Storm Financial Group

[cuttlefish]

Investigative journalist and Emmy award winner Jonathon Hall is ABC lead journo. I quote his article:
"New South Wales Nationals Senator John Williams also addressed the function, promising to push for a Senate inquiry into the role banks played in the demise of Storm Financial."

Politicians love any opportunity for a 10 second media grab - lets see what actually happens.

I can see the court case:

Lawyer to Victim: So the bank lent you money that they shouldn't have?
Victim: Yes
How much did they lend you?
Victim: I don't know exactly, about $XXX
Lawyer: Did you sign this document that states the amount that the bank lent you?
Victim: Yes
Lawyer: And did you request the bank not to lend you this money?
Victim: No
Lawyer: Did you express to the bank that you did not want them to lend you the money?
Victim: No
Lawyer: Did you request the bank to loan you the money or did they bank offer to lend you the money?
Victim: My financial adviser recommended I loan the money.
Lawyer: Did you sign this document outlining the repayment requirements?
Victim: Yes
Lawyer: Did you intend to meet those repayments?
Victim: Yes
Lawyer: Have you met those repayments?
Victim: No
Lawyer: Why haven't you met those repayments?
Victim: Because I didn't have any money to make the repayments?
Lawyer: Are you stating you didn't have the capacity to make those repayments?
Victim: Yes
Lawyer: Did you sign this income declaration stating that you earnt $XXX per annum?
Victim: Yes
Lawyer: This income is sufficient to cover the loan repayments, have you lost your job?
Victim: No
Lawyer: Then why are you unable to make the repayments on the loan?
Victim: Because the income isn't as stated on the document
Lawyer: Are you saying you did not earn this level of income?
Victim: Yes
Lawyer: But you signed a document stating that you did?
Victim: Yes - but my financial adviser said it would be ok
Lawyer: You agreed to sign this because your financial adviser recommended it?
Victim: Yes
Lawyer: Did you realise that the income statement was incorrect when you signed the document?
Victim: No, I thought that it was correct
Lawyer: But you now realise you actually don't earn this amount?
Victim: Yes, the financial adviser said it would be ok.
Lawyer: Did you speak to your accountant to verify your income?
Victim: No
Lawyer: Did you check that the income matched the amount of money that you earnt from your payslips and investment income?
Victim: No
Lawyer: Did you check that the income on the statement matched the income stated on your last tax return?
Victim: No, I just trusted my financial adviser, thats his job, not mine
Lawyer: Did the financial adviser sign the document on your behalf?
Victim: No

etc. etc.

Not much hope imvho.

 

[sqwark7600]

For example - anyone that takes out a loan has a responsibility to ensure that they can repay the interest and principal on that loan.

Very easy to say.
Tell it to all the retail and investment banks that have failed. Maybe Mr Babcock and Brown would benefit from your wisdom or Mr Centro. Mr CBA is in the hole for about $30 to Mr Storm. Bank of Scotland, Barclays, UBS, etc etc are all in the hole for billions. Mr Obama is still shovelling money into the hole.
Also, margin lending has been around and used successfully by the market for 20 years.
With respect my point is that there is a lot more to this story than glib homilies.
:sheep:

 

[pilots]

Politicians love any opportunity for a 10 second media grab - lets see what actually happens.

I can see the court case:

