Storm Financial Group

irish joe · 2 July 2010

Thanks Julia.

The other interesting thing that I failed to mention is that levitts are basing their argument on the notion that there was an "illegal scheme" being run by Storm and the CBA. This is preposterous.

Storm provided a flawed advice model that was implemented using a lending product provided by in the main CGI or Macquarie. Funds were invested in managed funds that were essentially "badged" for storm by either Colonial first state or challenger. I have read the product disclosure statements and the funds whilst expensive due to Manny's snout in the trough were structurally sound.

If an illegal scheme was in play,then Macquarie and challenger would also need to be party to the litigation.

I have no doubt that many people within all of these institutions knew about the risk associated with the storm process, but we need to remember that all of these institutions effectively produce and market investment and or lending products. They were not the providers of the advice. At the endof the day they probably knew of the risk in the storm model but chose to ignore it due to the massive volumes of business and therefore profit they were enjoying. At the end of the day someone bought their product because they were advised to buy their product by Storm.

The advice is where the issue is. I am aware of another group who use(or used) a similar strategy using a different home lender and a different margin loan provider. again the advoce is shonky, but the products used to implement that advice are fine

Garpal Gumnut · 2 July 2010

irish joe said:
Hi All,
I have observed this thread with much interest almost from when it began.

A couple of disclosures.

1. I am a financial Planner and have been since the early 1990s in an area that has seen much storm damage

2. My practice is fee for service and we focus on strategic and holistic advice. We have done pro bono work for some storm victims and have had some very good outcomes with a few (resolution scheme) and also are close to some others

3. My practice is large and self licenced,with about 60% of clients benig retirees or those nearing retirement. As such we do not have large exposures to margin lending but younger clients whom we do have margin laons for are predominantly with CGI and as such I have an intimate knowledge of the processes.

Observations

I am not going to repeat much of what is already well articulated elsewhere in this thread suffice to say that I agree with the sentiments of GG and Solly in that the genesis of the entire disaster and as such the culpability lies with cassimatis and his team of salesmen who exposed their clients to unacceptable levels of risk through the double gearing strategy and in many cases these clients should have not had borrowings at all. Rather I would like to share ny observations as to the likely outcomes of the variuos legal proceedings occurring at the moment

The banks are not blameless and indeed some of the lending is unconscionable with regards to the equity extended against people's homes but the margin loans were all granted within the rules of the day ( ie no requirement to ask where funds were sourced). The advisers though had a duty of care to explain any and all risk to the borrower.

With respect to the margin call process, I had clients experience margin calls with CGI. The process which has been in place as long as I can remember is that CGI (AND MAcquarie) contacted the adviser to contact the client to rectify the situation. This is for two very good reasons. The adviser has the primary relationship with the client and is licenced to give the advice as to what options the client has with respect to lodging additional security, cash or selling down. Staff in call centres for any margin lender are generally not licenced to recommend that a client sell stock/managed funds. Frankly I would be incenced if CGI contacted my clients without first contacting me

So I was recieving emails from CGI when my clients went into buffer and or margin call. I am aware through a discussion with a former CGI staff member that these same emails were provided to storm head office. I am also aware through discussions with a former storm adviser that this was the process he experienced until his business was sold to storm, JC was the one who issues the edict that all correspondence come to HO and not to the advisers.

It is true that CGI should have stepped in earlier and not let the margin loans blow out to where they did however it is my understanding that some clients have had their position restored to where they would have been if the margin call had been issued at the correct time. For levitts and SICAG to be arguing for full restitution is reckless and unfounded and frankly misleading to the victims of cassimatis. Essentially what they are seeking is for the bank to also compensate for market risk as well as storm's negligent and reckless advice. If this course had any chance then many others would seek to sup at Ralphs diner.

The chances of CGI being found to have not followed due process are about as good as those of the proverbial snowflake.

On the complicity of others at ANZ,BOQ and CBA, I believe there is ample evidence (some of which i have intimate knowledge of through said pro bono work) that home loans written were done so on less than accurate information supplied to them via storm and also that the internal processes and risk management were compromised by the sheer volume of lending being generated by storm.

On the sell down of the index funds, I don't believe that CGI or colonial first state had much choice. Cassimatis sent a letter to all clients recommending they move to cash well before colonial made their call. If he had of followed through with the letter then the same would have happened anyway. I question though wy he (manny) did not act on his recommendation as all victims I have had contact with actually signed the letter and returned it. I suspect that Manny may have realised after the letter was sent that because of the ridiculous gearing levels he had exposed his clients to, a move to cash would mean few if any of them would have sufficient equity to reenter the market anyway.(There goes the fees old boy)

I am hopeful like many of you that ASIC come out with their findings soon so that stormers can stop chasing Don quixotes rainbows and get on with life.

irish joe said:
Thanks Julia.

