Storm Financial Group

[bunyip]

"Storm clients missed margin calls"

"ABOUT 1000 margin calls were never received by Macquarie Bank's Storm Financial clients when the market was crashing in October last year."

More by Stuart Washington in The Age here;

http://www.theage.com.au/business/storm-clients-missed-margin-calls-20091029-hnta.html

The argument will continue forever about whose responsibility it was to notify clients regarding margin calls.
It's clear that lenders notified Storm that some clients were in margin call, and it's also clear that Storm decided not to pass on that information to their clients.
Regardless of whether they failed their legal responsibilities, Storm certainly failed their moral obligations to their clients.
Common decency and concern for their clients - something that was clearly lacking at Storm - should have dictated that they do the right thing and let clients know they were in margin call.

Below are some extracts from the Storm website. The comments in bold are mine.

Our processes are transparent and we are accountable to all clients as we regularly monitor, measure and manage their portfolios.
OK - so wouldn't that include notifying clients if Storm knew they were in margin call?

At Storm Financial, our core desire is to support you in a genuine and lasting way in your quest for a fulfilling life.
OK - and wouldn't that 'support' include passing on the information to clients when a bank notified Storm that some clients were in margin call?

We take the confusion and complexity out of investing
OK - but wouldn't they only be increasing, not taking away, their clients confusion by failing to notify them of margin calls?

Storm Financial continue to be shown as incompetent, immoral and despicable.

 

[DocK]

The argument will continue forever about whose responsibility it was to notify clients regarding margin calls.
It's clear that lenders notified Storm that some clients were in margin call, and it's also clear that Storm decided not to pass on that information to their clients.
Regardless of whether they failed their legal responsibilities, Storm certainly failed their moral obligations to their clients.
Common decency and concern for their clients - something that was clearly lacking at Storm - should have dictated that they do the right thing and let clients know they were in margin call.

Below are some extracts from the Storm website. The comments in bold are mine.

Our processes are transparent and we are accountable to all clients as we regularly monitor, measure and manage their portfolios.
OK - so wouldn't that include notifying clients if Storm knew they were in margin call?

At Storm Financial, our core desire is to support you in a genuine and lasting way in your quest for a fulfilling life.
OK - and wouldn't that 'support' include passing on the information to clients when a bank notified Storm that some clients were in margin call?

We take the confusion and complexity out of investing
OK - but wouldn't they only be increasing, not taking away, their clients confusion by failing to notify them of margin calls?

Storm Financial continue to be shown as incompetent, immoral and despicable.

Agree completely. Interestingly, I had a margin loan with Macquarie and I cannot find anywhere in my paperwork where I have given them authority to notify storm, instead of myself, of any matters to do with the margin loan. As far as I was aware, anything to do with the margin loan was between Macquarie and I, and had nothing to do with storm once it had been set up. I didn't actually fall into margin call territory, but I certainly would have expected contact from Macquarie if I had. Never was I told by storm that they would deal with Macquarie on my behalf. It would appear that Macquarie and storm had an agreement that was either buried in fine print, or appeared in teeny tiny font at the very bottom of a statement somewhere down the line, that storm be notified of margin calls in lieu of the client. This confusion re who was responsible for margin calls is at the crux of a lot of ex-storm clients' complaints - and the cause of a lot of finger pointing between the major players involved who are now very keen to claim it was the responsibility of the other. And before I get a flood of replies telling me that clients should have been monitoring their situations themselves, I think that horse has been flogged to death by now - most are aware that yes, that would have been a good idea, but some just did not have the ability or the know-how, and I suspect all thought they'd be contacted (by one or the other) if a margin call eventuated.

 

[mellifuous]

Agree completely. Interestingly, I had a margin loan with Macquarie and I cannot find anywhere in my paperwork where I have given them authority to notify storm, instead of myself, of any matters to do with the margin loan. As far as I was aware, anything to do with the margin loan was between Macquarie and I, and had nothing to do with storm once it had been set up. I didn't actually fall into margin call territory, but I certainly would have expected contact from Macquarie if I had. Never was I told by storm that they would deal with Macquarie on my behalf. It would appear that Macquarie and storm had an agreement that was either buried in fine print, or appeared in teeny tiny font at the very bottom of a statement somewhere down the line, that storm be notified of margin calls in lieu of the client. This confusion re who was responsible for margin calls is at the crux of a lot of ex-storm clients' complaints - and the cause of a lot of finger pointing between the major players involved who are now very keen to claim it was the responsibility of the other. And before I get a flood of replies telling me that clients should have been monitoring their situations themselves, I think that horse has been flogged to death by now - most are aware that yes, that would have been a good idea, but some just did not have the ability or the know-how, and I suspect all thought they'd be contacted (by one or the other) if a margin call eventuated.

