneducated.

You 'assume' that you know what storm advisors told their clients and yet your post clearly indicates that you have no idea what they were told. Also we were never told 'this is too good to be true' quite the opposite in fact. The units which were part of the storm portpolios were not 'just shares' as you again assume they were.

I'm pleased that your advisor is one of the good guys, however, the average person seeking financial advice really does take a risk unless they know exactly what they are doing.

Like you, I also hope that Manny and co, get what's coming to them for the advice given. You know that their advice was very high risk and so did their partners in crime. What bank knowingly finances such rotten advice to the tune of billions of dollars?

 

[bunyip]

Many of you on this thread ,don't believe in financial planners, you only believe in manageing your own investments, and you've repeated this many times. You also say 'do your research' but I don't see any specific advice for doing your own research other than reading books on the subject.

Now we've got the FPA and banks all offering their financial planning services again via recent television advertisements. If you are a forum member who believes so strongly in not believing and taking financial advice from those who are supposedly licensed. These people are still out there peddling their wares, in fact, so many of the storm advisors are still advising with other companies.

What do you believe needs to be done to prevent these people doing something that most of you don't believe in.

How do you warn potential victims in the future against enlisting the services of people who most of you believe we should never trust.

If Manny and co are peeking on the forum well let them who cares, at least they'll know exactly what we're thinking.

Come on let's be proactive and come up with some positive strategies to prevent the storm financial tragedy reoccurring.

Harleyquin

I’d love to be able to respond to your call by coming up with some concrete strategies to prevent people being duped by rogues like Storm Financial.
Unfortunately though I feel that no matter what changes are made to legislation, no matter what attempts are made to educate the general public in finance and investments matters, no matter what penalties are imposed on rogue operators, human nature will ensure that there will always be rogues and there will always be people who will get duped by them.
Listed below are my reasons for these views.

No amount of legislation can ever make people use prudence and common sense in investment matters or in any other area of their lives.
Some people swim in waters that are known habitats of crocodiles and Box Jellyfish. Some people take crazy risks by driving while affected by booze or drugs. Others borrow crazy amounts of money and sink it all into risky investments like the stockmarket. The common factor among all these people is that they fail to exhibit a reasonable level of prudence and common sense.

No amount of legislation will ever force people to utilise the opportunities that are freely available to learn some basic investment knowledge and skills.
Personal computers and the internet have been readily available to the general public for at least the last 20 years or so. Anyone interested in knowledge and personal development should have embraced this technology many years ago, unless age prevented them from doing so.
Anyone considering margin loans can easily jump on the internet and type ‘margin loans’ into Google. Anyone considering stockmarket investment can easily type ‘Stockmarket crashes’ into Google. Anyone can call a stockbroker for information on Index funds or about the stockmarket generally. Anyone can go to the ASX website and find out what free courses and information they offer. Anyone can find many useful books in the finance and investment sections of bookshops, or in their local library.
And yet there are many people who don’t avail themselves of these excellent sources of useful information.

No amount of legislation can ever change the attitudes of people who go through life learning little or nothing from historic events such as the 1987 stockmarket crash.
The crash of 1987 – and there have been many other crashes as well – provide us with some of history’s most valuable economic lessons. The great majority of Stormers were adults in 1987 and should have some recollection of that event. They should not have even considered taking out margin loans and sinking those funds into the stockmarket unless they had first taken the trouble of researching the ‘87 crash to learn how far and how fast the market fell. They should also have researched margin loans so that they could make an assessment of what effect a crash like 1987 would have on anyone with big margin borrowings invested in the market.
Had Stormers done so before signing with Storm, they would have uncovered information that revealed the extreme danger in Storm’s strategy.

No amount of legislation can ever make people read the papers and watch the TV news.
As I read some of the posts on this forum I find myself wondering if the writers live a life that’s completely isolated from the outside world, where they have no access to news programs and newspapers. For example, trusting Storm because they were ASIC approved. ASIC would struggle to track an elephant with diarrhea – they have a well- documented record of incompetence in tracking down shonky operators and fraudulent investment schemes. For years I’ve been reading of various dodgy schemes that have slipped through undetected by ASIC. Given the amount of adverse publicity that ASIC were copping for years before Storm burst into the headlines, I find it most perplexing that anyone would have confidence in ASIC’s opinion of Storm or anyone else.