The other interesting thing that I failed to mention is that levitts are basing their argument on the notion that there was an "illegal scheme" being run by Storm and the CBA. This is preposterous.

Storm provided a flawed advice model that was implemented using a lending product provided by in the main CGI or Macquarie. Funds were invested in managed funds that were essentially "badged" for storm by either Colonial first state or challenger. I have read the product disclosure statements and the funds whilst expensive due to Manny's snout in the trough were structurally sound.

If an illegal scheme was in play,then Macquarie and challenger would also need to be party to the litigation.

I have no doubt that many people within all of these institutions knew about the risk associated with the storm process, but we need to remember that all of these institutions effectively produce and market investment and or lending products. They were not the providers of the advice. At the endof the day they probably knew of the risk in the storm model but chose to ignore it due to the massive volumes of business and therefore profit they were enjoying. At the end of the day someone bought their product because they were advised to buy their product by Storm.

The advice is where the issue is. I am aware of another group who use(or used) a similar strategy using a different home lender and a different margin loan provider. again the advoce is shonky, but the products used to implement that advice are fine

Your view irish, would be the consensus view on ASF I am pretty certain.

The model was good in a fairy tale bull market and everyone won, however it was over leveraged and badly monitored by the clients' advisers, the latter in my opinion having the greater culpability.

The banks were happy to lend and foreclose as they did, and bear some of the blame.

Manny must have one hell of a personality to have so many clients penniless, sticking with him in the Levitts adventure.

Does anyone know if Levitts are working for a percentage or charging fees?

gg

irish joe · 2 July 2010

Hello GG,

regardless of whether the ambulance is carrying cash ora clip of the ticket they are conflicted in that they are also representing former advisers as well.

I should be able to find out in the next week or so as I have some former storm clients who have made all of the enquiries and received documents from Levitts. On my advice they have chosen to continue with the SG/CBAresolution scheme,however they probably have an engagement letter that should disclose fees. That said, levitts may be using a storm disclosure model

Solly · 2 July 2010

"CBA in for a storm, lawyers vow"

"Lawyers promised a David and Goliath fight as they launched a class action against the Commonwealth Bank in Brisbane over the collapse of Storm Financial."

"...asserted that Storm Financial and the Commonwealth Bank of Australia effectively ran a managed investment scheme but it was never registered as such."

More in brisbanetimes.com.au here;

http://www.brisbanetimes.com.au/queensland/cba-in-for-a-storm-lawyers-vow-20100702-ztqg.html/queensland/cba-in-for-a-storm-lawyers-vow-20100702-ztqg.html

irish joe · 2 July 2010

The three hundred clients who Levitts allegedly represent have been duped before it ieven gets to court.

There is no legal basis for the claim that CBA and Storm operated an illegal managed investment.

Here are the facts

1.Colonial first state provided a badged product ( the index funds) under a registered scheme that had a produst disclosure statement that is required to be provided to clients by the adviser(storm). The product disclosure statement exists, I have one in my possession

2. money was borrowed by storm clients from the cba and others by way of home equity loans and margin loans. The institutions that lent money against property to pensioners and others of limited means have some blood n their togas but at best this amounts to unconsciable conduct which under the law only requires that they cannot profit from loans so judged. The borrowers entered into contracts and are still liable for the principal. This is why the CBA resolution is a generous one in that in many cases borrowers have a life interest and no requirement to repay the principal with no interest accruing. In other cases they have entirely forgiven the loan.

3. The margin loans were secured in the main against the managed funds referred to in point 1. When the margin call lending ratio (LVR) was triggered storm was notified and the responsible action by storm would have been to advise clients to either provide additional security or sell sufficient security to bring the loan back into order. Due to the inflated LVR Manny knew this meant the end. This is why his knee jerk reaction was t have clients sell down to cash which carries a lending ratio of 100%. What he didn't consider was the flaw in his advice meant that due to the inflated LVRS if clients went to cash they still could not find the requisite equity to reenter the market, thus he withheld the requests to go to cash and tried to reach an alternative arrangement that protected his interests and HIS INTERESTS ALONE. CBA had little or no alternative to sell down when some margin calls had blown out to in excess of 100%.

Clients should have been advise BY STORM of the risks associated with borrowing to invest.

That is the storm model in essence. As stated in my previous post, none of this represents an unregistered managed investment schem. In fact the products used or products like them are readilyavailable and when used properly there is nothing wrong with them.