Sorry to ask, but is it possible for members of Storm to set out a list (like in a statement of claim), eg.

The (facility provider) failed to ....
Storm failed to ...

thereby attempting to narrow your collective grievances?

Is this at all possible?

 

[Ironhalo]

There is definite neglect and culpability here on account of Storm and the banks.

I wasn't in margin call, but then again I wouldn't have been able to check...the CGI website and info was screwed for the whole months of Oct-Nov 08. I could put my tin-foil hat on and say it was probably due to people being laid off during the GFC?

What completely spins me out, is that CGI can offer me a margin loan (through Storm) and then 3 weeks later sell my 3 week investment at a 20% loss for NO REASON, and with NO CONSULTATION. I effectively made a 15k loss (and I was buying in at the near bottom of the market with the view to ride it out and enjoy the recovery), by Colonial giving with one hand and then taking with the other 3 weeks later, when I was in no danger of margin call.

Hang in there though Stormers. Someone I know (no names, no court-martials) just received a compensation package from CBA. Let's just say that it was six-figures, and there is a nice % rate reduction on the remainder of their loan repayments on what remains of their mortgage.

It's all being sorted out, and Slater and Gordon (ulterior motives in making money aside, who can blame them) are doing a good job getting these mediated and settled promptly. Give it a few weeks, some of you guys and girls may be up for a nice Christmas 'win'.

And now we wait for Manny and Julie to start moving out of Belmont and led away in irons. I almost feel sorry for their kids. At the worst, hopefully what remains of the personal fortune is obliterated.

 

[Judd]

And now we wait for Manny and Julie to start moving out of Belmont and led away in irons. I almost feel sorry for their kids. At the worst, hopefully what remains of the personal fortune is obliterated.

I don't know if many have pick up on the entity where the $2m "dividend" was to be paid but I seem to recall it was made payable to the Cassimatis Family Trust Fund. Hmmm, it may be that some people's wish may not eventuate.

 

[Ironhalo]

Nice pick up Judd.

I wonder where the 20+ million that was in Storm's 'War' account went in the latter half of last year as well? I remember Ron Jelich made a reference to it in his submisison to parliament; basically something along the lines of 'one month we had money in reserve, the next month we were told that we only had $2-3 million in the business account'. No doubt that all got rabbited away into this trust fund as well. Certainly I know that out of the $28 million they made or so in FY07-08, the Cassimatis paid themselves a dividend of about 75-80% of that money. So much for saving money for your business' rainy day.

And the wheels of rampant greed/capitalism continue to turn.

 

[Julia]

Bruce Auty, the bank's group executive for group risk, defended the bank's unquestioning belief in data provided by Storm about the size of client investments and their assets.

"Storm was acting as our agent for those loans. We had no reason to doubt that," Mr Auty yesterday told the public examination into Storm's collapse.

Last night's parliamentary hearing was told there was an 11-week gap between the first of CBA's 2500 margin calls in October last year and the bank's move to begin directly contacting Storm clients, whose investments were tanking as the sharemarket slid.

Macquarie Bank last night told the hearing it let only two weeks elapse before contacting clients and sending a team up to Townsville to investigate why Storm Financial was not acting on the margin calls.

The above quote at least seems to clarify what hasn't been clear to date, i.e. that the fudging of clients' assets and income situations occurred with Storm, rather than - as been suggested by some - the banks having inflated these.
I couldn't see that happening.

And the final paragraph also seems to confirm that the arrangement existed that for margin calls the lender would contact Storm whose responsibility it then was to either contact the client or act on the client's behalf.

 

[Steve Borden]

The above quote at least seems to clarify what hasn't been clear to date, i.e. that the fudging of clients' assets and income situations occurred with Storm, rather than - as been suggested by some - the banks having inflated these.
I couldn't see that happening.