No amount of legislation can ever make people absorb what they’re reading or hearing, or retain information over the longer term even if they do absorb it initially.
Useful information stops being useful if you let it go in one ear and out the other. We should all do our utmost to retain information, particularly if it could be relevant to our physical or financial health.

No amount of legislation can ever change people who are inclined to take the easy way out by relying on others to do their thinking for them, instead of thinking for themselves.
Accepting at face value an investment strategy proposed by an investment advisory firm – that’s allowing others to do your thinking for you. You start thinking for yourself when you put some real effort into researching the strategy that’s proposed to you.
The internet is an invaluable resource for conducting such research.

No amount of legislation will ever change people who ignore such age-old wisdom as ‘Don’t put all your eggs in the same basket’, and ‘If it sounds too good to be true then it probably is’.
We’ve all heard these two wise old adages hundreds of times. We ignore them at our peril. Some people have to learn this the hard way.

No amount of legislation will ever stop banks from making large loans to people who apply for them, providing that the application shows how the loan will be serviced, and providing that the banks security requirements are met.
Forget about the banks ensuring the viability of the enterprise that you propose to fund with their money – that’s your job as the loan applicant. They have neither the time nor the resources nor an obligation to do your due diligence for you.

No amount of legislation will ever eliminate dodgy operators like Storm Financial.
ASIC probably give it their best shot, and to be fair to them they do have an exceptionally tough job. But no matter what degree of diligence they apply to the task, shonky operators are always going to sneak through the net. In the USA the SEC (Securities and Exchange Commission) have been equally ineffective in filtering out dodgy investment schemes and illegal stockmarket dealings. No matter how many convictions they get in the US courts, shonks and their crooked schemes continue to plague the unwary.

In conclusion..........the only way to avoid getting stung by the likes of Storm Financial is to get yourself some basic finance and investment knowledge (no sophisticated knowledge or skills required) and to use prudence and common sense at all times.

 

[Solly]

GG

Have you had any intel on what Manny has been up to lately?

I haven't seen any media reports for a while.

I wonder if he is involved in any new business start ups lately?

 

[SJG1974]

Harleyquin,

In answer to a few of your questions....

Yes I am in the financial industry, but not directly involved in this area.

I stand by my claim that people saying the industry is rotten is an overreaction. There are a lot of good folk who work very hard for their clients, but also a lot of rogues. It can be difficult to sort the wheat from the chaff, but I maintain that obtaining second opinions and doing some research on the strategies recommended is a good starting point.

Again, the fees are something I just cannot comprehend.

A couple of questions- how did Storm justify to you their 7% upfront fees?
Did they charge you 7% everytime they ramped up your loan like they evidently did with others (this from PJC submissions)?
What was it that they sold to you to justify this fee. Surely you saw some sort of value in paying this- what was the value they sold you? You wouldn't go out and pay thousands of dollars (or hundreds of thousands in the case of some clients) if you didn't see a way of recouping this investment and more?

I would dispute that people who allowed Storm to gear against their home, and then gear further into margin loans, putting all of it into shares were financially literate if they did not fully comprehend the risks of doing so. This is financial illiteracy on a grand scale IMO.

Correct me if I am wrong, but the units in the Storm Portfolios were in index funds were they not? They are invested in shares. As Allan Jeans said about sausages, you can boil them, fry them, put them in a casserole, but at the end of the day they are still sausages. The same as shares. You can package them up any way you like, but at the end of the day they are still shares and when the market tumbles, be ready for the fallout.

You stated previously that your portfolio was well diversified. No it wasn't. It was invested in Australian shares- just because it is in mining companies, small caps, industrials etc doesn't make it well diversified. And it doesn't make it safer than ordinary shares....they are ordinary shares!

I feel for you and others caught up in this. I don't know what exactly happened because I wasn't involved thankfully. But, having read almost every submission by battered clients to the PJC, it is easy to get a picture of what happened and how Storm operated.

