Storm Financial Group

Solly said:

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 .

Click to expand...

Solly said:

"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

Click to expand...

sginrocky said:

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!

Click to expand...

Ironhalo said:

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

Click to expand...

Solly said:

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

Click to expand...

cuttlefish said:

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.

Click to expand...