Lawyer to Victim: So the bank lent you money that they shouldn't have?
Victim: Yes
How much did they lend you?
Victim: I don't know exactly, about $XXX
Lawyer: Did you sign this document that states the amount that the bank lent you?
Victim: Yes
Lawyer: And did you request the bank not to lend you this money?
Victim: No
Lawyer: Did you express to the bank that you did not want them to lend you the money?
Victim: No
Lawyer: Did you request the bank to loan you the money or did they bank offer to lend you the money?
Victim: My financial adviser recommended I loan the money.
Lawyer: Did you sign this document outlining the repayment requirements?
Victim: Yes
Lawyer: Did you intend to meet those repayments?
Victim: Yes
Lawyer: Have you met those repayments?
Victim: No
Lawyer: Why haven't you met those repayments?
Victim: Because I didn't have any money to make the repayments?
Lawyer: Are you stating you didn't have the capacity to make those repayments?
Victim: Yes
Lawyer: Did you sign this income declaration stating that you earnt $XXX per annum?
Victim: Yes
Lawyer: This income is sufficient to cover the loan repayments, have you lost your job?
Victim: No
Lawyer: Then why are you unable to make the repayments on the loan?
Victim: Because the income isn't as stated on the document
Lawyer: Are you saying you did not earn this level of income?
Victim: Yes
Lawyer: But you signed a document stating that you did?
Victim: Yes - but my financial adviser said it would be ok
Lawyer: You agreed to sign this because your financial adviser recommended it?
Victim: Yes
Lawyer: Did you realise that the income statement was incorrect when you signed the document?
Victim: No, I thought that it was correct
Lawyer: But you now realise you actually don't earn this amount?
Victim: Yes, the financial adviser said it would be ok.
Lawyer: Did you speak to your accountant to verify your income?
Victim: No
Lawyer: Did you check that the income matched the amount of money that you earnt from your payslips and investment income?
Victim: No
Lawyer: Did you check that the income on the statement matched the income stated on your last tax return?
Victim: No, I just trusted my financial adviser, thats his job, not mine
Lawyer: Did the financial adviser sign the document on your behalf?
Victim: No

etc. etc

Thats how it should read, but the lawyers will take the long way, and take the last of the money you have, you have lost.

 

[Julia]

- anyone that takes out a loan has a responsibility to ensure that they can repay the interest and principal on that loan.

Yes.

Storm didn't force people to take out loans, and every loan document you get from a bank clearly states the amount of the loan and the amount of repayments that are required. So I can't believe that anybody was unaware they were borrowing large amounts of money and what the repayments were.

This is where I have difficulty understanding the claims from investors that property values and incomes were inflated. When? By whom?
Did they knowingly sign documents with incorrect figures on them? If
so, any hysterical claims that they are going after the greedy banks will look pretty stupid.

Most Australian banks are reasonably conservative and I wouldn't have thought they would have lent excessive amounts across the whole range of Storm clients which is what seems to be being suggested.

Are lawyers telling distressed investors they will go for the banks because there's no money anywhere else? If so, as already pointed out, the banks will fight until doomsday.

What were "the assets" of Storm referred to earlier?

The legal fees of the principals alone will be huge.


No one has yet offered any answer to my question as to whether level of PI insurance Storm surely would have held would cover investors' losses.

Further question: it seems the banks, the ATO, the Funds etc are all creditors. Surely if there IS any money, they will get paid before the erstwhile clients get anything?

And let's not forget the fees that Worrells will charge.
A mortgage investment in which I was involved several years ago had considerable assets when it failed and was put into the hands of Worrells.
But by the time they had investigated, their fees used up all the realised assets.

 

[cuttlefish]

Originally Posted by cuttlefish
For example - anyone that takes out a loan has a responsibility to ensure that they can repay the interest and principal on that loan.​

Very easy to say.
Tell it to all the retail and investment banks that have failed. Maybe Mr Babcock and Brown would benefit from your wisdom or Mr Centro. Mr CBA is in the hole for about $30 to Mr Storm. Bank of Scotland, Barclays, UBS, etc etc are all in the hole for billions. Mr Obama is still shovelling money into the hole.
Also, margin lending has been around and used successfully by the market for 20 years.
With respect my point is that there is a lot more to this story than glib homilies.
:sheep:

Its very easy to say because it is true. People that borrow money have a responsibility to pay it back. Most people learn about this from a very young age, and if you sign a document stating that you agree to borrow such and such amount, and that you have this level of income, and that you agree to pay it back, then you will be asked to honour that agreement that you signed.

No amount of irresponsibility on behalf of the banks or financial advisers takes that fact away.

The banks were idiots in lending money to people in this way, but they didn't put the pen in people's hands.

Storm advisors may even have encouraged people to commit fraud in relation to income statements and encouraged people to borrow more money than they had any hope of being able to pay back, which is highly irresponsible and possibly illegal in some of the cases, but they didn't put the pen in peoples hands either.