Storm sold advice in a one size fits all approach which involved a risky double gearing strategy, with investments invested in a single asset class that was riding the greatest bull market of our lifetimes. And this strategy was sold to people who could least afford the inevitible fallout when markets predictably fell (as they always do).

I am sorry, but for people to have believed that was an appropriate low risk strategy and to have paid huge fees for it, they must have been gullible, or at the very least naive in the extreme.

 

[doobsy]

Have to agree here - nothing beats a second opinion when it comes to money. But people as a rule love a good story and storm had the best story of all. All this talk of licenced planners is a sideline - Storm planners were qualified and they followed the rules of the industry. The same as a teacher who has done the uni course - that doesn't automatically make them the best person to put in front of our kids.

HQ, I am not picking on you but you are about our only regular forum contributor that was a client so we reference you a lot.

Nothing that storm did was anything an average punter could not do themselves. Anyone with or without a planner could arrange a line of credit on their home. Everyone had access to margin loans. These were the topics of BBQ talk for most of 2006/07. It wasn’t where you went on holidays, it was how much you had borrowed and how much of a killing you were making on the market.

As a society our greatest fear is not being part of the crowd. We therefore will do pretty much what is needed to fit in. If all our friends have a margin loan, maybe we should get a margin loan etc etc.

You were sold the story. You were sold how markets ALWAYS go up over the long term. You were sold how your strategy could handle significant market falls and still be ok. You were sold how the trigger points and cash dam would allow you to keep your house safe. You were sold how diversifying within the Aussie share sectors would provide “diversification”. You were sold how should you not adopt the strategy you would be stupid and be missing out. The whole thing was geared around pushing all the right buttons to make people feel like they were either IN or OUT. As most people were referred by friends, Manny even knew how to use that – people don’t want to look ungrateful for the referral (works for Tupperware) and will look for reasons to buy the story.

The extra LVR arranged with the banks was sold as yet another failsafe, clients could retain their exposure for longer, therefore the market could fall further and they would not be sold out and therefore would be fully invested for when it recovered.

My point in all this is that I for one can see how you did accept you were doing something you should do. People go to advisers whether they be in finance, stocks, accounting, legal, medical looking for guidance. What you unfortunately found was the group that had a strategy that sounded perfect, had all the right features and would look after you. Who designed this strategy, one E Cassimatis. The banks didn’t push this process on you, they didn’t run the smooth sales pitch outlined above, Storm did. I will continue to harp on this as someone needs to. This was a storm model, it was a storm strategy, he even went as far as to badge his own index funds to make it look even more exclusive and special. Manny was the one that designed a model that could withstand a 40% drop in markets and still have clients fully invested throughout. What happened????? MARKETS DROPPED 50%. He stuffed up. He failed to factor in that big a fall, he failed to adjust his strategy through 2008 because his arrogance was such that he figured he knew more and that it would never happen (read their old newsletters). He thought he could paper over things by expecting the banks to give him even more leeway than before. He couldn’t deal with 3000 clients all getting margin calls at the same time.

 

[doobsy]

SGC1974 – On the fees, my understanding is they had a nice simple way of showing that if you paid 1% ongoing fees (industry average at the time) and surprise surprise factored in some nice growth assumptions over time, then you would pay more than paying a supposed one off upfront fee. What they failed to show was that most planners were not double gearing and therefore the asset base the fee was being taken on was about 50% lower. That and the glossing over the ongoing upfronts evertime they suggested you jump into some more exposure.

 

[doobsy]

Well I just got the perfect example, I post a few thoughts on a thread and next thing I am getting an emails from ASF offering my an exclusive chance to get access to a subscription for foreign exchange education.

AND I QUOTE FROM THE EMAIL

Quite simply, it’s a way to introduce you to us and what we do.
LTG ******** is primarily a Forex Education company. We focus on giving the very best education and support structure (including a 24 hour a day Live Trading Room and world class trading mentors, ex bankers and institutional traders), to support, mentor and help traders at all levels perform at their peak.

I am a fully qualified planner and Forex scares me, what chance does the average punter have????????????????????

 

[Harleyquin]

Thank you to all forum posters for your feedback appreciate it. I think that any questions that you have to ask ex stormies have been answered in previous posts.

