Storm Financial Group

Here's a possible interesting film due for release today

FILM:
'Margin Call': Calm Before the Storm of 2008 Financial Crisis

Posted by Jeffrey Brown and Saskia de Melker , October 21, 2011
The 2008 financial collapse is a complex phenomenon to fathom. It's an even harder phenomenon to recreate in a cinematic narrative. 'Margin Call,' a film that opens in theaters Friday, takes on that challenge and offers a fictional account of the first 24 hours inside a Wall Street financial firm as it discovers that it's over-run with toxic, essentially worthless assets.

The director of the film, J.C. Chandor, drew on his own experiences to build the story's narrative and characters: His father worked on Wall Street for Merill Lynch for more than 35 years, which gave him a unique insight into the world of traders.

"I knew why these people made the decisions that they do, why they get hired, why they get fired, why they get promoted," he said. Chandor himself had taken out a loan to invest in renovating a building in Manhattan several years back. Halfway through that project, he was advised to sell early. "I started to think back on what it must have been like to be an insider and actually really feel like the world was going to come apart but still seeing leaders of investment banks hitting the accelerator instead of the brake pedal," Chandor said.

"Margin Call" is full of intensity, but it's a quiet drama. Don't expect any explosive face-offs between villains and heroes. Rather, most of the action unfolds through the dialogue of traders talking calmly on the phone at their desks and conversations between executives in suits in austere conference rooms. Chandor admits that he's surprised that audiences are kept on the edge of their seats since the film is "essentially about information coming across fairly static forms like computer screens and pieces of paper," he said.

The film is Chandor's directorial debut. Despite the low budget, short shooting schedule (just over two weeks) and limited location (a single floor of a skyscraper in lower Manhattan), he managed to line up an all-star cast. He credits the film's force to the performances of Kevin Spacey, Jeremy Irons, Paul Bettany, Stanley Tucci and Demi Moore.

I for one appreciate your honesty Harleyquin. I can only imagine what you and the other Stormers have gone through.

And also your attempts to explain your mindset when the fees were presented to you. I hope you don't feel as though I have been badgering you, because that isn't the intention at all.

With regards the fees, did they make any outrageous claims that you could expect this and that? Did you think that perhaps because it was borrowed money that was paying the fees that somehow it was cheaper than if you had have dipped into your own pocket?

It certainly seems from some of your previous posts that the risks inherent in your strategy were effectively glossed over, or made to sound nowhere near as risky as what they really were. Perhaps it was the thought that "gee we can get all this for minimum risk, we would be crazy not to do it" that swayed you and others?

I wish you luck, I really do. As I have said previously, I think as your adviser Storm bear the brunt of the blame for putting you and others into a high risk strategy that most clients didn't fully comprehend the risk of, and they failed in their duty to look after you as the markets tumbled. They screwed you prior to the GFC, even though it may not have been reflected in the value of your portfolio.

Certainly, if the banks are proven to have done wrong by you and other clients then I hope you are compensated accordingly.

Igetit,

As I have said before, if it can be proved that the banks have broken any laws and agreements or whatever in all of this, then they should pay accordingly. No issue with that.

I guess we will wait and see what this documentation you refer to reveals.

You in all your posts have focussed specifically on the banks, and in particular the margin call fiasco which sealed Storm and its clients' fate. Storm and its advisers seem to have been overlooked in your criticisms.

What are your thoughts on the strategy itself?

*The strategy of double gearing investors who, evidently by comments on this forum and in the PJC submissions, did not understand the huge risk they were taking, and for many didn't need to take this level of risk to live comfortably?

*The strategy to pass off investing in different index funds as diversification?

*The strategy of taking 7% up front to monitor the market for them?

*The strategy to get clients to increase their gearing when the market rose and their LVRs dropped, or when their sophisticated software suggested that their house could be revalued?

*The strategy of keeping clients invested as the market was tumbling from its highs, waiting until investments were forcibly sold via the margin calls (regardless of who did or was supposed to issue them), rather than safeguarding them earlier?

Yes the banks provided the funding for this (yet I haven't seen any evidence that the banks broke any laws by approving loans or margin lending products- there have been suggestions that Storm reps "misrepresented the truth" on applications), but it was Storm who sold the strategy to clients on a one size fits all approach which goes against the very basic know your client rule that financial advisers need to abide by.

Storm screwed the clients well before the GFC came along. The banks may have just inflated the level to which they were screwed.

SJG 1974,

Hello there,

Not that I don't want to address all of the issues you would like my opinion on. It's just that I think by doing that I end up like looking like an apologist for Storm. I can assure you I am not. Far from it.