Those stormers who have paid money to levits are throwing good money after bad

Solly · 2 July 2010

"CBA says Storm class action premature"

"THE Commonwealth Bank of Australia says a class action being sought on behalf of Storm Financial victims is premature and potentially denies the claimants a quick and certain outcome."

More from Alison Bell & AAP in the Herald Sun here;

http://www.heraldsun.com.au/news/breaking-news/cba-says-storm-class-action-premature/story-e6frf7ko-1225887307146

Garpal Gumnut · 2 July 2010

Solly said:
"CBA in for a storm, lawyers vow"

"Lawyers promised a David and Goliath fight as they launched a class action against the Commonwealth Bank in Brisbane over the collapse of Storm Financial."

"...asserted that Storm Financial and the Commonwealth Bank of Australia effectively ran a managed investment scheme but it was never registered as such."

More in brisbanetimes.com.au here;

http://www.brisbanetimes.com.au/queensland/cba-in-for-a-storm-lawyers-vow-20100702-ztqg.html/queensland/cba-in-for-a-storm-lawyers-vow-20100702-ztqg.html

I'm a bit confused here. Are Levitts saying that Storm and CBA are culpable? I was under the impression that Manny was in the Levitt's tent pissing out.

Are Levitts then going after Manny, Storm and CBA, and MQG down the track?

As the Levitts Lawyers seem to have

"...asserted that Storm Financial and the Commonwealth Bank of Australia effectively ran a managed investment scheme but it was never registered as such."

gg

irish joe · 2 July 2010

Interesting article Solly. levitts are feasting on a carcass.

Over 40 legals firms particpating in resolution scheme and levitts choose another path.

300 clients at minimum $5000 each is good chips. Some may be paying more.

Will be interesting to see at what point they fold the action and look to settle which will result in a similar outcome to resolution scheme but levitts will have their funds.

Fact that Ron jelich was the spokesperson for them in their roadshow means stormers should have run a mile.

On the redcliffe legend, Heard he was still getting paid becasue andrew o'brien was "looking after his clients". Now andrew has had licence revoked by infocus securities, he will need another source of income. I hear he is hawking a Multi level scheme

Solly · 2 July 2010

"CBA responsible for losses, Storm clients claim"

"Commonwealth Bank partnered Storm Financial in an unlawful managed investment scheme and was therefore responsible for its losses, a statement of claim has alleged today.

No amount of damages sought has been specified on behalf of four former Storm Financial investors chosen as representatives, which includes a vigorous Commonwealth Bank critic Sean McArdle."

More by Stuart Washington in the SMH here;

http://www.smh.com.au/business/cba-responsible-for-losses-storm-clients-claim-20100702-zslt.html

irish joe · 2 July 2010

GG,
I am pretty sure that even levitts would not invite Manny into the tent. He has merely crawled out from under his rock( a fairly flash rock from what i am told) to comment on the levitts case because it supports his positionthat it is all the fault of CBA. In his own words, "the truth will come out and soon.
Anyway I dont think Levitts do criminal law.

irish joe · 2 July 2010

GG,

I see you are still online. insomnia,wimbledon and this forum provide terrible hinderances to sleep. I trust you are enjoying a good red. I am currently talking cricket with "jim Barry"

specialed · 3 July 2010

irish joe said:
With respect to the margin call process, I had clients experience margin calls with CGI. The process which has been in place as long as I can remember is that CGI (AND MAcquarie) contacted the adviser to contact the client to rectify the situation. This is for two very good reasons. The adviser has the primary relationship with the client and is licenced to give the advice as to what options the client has with respect to lodging additional security, cash or selling down. Staff in call centres for any margin lender are generally not licenced to recommend that a client sell stock/managed funds. Frankly I would be incenced if CGI contacted my clients without first contacting me

So I was recieving emails from CGI when my clients went into buffer and or margin call. I am aware through a discussion with a former CGI staff member that these same emails were provided to storm head office. I am also aware through discussions with a former storm adviser that this was the process he experienced until his business was sold to storm, JC was the one who issues the edict that all correspondence come to HO and not to the advisers.

The chances of CGI being found to have not followed due process are about as good as those of the proverbial snowflake.

I am hopeful like many of you that ASIC come out with their findings soon so that stormers can stop chasing Don quixotes rainbows and get on with life.

Irish Joe,

Thanks for adding your perpsective and analysis of this affair. Given your experience as a FP what is your belief on the following.

1. What is the difference between industry standard practice and legal responsibility with regards to margin calls. Within this, who is the contrat between; the client, the bank and the advisor or just the client and the bank.

2. Why have the CBA been involved in the resolution process given it is not just those who recieved dubious loans who are being compensated.

3. What is your understanding of the recent high profile margin loans court case where the client was awarded full restitution for not receieving a margin call directly.