And the final paragraph also seems to confirm that the arrangement existed that for margin calls the lender would contact Storm whose responsibility it then was to either contact the client or act on the client's behalf.

Mr Auty may very well say that but it doesn't answer the question why the the information that Storm sent to BoQ is not what is on the BoQ application, ie no margin loans, over estimated cash reserves, etc.

Or why BoQ accepted that a $200k investment was generating an income of $100k pa.

IF Mr Auty did say that Storm was an agent of the Bank (my information is that he may have been misquoted) then BoQ is now in a world of hurt.

 

[Julia]

Mr Auty may very well say that but it doesn't answer the question why the the information that Storm sent to BoQ is not what is on the BoQ application, ie no margin loans, over estimated cash reserves, etc.

Sorry if I'm being obtuse here, but can you explain this a bit more?
I was getting the sense from the extract that Storm filled out all the application forms and in so doing did not correctly record clients' asset and income levels, and that the bank accepted what Storm offered.
(I thought that quote was from a CBA person, but you're obviously pointing out that Mr Auty is from BOQ?)

 

[Steve Borden]

Sorry if I'm being obtuse here, but can you explain this a bit more?
I was getting the sense from the extract that Storm filled out all the application forms and in so doing did not correctly record clients' asset and income levels, and that the bank accepted what Storm offered.
(I thought that quote was from a CBA person, but you're obviously pointing out that Mr Auty is from BOQ?)

Julia

It's important to go back to the beginning to get a sense of the flow of data between Storm and the lenders.

In the main Storm would send out a letter to say four (4) Banks seeking a 'tender' for a customer. The Storm pack would include the assets and liabilities information, some income details (if the client was employed) and some cashflow projections that formed part of the SoA together with a signed privacy act form for each lender (Storm had a supply of these for each lender and got them signed in blank by the client to send to the lender as required).

The lender would then come back with an offer based on the information they had received, say a lend of $400k given the estimated value of the property was $500k, with the applicable interest rates, fees, interest only terms, etc.

Storm would then recommend the appropriate lender to the client, usually via the SoA when it was presented to the client, prior to this though Storm would advise the lender to proceed so the finance and the SoA met up and not waste further time.

The lender would then complete an application based on the information extracts they received from Storm, mostly through a proprietary electronic system. That is why the almost all the applications are typed and not hand written (except for some NAB and Westpac deals). The lender appears to then have placed the previously signed privacy act forms together with the computer generated application and we now have a signed loan application that the client has never seen nor been interviewed regarding.

In a majority of instances I have seen the information the lender has on their file (or what was sent to them).

The issue is that the Storm information extracts held on the lender's files (or what should be on the lender's file) does not marry up with what the lender used in their application. Only someone from the Bank could have decided to include, exclude, vary or accept that information.

Mr Auty is the BoQ Group Executive for Group Risk.

 

[Garpal Gumnut]

Its all getting very complicated for a simple fellow like me.

It sounds as if the lawyers will be a feeding for a few years on this.

Perhaps if Manny and his advisers had read Percy Bysshe Shelley's (1792–1822) famous sonnet on the folly of grandiose wealth, and its inevitable decline, this may not have come to pass

OZYMANDIAS

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shatter'd visage lies, whose frown
And wrinkled lip, and sneer of cold command
Tell that its sculptor well those passions read
Which yet survive, stamp'd on these lifeless things,
The hand that mocked them and the heart that fed.
And on the pedestal these words appear:
"My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!"
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare,
The lone and level sands stretch far away."

gg

 

[Solly]

Its all getting very complicated for a simple fellow like me.

It sounds as if the lawyers will be a feeding for a few years on this.

Perhaps if Manny and his advisers had read Percy Bysshe Shelley's (1792–1822) famous sonnet on the folly of grandiose wealth, and its inevitable decline, this may not have come to pass





gg

gg, I've got my Stormer mate over tonight with the rest of the gang & got ASF idling in the background. Thanks for the pics he's p*ssing himself laughing over those pics.:

 

[Ironhalo]

Solly, mention to your Stormer mate that people have started getting their compo deals looked at by CBA.

Six figure payouts,
% cuts off residual loan amounts, and
waiving of loan fees etc.

Crack open a few bottles and say cheers, hopefully they feel better.