I agree that these people are victims, but they need to also accept their own responsibility for the situation they are in - it can't all be offloaded.

 

[Waveglider]

If these investors believe that they will recieve any funds from a class action against the banks or storm farcial group they are unfortunatly kidding themselves.

Lawyers say you have a case (i.e. just watch us make heaps of money & you will get squat).

As several other posters have advised previously just move on

 

[Slight Edge]

The issue of serviceability is an easy one to understand. MOST clients never started with Millions invested. If you actually go through the history of advice, MOST initial advice was true and correct for the client at the time it was published.

Serviceability in most inception cases was based on surplus cashflow. Current retirees weren't retirees when a lot of this advice was given which is why they had unencumbered properties and surplus cash - (non dependant children etc). Margin loans were often added after the fact and at this time a clients tax return would indicate revenue from CMT's, Investments etc which all would have contributed to the serviceability of the margin...

If you do your homework, you'll see that the Margin loans were being capitalised at a rapid rate of knots in the last couple of years and clients understanding of "How" this was being serviced was glossed over with advisers. "Buyer Beware" may well be true, but the wheels did NOT fall off with the borrowing to invest - it fell off with the borrowing what you could afford and Storm's greatest brain explosion was using interest on interest on interest to perpetuate clients positions.

I know of clients who didn't understand how the last steps were paid for and can now see the stack of cards that have been built. These steps were presented to clients as investment "successes" and clients were shown LVR charts that indicated that their debt ratios were not only NOT compromised but within safe limits.

I'm not saying that Clients don't deserve some of the responsibility - but the bully tactics used in the last 18 months have been horrendous and I feel for those people who dared to ask the hard questions and get shot down.

I think people need to search a little deeper than some of the prima facie commentary - there are many parties at fault and yes, clients, as humans bear SOME of the blame - not all of it.

 

[daisy]

Hi So if u r a Storm client I would suggest u consider the following course of action:

1. Contact your home and margin loan providers and request copies of the actual loan application forms and associated consumer credit contract schedules - they must give them to u so be firm. It may take a few days for u to receive these documents.
2. Review the asset, liabilities and personal income details contained in the loan applications - look for irregularities such as: is your declared income correct or has it been overstated?.....etc etc

Mr Ramey, I thought a signature on a document meant something. and if the clients did sign these documents with overstated incomes assets etc. ?????

 

[daisy]

Sorry, Mr Ramm, I seem to have mispelt your name in my last post. My apologies.
But the question does remain if the clients signed those documents????

 

[Judd]

What I find interesting is that some of the Storm clients consider that they were unsophisticated. What does that mean? Somebody who does not know the difference between a direct share and a managed fund: who thinks that the All Ordinaries is just that; who is totally unaware that a loan from a lender be it against shares or a mortgage or credit card, has to be repaid at some stage? Or is it someone who saw or heard about the investment returns friends, relatives and/or colleagues were getting and decided that they wanted some of that?

Strewth, it is not so long ago that I lost my family close to $0.5m - and it could have easily been more. So who do I blame? The broker for executing my trades? The lender for allowing me to have so much money to lose?

Nah, decisions rest solely with the investor in my view.

 

[sqwark7600]

With respect the latest update-Some practical suggestions from this thread:

Step #1 Wind up all margin lending accounts, especially if your interest payment rate is greater than your interest accrual rate. If you have trouble with your bank use the services on the Banking and Financial Ombudsman Service~FOS. Their site is at:
http://www.fos.org.au/centric/home_page.jsp

So if u r a Storm client I would suggest u consider the following course of action:
1. Contact your home and margin loan providers and request copies of the actual loan application forms and associated consumer credit contract schedules - they must give them to u so be firm. It may take a few days for u to receive these documents.

6. If u are a Macquarie Margin Lending client then u should have been contacted by them informing u that the purchaser of the business (Bendigo Bank) has excluded Storm clients from the purchase - this means u must refinance or your portfolio will be liquidated. There are set dates for when this will occur. Please see a financial planner experienced in margin lending to assess your options and don’t leave it to the last minute.