To say that I'm bitterly disappointed in the whole financial industry would be an understatement. Once again appreciate the contributions by those of you who are well educated in this field.

 

[Julia]

'Corporate Greed' by the banking industry is behind the fall of storm financial and other financial planning groups.

I suppose if Storm clients have decided the only recompense available would come from the deep pockets of the bank, then this has to be rationalised by attributing most of the blame to the banks.

It was Storm's reckless lack of good strategy that caused the problem, but since no one believes any money can be extracted from Manny, it wouldn't do to attribute the deserved amount of blame to him.

were people seeking a financial plan from an ASIC / FPA backed financial planning group.

You keep repeating this. You seem to have some idea that Manny sat down with ASIC and said "hey fellas, I'm planning to offer retirees the idea that they source a loan secured over their freehold home up to 90% of its value, buy a bunch of shares with those funds, and then get a whacking great margin loan over the value of those shares. Terrific idea, huh? "
Whereupon, ASIC would say "Gee whiz, Manny, what a supa dupa strategy", and away Manny & Co would go, having received "ASIC approval" for a totally irresponsible suggestion.

I fail to see why we should be lumped together as gullible for seeking financial freedom in our retirement.

Oh dear, HQ, no one has said you were gullible for seeking financial freedom, just that you were gullible and totally unrealistic in not applying the basic common sense test to what was suggested to you.

It's a cop out by the finance industry to say that 'storm clients were gullible', our members included those who were very financially educated

Hard to believe this.

Also we were never told 'this is too good to be true' quite the opposite in fact.

Did you actually read what you've said here? Did you really expect Manny or whomever to outline this get rich scheme and then say to you, "but hey, client, you have to know this is just too good to be true"????

 

[DocK]

Thank you to all forum posters for your feedback appreciate it. I think that any questions that you have to ask ex stormies have been answered in previous posts.

To say that I'm bitterly disappointed in the whole financial industry would be an understatement. Once again appreciate the contributions by those of you who are well educated in this field.

Harleyquin, I think you have shown grace and dignity in your posts. You appear to have been able to retain a sense of humour throughout your ordeal. I hope you have gained whatever you were seeking from posting on this forum.

 

[Harleyquin]

Thanks DoK life is still good no matter what happens and we should all enjoy it. This has proved something which we knew all along anyway and that is that our families are far more important than any wealth and if wealth is measured by family and their support, I'll always be 'wealthy'.

Julia you and I think very differently in some areas however we'll just have to agree to disagree on some of these issues. I admire your investment skills however and wish I had them. Maybe some day I'll revisit the site you suggested a while back.

Bunyip the book I was talking about in a previous post is 'The Desert Column' by Ion Idriess, hope you enjoy it.

 

[Julia]

Harleyquin, I think you have shown grace and dignity in your posts. You appear to have been able to retain a sense of humour throughout your ordeal. I hope you have gained whatever you were seeking from posting on this forum.

Agreed absolutely. I did send you a PM to this effect a few weeks ago, Harleyquin.
I'm still concerned that, because you still don't seem to entirely 'get it' regarding responsibility of various parties, you could be vulnerable to being taken in again.

Dock, hope things have improved for you overall too.

 

[Junior]

You keep repeating this. You seem to have some idea that Manny sat down with ASIC and said "hey fellas, I'm planning to offer retirees the idea that they source a loan secured over their freehold home up to 90% of its value, buy a bunch of shares with those funds, and then get a whacking great margin loan over the value of those shares. Terrific idea, huh? "
Whereupon, ASIC would say "Gee whiz, Manny, what a supa dupa strategy", and away Manny & Co would go, having received "ASIC approval" for a totally irresponsible suggestion.

This may not be that far from the truth. A large fin. planning group like Storm would have been subjected to ASIC audits, whereby they scour a number of client files, read the SOAs, loan apps etc. to judge whether or not they are compliant. This includes whether or not there is a reasonable basis for advice given. Whether or not the advice is appropriate for the client given their goals and objectives, risk profile etc.

It's likely that they effectively 'OK'd' Storm's strategies at some stage.

