Storm Financial Group

[trainspotter]

Never trust anything with the name "STORM" in it ... kinda gives it away really. Not sure about the Melbourne Storm RLC either ... look what happened with Matthew Johns. And there was that movie with George Clooney in it "The perfect storm" .... sums it up pretty much. Also the Storm worm botnet that infected computers in September 2007 was another beauty to stay away from. I could go on and on and on but I wont. Storm in a teacup ... now that is my final word.

 

[darkside]

chrisgee, don't be too surprised if this whole thing will turn on some technicality and the principal players in this drama will get away unscathed.

Our legal system isn't so much about justice as it is about who can come up with the best lawyer. The court room is a stage and the best actor get the bouquets! In the olden days, when the laws were not as 'refined' as they are now, public humiliation in stocks and pillories was a major part of punishment. In the Middle East, public floggings and beheadings deal with such matters.

So true, one of the prosecuters i work with, told me the other day after i gave him a spray about what i considered an open and shut case but we lost it ,that nowadays "money buys justice" and when all the legal eagles turn up on massive pay packets , whoever throws the most money at the court system and PR spin will come out the winners.

 

[twiceshy]

yes, darkside, and unfortunately for the Stormers, "boo hoo we didn't know" or "boo hoo we didn't understand" are not legal arguments.

Once we're of legal age, we are responsible for our actions, however old or feeble-minded (until or unless we want to admit ourselves to an insane asylum.)

And no law will change that! Imagine the cries of "Discrimination, unfairness" by those same people we wanted to protect, if we enacted laws that made special provisions or even quarantined people of a certain age or educational standard!

Those Margin Loan Terms and Conditions are in very clear and very plain English. I don't know how plainer they could have been written.

As I said before, the whole thing will probably turn on some technicality.

 

[carey ramm]

twice shy - i think u may find that CML have changed their terms and conditions for margin lending from what it was in 2008 and prior - i wonder why they would have done that...

and

bunyip have u done anything to help any storm victims out? or have u just puffed around here making them feel like crap.

 

[twiceshy]

Just caught your last post before logging off: a bit cryptic on your part. Could you elucidate? How did the 2008 version read? The subsequent changes could be a revealing pointer! Look forward to reading your reply in the morrow

 

[Judd]

twice shy - i think u may find that CML have changed their terms and conditions for margin lending from what it was in 2008 and prior - i wonder why they would have done that...

and

bunyip have u done anything to help any storm victims out? or have u just puffed around here making them feel like crap.

Now that [in bold] is interesting. Always curious about these sorts of matters.

As for bunyip, that entity hasn't been engaged by "Stormers" to be nice to them or anyone else. That's your task.

Lovely lawyer jokes given to me by a couple of legal eagles.

"The trouble with law is lawyers" However, I think that is an actual quote from somewhere.

"One lawyer in town? Starvation. Two lawyers in town? Prosperity."

I don't think the latter was referring to the clients of the legal profession.

Well, I laughed anyway. :

But I believe the more pertinent adage is "Ignore the law at your own peril."

 

[Pindibog]

Indeed, and they entered into a contract with CBA/CGI etc

IMO any arrangement that allows clients to go substantially over 100% margin is so flawed that the fault rests jointly and severally with all the partners to that agreement.

That is the thing that amazes me, and I know there is a huge sh!tfight going on now, but I always understood, once your buffer was triggered, you have 24-48 hrs, or get sold down, no ifs, no buts.

I guess one problem is that Managed Investment updates are often several days behind constituent stock price.

So that could be a factor, but thats why buffers exist


I dont know what Iranian justice mandates for ripping out the life savings of thousands, but a few public executions would be great, they could have them at half time during State of Origin

After I was sold out on 4/12 I found out I had been in margin call for 56days?? and let go to 107.5% Never contacted and I had the capacity to remedy it. Every time I contacted Storm they stated I was not in margin call...

 

[Iggy_Pop]

After reading this thread and linked documents for a few weeks, the problem with Storm seem to be

1. Storm as a business was based on one financial model, a highly geared index fund
2. Revenue came in the form of upfront fees, trailing commissions and whatever other kick backs came back from margin loans etc
3. Storm had considerable debt, with acquisitions of other financial businesses being made and a failed floating of the company

When the market starts to go down, a reduced number of new investors would be investing reducing revenue from upfront commissions, a key part of their revenue stream. As the market got worse, the funds should have been swapped to cash, but that would stop the trailing commissions and the business would go under in any case, now due to no revenue. Storm hoped they could get through the downturn with more borrowing from CBA, but CBA refused. But as the margin loans became negative, the banks had to sell to protect their investment. This results in Storm with a large debt and no revenue. When the margin loans were sold down, Storm lasted about five weeks, before being wound up.