Step #2 Calculate your personal balance sheet. There are some useful calculators on this site:
http://www.nt.gov.au/business/resources.cfm?resourcetypeid=1

Step #3 If Step #2 results in a negative outcome you can't live with, voluntary bankruptcy is a legal government regulated option. I understand that if you have a super fund that it remains intact, you can earn a living, keep a modest car and there are ways of restructuring to keep your house. You need to suffer it for 3 years and lose your credit rating for 7 years. The Insolvency and Trustee Service Australia ~ITSA is the government agency responsible for the administration and regulation of the personal insolvency system in Australia.
Don’t be forced into bankruptcy check out the consequences of voluntary bankruptcy. Make sure you restructure as necessary prior to declaration. ITSA is on:
http://www.itsa.gov.au/
and there is a lot of information on:
http://www.fredappleton.com.au

Step #4 If Step #2 results in an outcome you can live with I would liquidate everything that you can live without. I’d think of transferring any non-liquid investments eg. property syndicates or locked mutual funds into your super.
Step #5 Make your holistic health your number one priority. If your loved-one goes quiet or demonstrates a personality change, watch them like a hawk. Suicide is a real danger; stress is carcinogenic. There are plethora of free counselling services available.
Step #6 Set yourself a budget and live within it. There is a calculator on:
http://www.nt.gov.au/business/resources.cfm?resourcetypeid=1

Step #7 Identify and activate new potential income sources.

Step #8 If your house is under threat get a relative to buy you out at a reasonable price and rent from them, with the option to buy back in. Consider moving in with an aged loved one that needs care.

Step #9 Spend a lot of time on collating your Storm activities. Write every memory item up as a diary note and find and file every piece of paper, note, brochure etc. you have from Storm, your FP, the bankers, margin lender, responsible entity or fund manager.

2. Review the asset, liabilities and personal income details contained in the loan applications - look for irregularities such as: is your declared income correct or has it been overstated?
3. Make notes on what dealings you actually had with official bank staff during the loan process - did u provide copies of pay slips, etc? some of u may have never met with bank staff - again make notes of these details.
4. Compile all your storm documents and records into a coherent set in chronological order.

Step #10 Every time you speak to someone on the phone related to your Storm situation take their full name and also request a reference number (some companies do keep phone logs). Write up a diary note detailing the conversation.

Step #11 Once you and yours are stabilised go after those that caused this with a vengeance. You have many covenants and powerful regulations crying out to lend a hand. Do it with a consolidated class action. For past precedence start with:
http://www.superreview.com.au/Article.aspx?ArticleID=218427
http://www.investordaily.com/cps/rde/xchg/id/archive/IFA0000000160.xml?rdeCOQ=SID-3F579BCE-4C8B1C13

5. Contact either Slater and Gordon (07) 3220 2555 or Connolly Suthers (07) 4771 5664 and register with them, then make a time to go and meet with their lawyers and review the information collected in steps 1 to 4.

Step #12 Don’t underestimate the power of networking. Communicate with your fellow Storm victims, join any group that they have set up to discuss the problem and their strategy. Seek out the Storm Investors Action Group.

It is up to each individual to determine what they wish to do (either fight or walk away) and I wish them the best in what is clearly a difficult time regardless of which direction they choose.
Best regards
Carey Ramm
Principal Economist
AEC Group Ltd

At each step seek advice as there are a multitude of organizations and agencies waiting to provide gratis help.
Can anyone add or insert a step or two? If you are a specialist please contribute and give some guidance or direction on your Step specialisation. My thanks to Mr Carey Ramm.
:sheep:

 

[daisy]

I'm not saying that Clients don't deserve some of the responsibility - but the bully tactics used in the last 18 months have been horrendous and I feel for those people who dared to ask the hard questions and get shot down. ..........

I think people need to search a little deeper than some of the prima facie commentary - there are many parties at fault and yes, clients, as humans bear SOME of the blame - not all of it.

I have a feeling some of this is probably addressed at my rant earlier. I must have got up this morning and put my opinionated hat on.
Maybe I didn't express myself very well but if this is directed at my early morning bigmouth session I would like to clarify that at no point did I intend to lay blame at anybody's doorstep.