What love an "insiders " perspective.

specialed · 3 July 2010

irish joe said:
The three hundred clients who Levitts allegedly represent have been duped before it ieven gets to court.

There is no legal basis for the claim that CBA and Storm operated an illegal managed investment.

I was under the impression that once filed the judge will make an initial determination as to whether there may be a basis for class action which will then determine if it is actually alowed to proceed. Does anyone know if this is the case.

specialed · 3 July 2010

Garpal Gumnut said:
I'm a bit confused here. Are Levitts saying that Storm and CBA are culpable? I was under the impression that Manny was in the Levitt's tent pissing out.

Are Levitts then going after Manny, Storm and CBA, and MQG down the track?

As the Levitts Lawyers seem to have

gg

I think they are TRYING to argue that it was the banks responsibility to register the fund as a managed investment given how it was run. I doubt levitts would bother going after Manny and co, they, like all the other vultures know where the money is.

I'm still unclear where ASIC's responsibility is to go after Manny, rather than the former clients. Civil actions are generally only persued in order to gain financial restitution. If anyone wants to go after manny they would want to do it quickly and on their own as their would not be enough to share between all the clients. Would they even be able to secure any restituion given there was an initial case filed against Cassimatis wasnt there ?

Garpal Gumnut · 3 July 2010

irish joe said:
GG,

I see you are still online. insomnia,wimbledon and this forum provide terrible hinderances to sleep. I trust you are enjoying a good red. I am currently talking cricket with "jim Barry"

I do hope it is JB vino, not JB wig, discussing cricket with you, I met the latter at the Pack do recently and his knowledge of Wisden is atrocious.

Your contribution is much appreciated.

The Storm saga will be discussed for centuries to come in the same manner as the Tulip bubble mania in Holland still is now. The markets do get a too deep whiff of oxygen betimes and the silver tongued lizards come out of their holes to lead the poor sods in to penury.

Rather like the Pied Piper of Hamelin with a soporiphic tune.

And as us oprah fans know, the show ain't ova till the fat lady sing.

gg

specialed · 3 July 2010

Solly said:
"CBA says Storm class action premature"

"THE Commonwealth Bank of Australia says a class action being sought on behalf of Storm Financial victims is premature and potentially denies the claimants a quick and certain outcome."

More from Alison Bell & AAP in the Herald Sun here;

http://www.heraldsun.com.au/news/breaking-news/cba-says-storm-class-action-premature/story-e6frf7ko-1225887307146

"The class action is premature considering that Levitt Robinson has not pursued all the opportunities available under the Scheme."

Read more: http://www.news.com.au/business/bre...r-1225887307146?from=public_rss#ixzz0sYhIhEIP

As I understood it Levitt has been in touch with the CBA, but the claim is that the scheme itself allows the bank to bipass justice for the clients. The statements by the CBA appear to chose to ignore the anger felt towards them by the clients. For many, it will only be through the court system that they can find piece. Whether in their favour or not they will know who is responsible for this mess. There is no doubt many more would like to join a class action but time has simply ran out for them and they have had to "take the deal"......

Solly · 3 July 2010

"CBA and Storm 'breached' Corporations Act"

"THE Commonwealth Bank has been accused of entering into an unregistered managed investment scheme with Storm Financial, in a court action demanding that Storm investors be repaid in full for their losses."

More by Stuart Washington in the SMH here;

http://www.smh.com.au/business/cba-and-storm-breached-corporations-act-20100702-zu2c.html

Solly · 3 July 2010

"Storm clients mount class action on bank"

"Stephanie Carmichael, also from Levitt Robinson, said the class action involved about 300 disaffected clients."

"It's a potential class action of 1,200."

From AAP in the SMH;

http://news.smh.com.au/breaking-news-business/storm-clients-mount-class-action-on-bank-20100702-zrdx.html

Garpal Gumnut · 3 July 2010

Solly said:
"Storm clients mount class action on bank"

"Stephanie Carmichael, also from Levitt Robinson, said the class action involved about 300 disaffected clients."

"It's a potential class action of 1,200."

From AAP in the SMH;

http://news.smh.com.au/breaking-news-business/storm-clients-mount-class-action-on-bank-20100702-zrdx.html

How much is it costing each client do you know Solly?

gg

Solly · 3 July 2010

"Storm probe drags on"

"THE corporate regulator investigating the collapse of failed wealth adviser Storm Financial is resisting putting a time limit to its long-running probe.

...liquidators.....report is understood to recommend up to 57 charges against parties involved in the company."

More by Tony Raggatt in the Townsville Bulletin here;

http://www.townsvillebulletin.com.au/article/2010/07/03/151071_news.html

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