I guess my opinion is, if people accepted the advice passed on to them by Storm, they must have felt comfortable with that. Not really sure what else to say. Weather it was good, bad or indifferent doesn't really matter at this stage. Personally, in my life, I've received both good and bad advice on a whole range of different issues. That's how it goes. Don't suppose it would be any different with financial advice.

My issue with the BANKS, however, comes to trying to get to the bottom of the true nature of the relationship they had with STORM. Was it really, as you suggest, this simple arms length impersonal association between the Margin Lending division of a Bank and just any other Financial Planning firm - or something more?

For example, as you know, the CBA gave STORM its own BSB (Branch Number - BRANCH NUMBER FOR GOODNESS SAKE!!!!!!) so prodigious was the volume of work flowing to them from Storm. I am not aware of any such association existing between any other financial planner and a Bank. Anywhere. Purely arms length or a little more to it. I have a sense that in the end Storm morphed into the Margin Loan client of the Bank and the real clients (the ones we are all meant to be concerned for as the victims in all of this) - became something else. Cannon fodder springs to mind.

I just get the sense that the Bank dropped the ball by getting too palsy with Storm - they did love writing those loans. Which allowed Storm to become progressively more emboldened and push the limits further and further for their clients. Some of those LVR'S I have seen from NOV, DEC 2008 are catastrophic. STORM DID NOT SET THE LVR. Their - dare I say it, partner - did. You do understand that there would have been some high end discussions between both interested parties before some of the things the BANK did with regard to its margin loan parameters were signed off on.

If the BANK (that's THE BANK - not Storm) allows the LVR to run higher, then capacity is increased for Storm to promote more borrowing to its clients. Banks from 2005, so I am told, really, really liked to lend money. Apparently that's how they make theirs.

So much synergy. So much complimentary endeavor. They must have been so, so happy together in the better days. Things that make you go hmmm....

Just to finish: I have a sense - OK I've seen one or two things that you may not have - that it was a result of abuse in tandem that saw so many people harmed. I am not an apologist for Storm, can you say the same for yourself about the Banks?

I quite like this by the way. You mentioned "all my comments to date" I think this is about number 6 - a few less than you I'm guessing (and I'm not even warmed up - gloves well and truly still on). Lets continue to have fun.

No i am certainly not an apologist for the banks...far from it. As I have said, if they are proved to have done wrong, then they should be made to pay.

Having taken an interest in this from around the time this thread started and read through the thousands of posts over that time, it strikes me that overall the banks are seen as the bad guys moreso than Storm.

Perhaps that is a result of Manny and his public blame game and refusal to admit any wrongdoing on his part, and the banks silence on the issue, I don't know.

Perhaps it is because the banks have deeper pockets and are more likely to provide compensation to the victims?

Perhaps clients can't see any wrong in Manny and his crew, but can with a big, faceless, cold hearted, money hungry multi billion company like the bank?

I don't know what it is, but IMO clients got screwed by Storm well before they got screwed by the banks. In fact, the clients got screwed as soon as they signed on the dotted line to accept their shoddy advice for their ridiculously high fees....that was the beginning of the end for them unfortunately.

And this LVR stuff...while Storm may not have set it, they did accept and negotiate this great deal on behalf of their clients, and by doing so allowed their clients investments to fall to the brink, when any good financial adviser would have taken a much more conservative approach.

I doubt very much that anyone from the CBA was holding a gun to Manny's head and telling him to gear up clients more and more, and wait until a margin call before selling down investments. I would have thought a good adviser, with clients' interests at heart and not his own, would have made a move before the final margin call fiasco, with his years of industry experience telling him that his clients were well and truly up the creek.

Look the Banks and Storm may have been in bed together, I don't know. You seem to know all the specifics. I wonder how???

It takes two to tango, but unfortunately it appears more people are prepared to accept that it was all the bank's fault, when it was Storm that took them by the hand and led them into the gas chamber all the while telling them they were going to have a nice hot shower.

SJG 1974

Well I am certainly glad we've got that cleared up.

Now, lets accept the advise was shoddy and expensive. Bit like a second hand car we've all bought at one point or other in our lives. Indeed, don't know about you, but I usually have the feeling that no matter what it is I've just bought, I paid too much for it. And it's invariably got something wrong with it.

Anyway, I am relatively new to this, and I have seen lots of threads that are quite long winded. So I will endeavour to be brief.

The issue is not the MARGIN CALL. The issue is NOT receiving the MARGIN CALL. Over the years I know many investors who have received margin calls on their loans and dealt with them. You would be aware of the mechanisms by which they could be dealt with.