Blame as far as I am concerned is one of the most pointless of human emotions because it changes absolutely nothing.

What I was trying to express was that if you see yourself as a victim of someone else's behaviour then you deny the fact that you are in charge of your life.
If you see yourself as a victim of your own behaviour then you are able to acknowledge the fact that you are the person who has control over your life, look inside yourself to see where you have made mistakes and attempt to change those things about yourself which have got you into stormy waters.

This is my personal philosophy.

 

[sqwark7600]

What I find interesting is that some of the Storm clients consider that they were unsophisticated. What does that mean? Somebody who does not know the difference between a direct share and a managed fund: who thinks that the All Ordinaries is just that; who is totally unaware that a loan from a lender be it against shares or a mortgage or credit card, has to be repaid at some stage? Or is it someone who saw or heard about the investment returns friends, relatives and/or colleagues were getting and decided that they wanted some of that?

Strewth, it is not so long ago that I lost my family close to $0.5m - and it could have easily been more. So who do I blame? The broker for executing my trades? The lender for allowing me to have so much money to lose?

Nah, decisions rest solely with the investor in my view.

I think we are much less unsophicated than we have ever been and I bet there are more punters in this world who can dissitate about collaturalised debt obligations as well as margin lending exit strategies.
Who do we blame for the biggest share collapse since the great depression? We will be blaming in hindsight and ad nausium, with the usual suspects as scapegoats.
So like you did yourself, let's just get on and fix it and with the hope that maybe some of the unfortunates amongst us can map out a way of picking up the pieces and the regulators can yet again try to ensure that it doesn't happen again.
Let the horse floggers desist.
:whip

 

[daisy]

I have a feeling some of this is probably addressed at my rant earlier. I must have got up this morning and put my opinionated hat on.
Maybe I didn't express myself very well but if this is directed at my early morning bigmouth session I would like to clarify that at no point did I intend to lay blame at anybody's doorstep.

Blame as far as I am concerned is one of the most pointless of human emotions because it changes absolutely nothing.

What I was trying to express was that if you see yourself as a victim of someone else's behaviour then you deny the fact that you are in charge of your life.
If you see yourself as a victim of your own behaviour then you are able to acknowledge the fact that you are the person who has control over your life, look inside yourself to see where you have made mistakes and attempt to change those things about yourself which have got you into stormy waters.

This is my personal philosophy.

I've just realised I used the word stormy. There was no pun or implication intended.

 

[awg]

Yes.






No one has yet offered any answer to my question as to whether level of PI insurance Storm surely would have held would cover investors' losses.

Hi Julia,

see attached, $100,000 is the quoted figure

http://www.theage.com.au/news/busin...-under-scrutiny/2007/03/19/1174152976959.html

Hi



So if u r a Storm client I would suggest u consider the following course of action:



Carey Ramm
Principal Economist
AEC Group Ltd

Excellent post in my opinion.


FWIW, I think ASIC will want to make an example of the Storm principles, if they have breached ANY regs, cause they have made ASIC look incompetent.

 

[Glen48]

can see the court case:

Lawyer to Victim: So the bank lent you money that they shouldn't have?
Victim: Yes
How much did they lend you?
Victim: I don't know exactly, about $XXX
Lawyer: Did you sign this document that states the amount that the bank lent you?
Victim: Yes
Lawyer : If you had of made a large profit would you give some money back to the Banks?
Investor: errr No why should I?
Lawyer : What would have done if you made a profit?
Investor: Give some to my kids, buy a new car, pay off the house, play the Pokies.

 

[sqwark7600]

With respect:

I have a feeling some of this is probably addressed at my rant earlier. I must have got up this morning and put my opinionated hat on.

I read your posts and most others on this thread with interest and stimulation.

Maybe I didn't express myself very well but if this is directed at my early morning bigmouth session I would like to clarify that at no point did I intend to lay blame at anybody's doorstep.

Nor is that reflected in your past writing style.

Blame as far as I am concerned is one of the most pointless of human emotions because it changes absolutely nothing.

Blame in my understanding in itself is not an emotion it is a judgement of causal effect. Whereas, the urge to blame is a common emotion and for many the misplaced use of the victim's mantle has worked well esp. for the civil libertarians and politicians amongst us.