This just further highlights how ASIC cannot be relied upon to provide safeguards to individual investors. They don't have the knowledge or resources.

 

[bunyip]

This just further highlights how ASIC cannot be relied upon to provide safeguards to individual investors. They don't have the knowledge or resources.

Agreed. ASIC have little ability to prevent us from being conned.
We have to look out for ourselves in this world, not expect others to look out for us.

I wonder who ASIC is staffed by? Are they people with some business and life experience, or are they mostly youngsters not long out of uni who have little experience in life or business or finance or anything else?
Does anyone know?

Most important of all, are they people who can think for themselves and use a bit of common sense? They don’t appear to be.
Then again, maybe I just don’t understand the difficulty and enormity of their job.

 

[Julia]

This may not be that far from the truth. A large fin. planning group like Storm would have been subjected to ASIC audits, whereby they scour a number of client files, read the SOAs, loan apps etc. to judge whether or not they are compliant. This includes whether or not there is a reasonable basis for advice given. Whether or not the advice is appropriate for the client given their goals and objectives, risk profile etc.

It's likely that they effectively 'OK'd' Storm's strategies at some stage.

.

Really? You're actually saying ASIC would have approved double gearing such as I described for retirees???

If that's the case, I'm going to have to include myself amongst those who have been quite deluded about the capabilities of ASIC.

If Junior is right, Harleyquin, I apologise for suggesting you were incorrectly perceiving ASIC's overseeing role. Still find it almost impossible to believe that they'd OK any such thing, though.

 

[McLovin]

Really? You're actually saying ASIC would have approved double gearing such as I described for retirees???

I'm with you, I highly doubt it. However, ASIC is so woefully underfunded that I would also doubt any follow up audits were done to see who was actually being marketed to. I can't find the figures but since ASIC took over regulating brokers from the ASX last year the number of brokers being fined has fallen by more than 90%. As I understand the main action being taken by ASIC is that Storm's directors allowed it to sell financial products to people without being aware of their personal financial situation.

My own opinion is that geared equity investments have no place being marketed to retail investors.

 

[Helen Gillies]

Doobsy,

I’ve read what you have to say with some interest. There are some things however that I feel I must correct you on.

You state that, "The banks didn’t push this process on you, they didn’t run the smooth sales pitch outlined above, Storm did." I agree with Frank Ainslie that you do appear very one-eyed when it comes to discussing the Banks’ roles in all this.

You have said that you only equate 5% of the blame to the Banks. The evidence does not support this. Why, if the Banks are only 5% responsible, did Ralph Norris, the former CEO of the CBA admit partial liability, and that Bank settle under its ‘resolution scheme’ for many millions of dollars? Banks are not noted for their magnanimity.

You also said in a previous posting, “…the margin calls were the advisers responsibility.” This is an assumption on your part rather than a fact and has no foundation in law. Margin loans are contracts between Banks and their customers. Under such contracts both the lender and the borrower have certain contractual obligations to one another that cannot be denied. It should be added that “obligations” cannot be assigned to any third party unless novation occurs. It did not!

The ‘Goodridge v Macquarie Bank Appeal’ clarified certain points in relation to assignment transactions, especially securitisations. However, the Appeal judges did not reject the primary judge’s remarks regarding the making of margin calls and the form in which they should be made. In fact there was little in the ‘Goodridge’ case that is detrimental to our case against the Banks. Rather, it reinforces the notion that the banks have an obligation to effect margin calls. The “reasonableness” element of contract dictates that such margin calls should be made in a timely manner. The law of “custom” that exists in the market place (margin calls in 5 days) also has a marked bearing on our rights as margin loan customers to be so advised within that time-frame.

Here’s what Mr. Paul Johnston ( Head of Colonial Margin Lending from its inception in early 1996 until his departure from the company in 2003) had to say about this issue in 2009:

“An agreement entered into between CGI and Emmanuel Cassimatis in May 2007 provided for an upward movement in loan-valuation ratios exclusively for Storm clients. The agreement allowed for an increase in the buffer from 70% to 80% and from 80% to 90% for a margin call. There appears to be no evidence of any formal advice to advisers or clients of this variance.