Some people don't panic when this occurs; indeed, if funds are at hand - buying in a falling market is not such a frightening proposition. You've read, just like me, about buying low and selling high; when the streets are red with blood that's the time to get in etc, etc. Not for everyone; but nothing wrong with waiting for a margin call and meeting it. That is why the product offered by the BANK provides for such a scenario. If not, then they would say we don't like you stretching yourself to the point of MARGIN CALL so where going to do away with that and introduce BUFFER CALL. Much nicer on everyone. But that is not the case.

I was not there and don't know who could or could not manage a margin call. But you do not take out a margin loan not expecting you won't receive one. You can. And, in the case of Storm Clients, they should have. All the other clients of financial firms going around were receiving them during those hectic times. Which begs the question, lots and lots of other financial firms clients were in MARGIN CALL territory; NOT only STORM'S. Something you seem not to have acknowledged. Not every financial planner quarantined his clients from Margin Call. Hell, I know some folks who said they didn't want to hear anything from their Margin Lender until they were actually in Margin Call. "Great buying opportunity". These were dealt with according to the options available to the client. As I say, not for everyone, but that is why the product is designed the way it is - to allow people the opportunity to run things to the wire if they wish.

Why did Storm's Clients not get the CALL? What agreement was struck. Which party had an obligation to advise THEIR MARGIN CALL CLIENT of any changes to the way they would be managing that individual's margin loan. The LOAN AGREEMENT was always between the BANK and the CLIENT. THE BANK, THE BANK, THE BANK. The Bank has let the people down. BAD ADVICE, HIGH FEES, etc, etc. No doubt. But not having an opportunity to respond to a margin call was the non recoverable blow.

"THEY MAY HAVE BEEN IN BED TOGETHER; I DON'T KNOW?"

Well, I do. It ain't a pretty story. Gut churning deceipt and corruption. I'm still having fun by the way. But not nearly as much as when the BANKERS have to put their hand on the bible and start telling the old....

Igetit , you agenda is clear. It is the banks' fault, and given your apparent intimate knowledge of their wrongdoing, I am guessing you were very close to the action.

Yet again, your comments overlook some common aspects of Storm's "advice", which is how they got into this mess in the first place....they sold the strategy which is flawed in the extreme and entirely inappropriate, not the banks.

"Some people don't panic when this occurs; indeed, if funds are at hand - buying in a falling market is not such a frightening proposition."

True, but then again most people havent mortgaged their house and then taken out a margin loan. I would say anyone in this position would panic.

"But you do not take out a margin loan not expecting you won't receive one. You can. And, in the case of Storm Clients, they should have."

Again, true in most cases, except when reading how clients were sold this shoddy plan, Storm made it seem like the world would have to be about to collapse for them to get a margin call. And they were told that there were protection mechanisms in place to help protect them. Isn't that what Ignite or Phormula or whatever their crummy software was supposed to be for? Clients were told they wouldn't lose their houses. Manny told clients as their world was ending that everything would be OK.

So was the extent of Storm's management of their portfolios to let them get to a margin call, and let the bank deal with it? Gee thats great management and protection isn't it?

So I doubt very much that many of the clients expected Storm to let it get to the margin call stage. And of course, we have the inflated LVR which means clients had even less chance to make their money back by the time the margin call came (whether it actually did come or not).

Yet you continually overlook these simple facts which were the cause of the problems in the first place.

"Not every financial planner quarantined his clients from Margin Call."

True, and then again there would be very few planners who motgaged their clients to the hilt and had their whole financial existence wrapped up in a margin loan. Are you starting to get the picture yet???


"These were dealt with according to the options available to the client. As I say, not for everyone, but that is why the product is designed the way it is - to allow people the opportunity to run things to the wire if they wish."

At the risk of repeating myself, most other clients would have options available to them, given they wouldn't have everything tied up in a margin loan. Storm cleints however, what options did they have...devastation was around every corner because Storm had let them fall to the precipice.

I don't know what agreement Storm had with the bank about the margin calls. To me, the clients were already stuffed by the time the margin calls came (or should have come when the LVR hit the inflated limits). the damage was done due to double gearing promoted by STORM, not the BANKS. Strategy screwed them, not the banks.