GG, those photos are pure hilarity, love the one of him dressed up as a British Island Governor! Wonder if he turned a blind eye to piracy? The self-grandiosing photo with Bill Clinton is a classic.

 

[bunyip]

I bumped into an old mate at a school reunion earlier this year - turns out that he was caught up in the Storm Financial debacle.
He lost serious money and has been left in debt, but is nevertheless confident of getting his life back on track.

Based on my recollection of what he told me, I thought I'd have a crack at putting his Storm experiences into verse.....


Our money's insufficient for
Retirement so it seems
We need to give our wealth a boost
To fund our many dreams.
We lack investment knowledge
And so we have agreed
We'll leave it to the pros to tell us
How much wealth we'll need
And how to get it - that's their job
To give us sound advice
So we can live our every dream
Myself and my good wife

But who to turn to?
Who to trust?
We're scared of getting burned
Maybe our accountant
Can tell us where to turn

We speak to our accountant
He hesitates a while
Then mentions Storm Financial
With ever-knowing smile

And so along to Storm we go
Their Townsville office grand
Prime location - Sturt Street
Short stroll to The Strand
Plush interior
Smiling staff
Greetings most sincere
Or so it seems to us at least
We feel most welcome here.

We meet a Storm adviser
A welcome smiling face
A handshake warm and friendly
We really like this place
We're offered tea or coffee
They even give us cake
We're sure that coming here today
Has not been a mistake

We're told about the marketplace
Stocks are king it seems
Superior to real estate
We'll soon fulfil our dreams
Next we learn of Indexed Funds
Sounds just right for us
This friendly Storm adviser seems
To really know his stuff.

Margin loans - a great idea!
Grow our wealth much faster
Put in one and borrow two
No thought of disaster

Seems that we can use our home
To borrow funds against
Buy into some Indexed Funds
Seems to make good sense
Then, says he, your Indexed Funds
We'll use as more collateral
Borrow even more for stocks
No more slog and battle

Join the bulls and ride the wave
Don't get left behind
Our fees? a paltry 7%
As cheap as you will find!
Debt is good when put to work
That's how pros invest
We sign upon the dotted line
And leave to Storm the rest

Our wealth increases monthly
The market's looking strong
With Storm advising us it seems
We really can't go wrong.
They've put us into further 'steps'
To grow our wealth still faster
We're ten feet tall and bullet-proof
We think not of disaster.

But wait, the market's going down
This doesn't look so healthy
If this keeps up we'll never reach
Our dream of being wealthy.
We call our friendly man at Storm
And tell him we want out
But he says "No, your thinking's wrong
It's not a market rout
While price is cheap we'll buy some more
It's just a brief correction
I'll get you more investment funds
I'll use my bank connections"

Our house is valued up again
Our bank is keen to lend
The extra cash invested through
Our Storm adviser friend
We now possess more Indexed Funds
The future's looking bright
The market's going up again
The Storm man got it right!
Both our bank and Storm are great
Without them we could never
Build our wealth and reach our goals
We'd struggle on forever

A few months later
Bulls are tired
The market goes no higher
Another urgent call to Storm
To speak to our adviser
He brushes off our grave concerns
Says "Leave it all to me
The market will bounce back again
Just wait a while - you'll see!"

The next 12 months are living hell
The market falls and falls
And Storm just sit upon their hands
No risk control at all
They should have cashed us months ago
To keep our wealth intact
Our LVR has blown out
The future's looking black

At last a phone call from our bank
With news that isn't funny
Our Indexed Funds have all been sold
And still we owe them money
We've been in margin call for weeks
HOW COME WE WEREN'T INFORMED???!!!
"Not our job" they say to us
"You should have talked to Storm"

We judge the banks immoral
For lending so much dough
And yet, they didn't force us
We could have told them 'NO'
No one pulled a gun on us
And said "SIGN HERE, OR ELSE!!!"......
The choice to borrow margin funds
Was taken by ourselves

As for Storm Financial
Incompetent for sure
But inner voices tell us
We should have watched them more
Made sure they were doing
What they were paid to do
Ensure they ran our business
The way we asked them to
Managers runs businesses
But owners always must
Ensure their manager's competence
Or else the show goes bust

Margin loans - a two-edged sword
Hindsight makes us wise
They magnified our profits
But hastened our demise
Made us heaps of money
While markets kept on soaring
Multiplied our losses
When bears began their roaring
Should have properly checked them out
Found out so much more
Wiser now but much too late
The bank has closed our door