From my perspective, Storm was always doomed as a business with all revenue coming from one area, and working with high leverage. As soon as that revenue stream was impacted, they were in trouble. Most businesses try to establish a few revenue streams to give some chance of riding out the tougher times.

Storm had the option of changing over to cash but instead chose to stick it out and take all of their investors down with them

 

[Julia]

After reading this thread and linked documents for a few weeks, the problem with Storm seem to be

1. Storm as a business was based on one financial model, a highly geared index fund
2. Revenue came in the form of upfront fees, trailing commissions and whatever other kick backs came back from margin loans etc
3. Storm had considerable debt, with acquisitions of other financial businesses being made and a failed floating of the company

When the market starts to go down, a reduced number of new investors would be investing reducing revenue from upfront commissions, a key part of their revenue stream. As the market got worse, the funds should have been swapped to cash, but that would stop the trailing commissions and the business would go under in any case, now due to no revenue. Storm hoped they could get through the downturn with more borrowing from CBA, but CBA refused. But as the margin loans became negative, the banks had to sell to protect their investment. This results in Storm with a large debt and no revenue. When the margin loans were sold down, Storm lasted about five weeks, before being wound up.

From my perspective, Storm was always doomed as a business with all revenue coming from one area, and working with high leverage. As soon as that revenue stream was impacted, they were in trouble. Most businesses try to establish a few revenue streams to give some chance of riding out the tougher times.

Storm had the option of changing over to cash but instead chose to stick it out and take all of their investors down with them

Excellent summary, Iggy Pop.

.

To weed out the financial planning profession requires that those people need to sit for far more stringent examinations then they do at present, and that their practising certificates should be graded and limited to specific ranges of investment portfolios, i.e. a planner who advises on a million-dollar portfolio must hold a more advanced license than a planner who does the mum-and-dad stuff, etc. and would need to re-apply year after year under stringent conditions which would include further education, etc. Maybe all this is already happening? I do not know as I wouldn't use any of those guys (except as a doormat perhaps

Sensible idea. The study and examination criteria for FP Licence has been discussed in other threads. It's astonishingly minimal. They are essentially salespeople, rather than advisers in any genuine professional sense.

Tell me, how Hard do you think CBA worked for their 2.5bill profit? I dont think they did an honest days work to tell you the truth, and to raise interest rates a few days before announcing the storm deals they are making, Gee what a coincidence?

Monario, the tiny amount involved in that very small interest rate rise just on the interest owing by Storm clients, wouldn't even register on CBA's bottom line! To suggest the rise had anything to do with Storm is simply ridiculous.
CBA have already stated that they will not be 'materially affected' by the entirety of the Storm debacle.

I'm really sorry for you and all the other people who are having to come to terms with this mess. I don't think there would be too many people on this forum who haven't made a substantial mistake at some point in their learning experiences. Best wishes for the future.

 

[Julia]

Cutting to the chase on Colonial Mutual Margin Loan Terms and Conditions, paragraph 4.3 throiugh to 4.5 puts it all squarely on the borrower:

Notice of Margin Call

4.3 (a) You agree that we may provide notice of margin call by any
or all of the following ways to you or your Client Adviser:
• In writing (including by fax, email or other electronic
means)
• Orally, including by telephone
• Updating the Colonial Geared Investments website.
(b) It is your obligation to keep your or your Client Adviser’s
contact details up to date.

4.4 You are responsible for:
(a) monitoring your portfolio and determining when your loan is
subject to a margin call; and
(b) being in a position to receive any communications from us
in relation to this clause and to act within the time limits
specified in this clause; and
(c) ensuring that a margin call does not occur.

4.5 If you do not meet a margin call:
(a) we may (but are not obliged to) sell any, or all of the security
supporting your loan and reduce the amount owing.
(b) we may, if we consider it necessary or prudent to do so,
sell more security than the minimum required to satisfy the
margin call.
(c) we may sell security without first contacting you, any margin
call contact, or agent you may have nominated.
(d) we may sell security in the order we choose.


(bold emphasis added by me)

Signed, sealed and delivered - or better, stitched up for good!

That took less than 10 minutes to read. I rest my case.

So, we may assume that Storm clients signed over their responsibility to Storm it seems.
And we all know what happened after that.


Carey Ramm: where is it determined that Bunyip holds the responsibility for comforting the Stormers?
As has been pointed out in the past, this is a forum, not a support group.

I have absolutely no wish to increase the misery of any Storm client, but I do get pretty annoyed at you coming onto this forum and telling people what attitude they should adopt. A forum is a place for discussion, back and forth, pros and cons. Any of us who put up a comment do so in the knowledge that someone else may criticise, disprove, or object to what we say.