The entire margin call debate wouldn't have been such an issue if clients werent geared up to the gills by salesmen who were rewarded by how much they could get the clients to invest. And even if the margin calls came when they should have, just what chance did clients have to respond? Had no equity to pump in the reduce the LVR (unless they borrowed more against the house), had to therefore sell and given the level of debt they had no hope of recovering even a fraction of their losses. As Doobsy said and his analysis showed...screwed....by STORM. There are lots of could haves and what ifs but they are no good to clients now because their advisers sat on their hands and didn't protect them like they said they would. And please don't use Manny's scrambled data line as a defence, because anyone with half a brain could see the market was falling by the day. Perhaps that was Manny's problem?

Just how do you know so much detail, and how close are you to Manny and his henchmen, because you seem to be peddling the same lines that he has in his crusade for justice...its all the nasty banks fault????

You know my views, I have already repeated them ad nauseum, and I certainly know yours and they won't change despite what I or anyone else says. I just hope your mate Manny pays for what he did to those clients, becuase while he was sitting in one of his palatial mansions counting the proceeds of his 7% up front fees, his clients were being taken to the poorhouse by STORM.

At the risk of being flamed...

One of the things that particularly frustrates me about this forum is that so many people who post here seem to believe that the world is black or white.

This travesty is one of the more complex financial disasters that has been seen in Australian history. It is not as simple as it being (a) the client's fault, (b) the Bank's fault (c) ASIC's fault, (d) Storm Financial's fault or (e) any combination or other possibility. To find the truth requires millions of pages of documents, interviews and more than a dash of perseverance, millions of dollars and sheer bloody mindedness and probably gallons of Veritaserum poured down people's throats.

If someone disagrees with your belief that it is the Bank's fault, it doesn't put them in the pockets of the bank. To imply so is rude.

If someone disagrees with your belief that it is Storm Financial's fault, it doesn't make them Manny's best mate. To imply so is to deliberately set out to insult them.

If someone disagrees with your belief that financial planners are wicked, greedy con men it doesn't make them wicked, greedy con men out to separate a fool from their money. To imply such a thing is disrespectful to all parties.

If someone disagrees with your belief that ASIC didn't do enough to prevent it, it doesn't make them pro-establishment apologists. By now I am sure you get my point....

Insulting someone in the manners outlined above (whether it is strong and obvious or subtle) shows a lack of finesse and an obvious inability on your part to put a point across using truth and fact. Using an insult weakens your message by distracting from the point you are trying to make.

This matter isn't simple and it won't be solved by opinion. In this case opinion gets us nowhere but backwards. Opinion is a waste of energy and time! What we need is cold hard proof. I look forward to seeing that proof in the future as cases go to court and people learning what actually happened. I then look forward to having it explained in lay terms so that real people can avoid it happening again.

cheers
maccka

BTW - has anyone noticed this site?

http://www.commonwealthbankdeception.com/action.htm

cheers
maccka

Hi there SJG 1974,

Well yes and no. My agenda, in some respects, is a bit like yours. Only the opposite.

I haven't been overly critical of yours; yet you seem very resentful of mine. But that's OK.

I am pretty sure I've acknowledged the advice from Storm to its clients was overpriced and poor.

So I will leave it at that for the moment whilst you check that that is in fact what I said. Once that is sorted I'll get back to you.

So - did you check my last thread? OK - lets proceed.

Just briefly though, Manny was only able to ratchet people's Margin Loans up to certain levels, because those levels were set by THE BANK. You need to ask why that was. Why? Who was to benefit from that? Long and detailed discussions were held regarding this issue. You seem like you have your head around a lot of the detail. Just pause and think a little further. You are right - Manny took everyone to the precipice. Well not everyone - but lots. But how was this made possible and why?

The pebbles are still in my hand grasshopper. The Margin Loan agreement was the BANKS DOCUMENT. There were terms and conditions attached to it. They talk, for example, of what they will do if you enter MARGIN CALL. At no point do they discuss what they will do if you enter NEGATIVE EQUITY. Indeed, the term NEGATIVE EQUITY is never mentioned in any Margin Loan document I have reviewed and yet, by providing clients with a product with an LVR of 93, 94....99% - meant an overnight drop of 10% would put THEIR MARGIN LOAN CLIENTS into this strange world of NEGATIVE EQUITY. They had created an enviroment that did NOT allow them to provide their clients with the MARGIN CALL that they said they would. This was their product. Not Storm's. Sorry - but Storm did not develop that product; they used it. But it wasn't there's. Can you acknowledge where the responsibility lies? The MARGIN LOAN product offered by the BANK was not actually fit to take to the market. It was flawed. But they - in conjunction with Manny and his gang - took it to the masses. Why was that I wonder? Oh I think IGETIT. You will too. But don't get sour. We are meant to be having fun.