Must admit it felt so good
To join the bullish rumble
Never really spared a thought
That markets just might tumble
Bears began to come awake
From their hibernation
Caused us many sleepless nights
Lots of consternation

Easy now to dish out blame
Say we weren't informed
True enough but even so
Not all blame is Storm's
Nor the bank's, for well we knew
Investment carries dangers
Part of blame belongs to us
Too much trust in strangers

Should have heeded warnings
GLOBAL MELTDOWN COMING
US BANKS ARE FAILING
BEARS HAVE STARTED RUNNING
Media warned us daily
Wish we'd liquidated
All of our investments
Shame we hesitated

Should have got ourselves at least
Some basic education
Found out how investments work
Controlled our situation

Little knowledge, too much dash
We didn't see it then
Not the way to grow our cash
Disaster in the end

Poorer now but wiser
Debt is quite substantial
Wish we hadn't trusted
Manny's Storm Financial

 

[another one]

GG. Where did you find the photos. The first one appears to be from the trip to Italy but the second?

 

[Garpal Gumnut]

GG. Where did you find the photos. The first one appears to be from the trip to Italy but the second?

Go to google.
Click images at the top.
Type in Emmanuel Cassimatis
Go
That was the HMS Pinafore one.

The second was sent me by Bill. He's a mate. I met him in a fumidor in a hotel in Little Rock one night before he became President.

gg

I bumped into an old mate at a school reunion earlier this year - turns out that he was caught up in the Storm Financial debacle.
He lost serious money and has been left in debt, but is nevertheless confident of getting his life back on track.

Based on my recollection of what he told me, I thought I'd have a crack at putting his Storm experiences into verse.....

Thats a beaut poem bunyip, very relevant.

gg

 

[another one]

Sorry should perhaps introduce myself. I have been following this site since Dec 08 but never posted before. Agree with some but feel some use it to grandstand and brag. Solly, thankyou for your useful reporting. GG appreciate your satire but your keyboard skills disappear on any postings after 10pm. Would that be due to indulgence in liquid sustenance? Julia appreciate your comments but feel you need to have an original thought. Know that some Stormers were driven by greed but the majority including myself just wanted to have a comfortable retirement. Agree that the SICAG site leaves a lot to be desired.

 

[Solly]

Solly, mention to your Stormer mate that people have started getting their compo deals looked at by CBA.

Six figure payouts,
% cuts off residual loan amounts, and
waiving of loan fees etc.

Crack open a few bottles and say cheers, hopefully they feel better.

GG, those photos are pure hilarity, love the one of him dressed up as a British Island Governor! Wonder if he turned a blind eye to piracy? The self-grandiosing photo with Bill Clinton is a classic.

Thanks mate, I've let him know that things are looking up. He's hasn't had any news yet.

We are sans XX tonight so it could turn ugly. I can't put in writing what he said about the subjects of the pics, otherwise Joe would disable my account and he's not very glowing about Sir Ralph either. At least he'll never go near a financial adviser again.

I'd better go now I think they are now trying to hot wire Lady Penelope's Corolla. I don't want another night pleading for forgiveness at the Southport Watchhouse again

 

[Solly]

Go to google.
Click images at the top.
Type in Emmanuel Cassimatis
Go
That was the HMS Pinafore one.

The second was sent me by Bill. He's a mate. I met him in a fumidor in a hotel in Little Rock one night before he became President.

gg



Thats a beaut poem bunyip, very relevant.

gg

gg, where are Bill's hands ..?

Just askin'...

 

[Garpal Gumnut]

Sorry should perhaps introduce myself. I have been following this site since Dec 08 but never posted before. Agree with some but feel some use it to grandstand and brag. Solly, thankyou for your useful reporting. GG appreciate your satire but your keyboard skills disappear on any postings after 10pm. Would that be due to indulgence in liquid sustenance? Julia appreciate your comments but feel you need to have an original thought. Know that some Stormers were driven by greed but the majority including myself just wanted to have a comfortable retirement. Agree that the SICAG site leaves a lot to be desired.

lol.

Hang in there mate, it ain't over until the fat lady sings. you'll survive, you all will. I did after an attempted rootin by a financial adviser.
Never bend over to a financial adviser.

gg