 

[Garpal Gumnut]

After I was sold out on 4/12 I found out I had been in margin call for 56days?? and let go to 107.5% Never contacted and I had the capacity to remedy it. Every time I contacted Storm they stated I was not in margin call...

And is the Inquiry run by Bernie Ripoll going to hear about this or will it just get the spin from SICAG about the banks being the only culprits in this fiasco?

gg

 

[Quincy]

ASIC licensing hurdles lower than many realise

25 June 2009 | by Lucinda Beaman

The Australian Securities and Investments Commission (ASIC) has terminated less than 1 per cent of 4,811 financial services licences over the past two years.

According to media reports today, ASIC official Joanna Bird told the joint committee inquiry into financial services that the “minimum requirements for licensing were lower than some investors realised”.

“They may have a perception that if they have a licence, it's gone through ASIC and everything's all right," The Australian reports.

Bird said the two requirements licensees must meet are being “of good character” and “likely to comply with their licence conditions”.

Count chairman Barry Lambert warned earlier this year that the licensing regime employed by ASIC was too lax.

"The biggest problem in our industry, in my view, is our licensing system,” Lambert said at Money Management's State of the Industry forum in April.


The Australian said ASIC will submit a chronology of events relating to its handling of the Storm Financial case to the joint committee by July 31, but has asked that it not be released to the public. The report will include when ASIC first received complaints against Storm Financial and what its responses were.

http://www.moneymanagement.com.au/article/ASIC-licensing-hurdles-lower-than-many-realise/487883.aspx


I agree. The issuing of an AFSL by ASIC and the ongoing overseeing of the obligations associated therewith should be much more stringent. The current requirements for holding a licence and the monitoring of same by ASIC are currently much too lax.

This matter of holding an AFSL should bring with it much more accountability / penalties along the way by ASIC (while it is in force). When (if) an AFSL is cancelled it is usually only after the subject company is at a point of no return, which of course is all too late then for investors.

If no AFSL then the company wanting you to invest with them can't operate.

 

[carey ramm]

Bunyip / Julia – the point I am trying to make is that there are a lot of views on this topic and I hope people like u will make a submission to the parliamentary enquiry. This is how u can make a change – all it takes is 1 hour of your time.

In terms of the stormers, of the many that I have come across, the majority’s main concern is that they don’t want this to happen to anybody else.

This is why they are making submissions to the parliamentary enquiry, knowing full well they will be open to criticism on forums like this, so that they can tell their story and hopefully bring about change.

And they have certainly copped their fare share of criticism on this forum.

They are also telling their story so that hopefully they can stop people like Storm and Co from doing this again to other people – so that people like ASIC can investigate this sorry tale fully. Without them standing up, Storm and Co will be free to do this again and again.

Many storm victims are still to embarrassed or distressed to go public with their story. Hopefully this will change with time. Hopefully known of them are your family or friends.

 

[DocK]

And is the Inquiry run by Bernie Ripoll going to hear about this or will it just get the spin from SICAG about the banks being the only culprits in this fiasco?

gg

Totally agree! I hope all of the ex-Storm clients who have experienced this type of treatment by Storm let both the enquiry and ASIC know (for what it's worth).

One phone conversation with one of the "higher-ups" at SICAG was enough to convice me that although they profess to be neutral, you won't see SICAG going after either the Storm directors or advisors any time soon. It quite annoys me at times that SICAG are seen by the general public as representing all ex-stormers, when I suspect that quite a few of them hope to "use" the voices of the many to further the ends of themselves and their mates/family.

It struck me as odd right from the beginning that their website contained only links to news releases about the banks, or E&J defending themselves, and not one single link to the many articles published that discussed last-minute dividends, failure to act on instructions, mysterious financial "loans" made to a select few of their clients from a company that was already insolvent, dodgy board meetings etc etc. The disclaimer at the bottom of their website seeks to put a "neutral spin" on the group - but is hard to swallow when the entire focus of the site is on the banks alone!

I hope I'm wrong, but have not joined as I don't wish to be used to further someone's agenda which is probably very different to my own.

I do feel, however, that a lot of people have gained much-needed information and support from being able to meet others in the same situation as themselves. The emotional devastation felt by many following the loss of their lifesavings was exacerbated by the lack of reliable information to be had at the time. SICAG do seem to have provided a support network for those that need it (and yes Julia, this forum is certainly not the place to come for support). I will also grudgingly admit that the CBA may never have buckled under the pressure to examine its lending practices/procedures if not for the onslaught from SICAG and associated "friends-of-SICAG" - and I may eventually benefit from that

 

[Quincy]

http://senatormacdonald.org/data/ASIC Statement re Storm Financial 25 Feb 09.pdf


Part of the above statement that reads "ASIC's powers are framed around a presumption of compliance by licencees . . . " basically sums up the problem (in my opinion) with the current system that is being administered by ASIC.