What I was trying to express was that if you see yourself as a victim of someone else's behaviour then you deny the fact that you are in charge of your life.

And such a denial could be valid. If someone has overwhelming, professional, statutory, legal or illegal influence or charge over your actions and options or has gained your unwarranted trust, their behaviour being out of your control, then is can be said that they are partially to blame for your situation as a result. eg. Bernie Madoff/Dr Patel/the holocaust perpitrators/captain of the Titanic/Storm maybe. And so we have our time honoured legal system and the courts to judge.

If you see yourself as a victim of your own behaviour then you are able to acknowledge the fact that you are the person who has control over your life, look inside yourself to see where you have made mistakes and attempt to change those things about yourself which have got you into stormy waters.

I fully agree. And so Storm victims should first proceed to take control of their lives and then seek a remedy in the courts for those that can be shown to shoulder some or any of the blame. It a the democratic right we enjoy.

This is my personal philosophy.

And so may it be.

 

[Sir Osisofliver]

What I find interesting is that some of the Storm clients consider that they were unsophisticated. What does that mean? Somebody who does not know the difference between a direct share and a managed fund: who thinks that the All Ordinaries is just that; who is totally unaware that a loan from a lender be it against shares or a mortgage or credit card, has to be repaid at some stage? Or is it someone who saw or heard about the investment returns friends, relatives and/or colleagues were getting and decided that they wanted some of that?

Strewth, it is not so long ago that I lost my family close to $0.5m - and it could have easily been more. So who do I blame? The broker for executing my trades? The lender for allowing me to have so much money to lose?

Nah, decisions rest solely with the investor in my view.

Judd they mean a sophisticated investor as defined by Australian Corporations Law

http://www.asic.gov.au/asic/asic.ns...issued+by+a+qualified+accountant?openDocument

If you have assets over 2.5 million or an income greater than 250,000 for the last three years you are entitled to be classed as a sophisticated investor which means that.

a) You do not need to be given a prospectus to participate in a capital raising.
and more importantly

b) You do not need to be provided with a Statement of Advice

There is other stuff - go look at the link if you are interested.

cheers

Sir O

 

[vincent191]

What good is a PI insurance policy? PI only covers negligence, error & omissions. In this case I wonder if it fits into any of the three criterias?

The next important fact is, PI insurance requires you to notify the insurer the moment that you are aware of any circumstance that could lead to a claim.

Hence, for the policy (if they had one) to respond, Storm would need to notified the insurer the minute they knew the fund is losing money due to their negligence. Notifying the insurer after the Company had failed is too late.

If I was the Insurance Company, I will be sleeping very well. In my opinion if Storm did have a PI policy and you were to lodge a claim against the policy, you will have little chance of success.

Remember, if you had lost money because the share market went down is not in itself a valid reason to lodge a claim. You will have to proof that Storm was negligent and made an error in giving you the advise.

The simple reasoning that "I had losted all my money following the share market collapsed and it was Storm that advised me to buy shares, therefore Storm had been negligent in giving me that advise" will not wash in a court of law.

Storm could have given the advise in good faith and for years investors were making a profit and never complained. Now they have collapsed and suddendly it is negligience?? Come on, pull the other leg.

 

[daisy]

Sqwark,
When I first learnt about investing I read lots and lots. A common thread was that in the world of finance you should never rely on hope.

I guess what I'm worried about is that some of the people that got caught up in this didn't really understand what they were doing and hoped.

Now my concern is that once again these people are relying on hope.re litigation etc.
Personally, I think they've got Buckleys. It may be unjust but as they say the law is not about justice.

That indemnity thing may get them a little back. I don't know enough about that to analyse it but from the looks of things it won't be that much.

I know you keep on saying get your life together first but if they are banking on winning court cases then that hope will colour the life that they are trying to rebuild and as Cuttlefish said take energy away from the monumental effort they are going to have to make just to put the pieces back together again now.

Everybody has the right to choose how to handle their lives but hope does not an informed decision make. Maybe I'm just being an overprotective mother hen......