The agreement was in fact not adhered to, as it talks about moving the buffer from 70% to 80% and the margin call from 80% to 90% for certain Storm funds, whereas in fact the real ratios sat somewhere in the low 80's for buffer and low to mid 90's for margin call.

From a risk management viewpoint, it seems an unnecessary risk to take, given the volume of business generated ... also if this was something I would do it would have happened back in 1996 so as to give me a superior competitive edge in the market.

The Loan agreement is and always has been between the client and the borrower, not the agent - in this case, Storm.

After consultation with a former IT colleague at the bank, I believe a margin loan facility could not go past 100%. If it did, it would be the bank's problem, not the borrower's.”

(Some went past 130%)

“The Lending parameters were set at 66%, giving the bank, the adviser and the client a level of comfort from a risk management stand point. To take the buffer to the low 80s and margin call to low to mid 90s is very risky.

At all times during my tenure as head of margin lending, margin call notices were sent automatically to clients, in writing, with advisers copied in for reference. If a margin call was not rectified within five days I felt it was my right and duty to sell the client up (unless evidence was supplied that positive action was being taken to meet the margin call to protect the client and the bank's position. I believe I (on behalf of the bank) was liable for any shortfall if action wasn't taken at the end of five days or 24 hours if direct shares were involved. The five-day window was a generous tlme-frame compared to other margin lenders at the time. “

(Macquarie took 3 to 4 weeks and the CBA 10 to 11 weeks and even then, many margin calls were never made – customers’ share portfolios were simply sold out from under them!)

“The margin call was always automatically generated by a computer system used by the bank called original MLS, now known as 'EMPIRE'. A margin call notice could only be stopped through manual intervention.

I was instrumental in the writing of clause 4.2 of the terms and conditions which talks about 'you' receiving a margin call. My knowledge and practical application of that clause is that the bank contact the client in writing, then the client (in consultation with the adviser) rectifies the position. Again, I should stress that if the margin call wasn't fixed in the five-day period, I immediately sold the client down to protect BOTH parties (unless evidence was supplied that positive action was being taken to get the call fixed).” [End]”

It should also be added that documents have come to light during the discovery process that will show that margin calls were issued by CGI to other dealer groups in line with standard practice. Therefore, its practice in the case of Storm whereby it allowed Storm to set the parameters was outside the norm and not standard practice at all. This will apply equally to Macquarie Bank!

Based on this evidence alone, it makes your 5% claim look a tad weak, don’t you think?

At the moment it seems a one-sided debate. I would be interested to hear what Frank can tell us about the Banks' and their involvement with Storm. I've been to his websites and he does seem to know what he's talking about. He was also directly involved whereas most on this forum were not, and are therefore offering opinions based on second-hand information.

 

[Judd]

Throughout this thread there have been claims that Storm was large a player in the financial planning world.

Was it? Can anyone verify that allegation? I've only been dabbling in the financial world since the mid-1990's but I never heard of this mob until it, and its clients, was on its knees.

It has been claimed that it had about 14,000 clients. Yet the firm which bought the fund book, on investigation, discovered that the claimed number of clients was largely a legacy one who had bought an insurance policy or such from the time EC was with MLC and had nothing to do with Storm since then. They finally whittled the active client base numbers down to 4,000 or so. That doesn't sound like a real big heavy hitter group to me. I could be wrong obviously.

It is simply that I am aware of other financial planning organisations, one with 14 planners across Perth, Adelaide, Melbourne, Sydney and Canberra, but Storm Financial never appeared anywhere in my travels.

I don't wish to appear to be rude but was it a firm with a client base concentrated mainly in the Townsville area and with a smattering of clients in other locations? If it was, then I can understand how those affected could make a claim along the lines of “It is (was) really big, you know.” I've encountered that concept before in large centres, such as Albury/Wodonga or Dubbo, whereas outside that community, an essentially local firm barely rates a mention, if one at all.

I suppose it doesn't matter really. Once litigation/mediation has been concluded and people are or aren't compensated, the whole issue will be consigned to the dustbin of history along with Cambridge Credit, Estate Mortgage, the 1973 oil shock and a variety of other financial traumas which come along from time to time.