 

[twiceshy]

Here is the latest news on the Madoff rip-off in the States. It may serve as an inspiration for the Australian authorities:

QUOTE
*Madoff ordered to forfeit $210b assets*

US authorities are demanding Bernard Madoff forfeit over $US170 billion ($210 billion) in illegally obtained assets as they seek to keep the disgraced Wall Street mogul in prison for the rest of his life.

Three days before the financier returns to a New York courtroom tomorrow for sentencing after pleading guilty to one of the biggest, most complex financial scams in history, US District Judge Denny Chin authorised the confiscation of Madoff's gargantuan holdings.

"Bernard L Madoff is liable for a personal money judgment in the amount of $US170 billion, a sum of money representing the amount of proceeds obtained as a result of... offences charged in counts 1, 3, 4 and 11 of the information," the judge wrote, referring to the charges against the tycoon.

In an accompanying order the US District Court, Southern District of New York also stipulated that wife Ruth Madoff be stripped of $US85 million ($105 million) in assets, leaving her with just $US2.5 million in cash.

US authorities have asked for 150 years in jail for Bernard Madoff, 71, who is accused of defrauding billions from investors in one of the largest fraudulent operations of modern times, according to documents made public here.

"The scope, duration and nature of Madoff's crimes render him exceptionally deserving of the maximum punishment allowed by law," prosecutor Lev Dassin said in a memorandum.

He added that "a reasonable sentence in his case would be the guidelines sentence of 150 years or, alternatively, a term of years that both would assure that Madoff remain in prison for life and forcefully would promote general deterrence."

The former chairman of the Nasdaq stock exchange has been in jail since March after admitting guilt in the scheme, the biggest in Wall Street history and estimated to have involved around $61 billion ($75 billion).

Many of the investors were elderly retirees who thought their life savings were in safe hands.

Madoff told the court in March that of the billions of dollars which passed through his hands during his three-decade scam he never invested one cent in the market.

Instead he stashed the funds in a Chase Manhattan bank account.

The funds were then used to pay out "dividends" to investors in what is known as a "Ponzi scheme."

Prosecutors say about $US13 billion ($16 billion) were handed to Madoff.

- AFP

UNQUOTE

 

[twiceshy]

In response to the DocK #2188 post:

QUOTE
Twiceshy - I think you'll find that many regular posters on this forum have used borrowed money to invest in one form or another. Borrowing against home equity and margin lending are fairly common practices advocated by a plethora of financial planners - it's the level of gearing that can get you into trouble! I think you're a bit confused about what is short-term lending (presumably you mean margin lending by this?) and borrowing against the house - which was done on the same basis as any other home loan - we had a 25 year loan - hardly short-term.
UNQUOTE

Well, DocK, I AM confused: if you borrowed money against your house on a 25-year loan, how could you have been taken down? That would have been no margin loan!

If I had taken a mortgage against my house and then taken the stash of money to my sharebroker and told him to buy 10,000 BHP shares with it at the top of the market at $50, I would still be holding the shares today, despite the shares having gone as low as $20 in the meantime. Essentally, I could have spent the loan money on Iced Vovos and the lender couldn't have cared less because he was secured by the mortgage over my house.

So, please enlighten me, how did you get taken down? Was it because you didn't leave it at that but, having bought a Storm product (I refuse to call it an investment) with the proceeds from your house loan, you borrowed once again against the Storm product by way of margin loan?

 

[twiceshy]

In terms of the stormers, of the many that I have come across, the majority’s main concern is that they don’t want this to happen to anybody else.

carey ramm, your view of the world is quite charitable.

And will you publish on this Forum the Margin Loan Terms and Conditions as they applied in 2008?

 

[Pindibog]

And is the Inquiry run by Bernie Ripoll going to hear about this or will it just get the spin from SICAG about the banks being the only culprits in this fiasco?

gg

Yes he will hear and alot more..

 

[twiceshy]

Stormers, don't expect too much from our politicians. They've just spent the last two weeks devoting all their waking hours to the OzCar (or RuddMobile) affair and a certain fake email while the rest of the world is going to hell in a handcart.

You may have more luck with the newly-formed Australian Sex Party http://www.sexparty.org.au/ , who promise all their members and would-be-members a pleasurable experience "in keeping with our credo that member's needs always ‘come first’."