There's lots more....Incidentally, not that I'm easily offended - but I am certainly "no mate of Manny's". I have far more altruistic motives. So take a deep breath and let me hear from you.

Harleyquin said:

Hindsight would be a really great thing to have before the event!!! I think, and wonder if this applies to other stormies, if the fear of being unfinancial in retirement , really did have an impact on why we believed storms spiel and allowed our normal common sense approach to fly out the window during this time. Guess I'll never really know. I have never been conned by anything before but approaching retirement was a scary time and I think storm knew this and they came at us from this angle.

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I completely get this. We all know that living just on a government pension is a pretty miserable proposition. So the principle of wanting to be self sufficient in retirement is what we should all aspire to.

At the end of the day some of you could probably call me a lazy investor, from my point of view I was busy working and had no interest or time in learning about financial planning, I just wanted to go in and pay someone who knew what they were doing to do it all for us, I had no experience and had read how 'stupid our age group was, they only know how to put their money in the bank and in ten years time their money will not keep pace with the rate of inflation and they'll struggle in old age' I think others would have read this spiel and storm compounded this line of thought.

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I have several friends who are very well educated, very successful in their chosen careers but when I try to get them to take an interest in their finances, their eyes just glaze over.
I just don't understand why any intelligent person would devote their energies to learning about other aspects of life but decline to take even the most basic interest in becoming financially literate, when it's not difficult at all. None of us were born with financial nous embedded into our DNA.

HQ, this is not 'getting at you', just a general comment about a considerable proportion of the population.

I understand that many of us don't have any natural affiliation toward financial matters. I feel the same about technology. If my computer fails, I have no interest in understanding why it has failed, I just want to pay someone to come and fix it smartly.
But that just involves a small amount of money, not all my assets.

Today we have no financial plan, have no idea what the future holds financially and will never approach another financial planner for help. I can see a time in the not too distant future when we'll have nothing left and I feel very disappointed in the whole financial industry.

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You've said that you have come a long way in two years. Hopefully, with the passage of a bit more time, you'll feel able to revise the above attitude with its pessimism and actually start to educate yourself. As I've said so often, it's not nearly as difficult as you seem to imagine. My original offer of walking beside you in this process stands.

I have one huge problem with this whole disaster and that is, all of the educated investors on this forum and everywhere else all knew exactly what storm were doing and how super risky it was.

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Hold up there, HQ. I, for one, had never heard of Storm until the **** hit the fan.
If you'd come on to this forum and explained the "strategy" that Storm had suggested to you, i.e. the double gearing, I don't doubt there would have been multiple instant responses of "that's crazy, don't even consider it".

Despite your assertion that Storm was a 'widely known and respected financial planner" I've not come across anyone outside of North Qld who had ever heard of them prior to it all coming unstuck.

Yet the whole Australian Banking system maintain that they had no idea what storm were doing. It just doesn't ring true to me.

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Not sure why any bank who was not directly involved with Storm would be expected to have any interest in what some Townsville FP firm was doing. They are probably all pretty busy just looking after their own clients.
And, for that matter, if they did hear about it, what do you think they should have done about it? It was none of their business, was it?

Was interested to read this item yesterday

The Association of Financial Advisers (AFA) will step up its push for a delayed start date to the federal government's financial advice reforms to ensure consumers are not lost amid the changes..............

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I hope you're not placing all your confidence in these changes being much more than window dressing HQ. Shonky operators will still find a way to con people.

SJG1974 said:

I don't know what it is, but IMO clients got screwed by Storm well before they got screwed by the banks. In fact, the clients got screwed as soon as they signed on the dotted line to accept their shoddy advice for their ridiculously high fees....that was the beginning of the end for them unfortunately.

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+1.

SJG1974 said:

I don't know what agreement Storm had with the bank about the margin calls. To me, the clients were already stuffed by the time the margin calls came (or should have come when the LVR hit the inflated limits). the damage was done due to double gearing promoted by STORM, not the BANKS. Strategy screwed them, not the banks.

The entire margin call debate wouldn't have been such an issue if clients werent geared up to the gills by salesmen who were rewarded by how much they could get the clients to invest.

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Julia said:

My original offer of walking beside you in this process stands.

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HQ,
Hope Julia doesn't mind my saying this, but from what I have observed on this forum, she has great financial acumen. This is a terrific offer. You should jump at it, even if you never plan to look after your own financial affairs.

Enjoyed reading your comments Julia and apologise I certainly didn't mean that anyone on this forum knew what storm were about pre-collapse, I meant that as soon as you all realised what their strategy was, you understood.

This is why I can't understand why the FPA, ASIC and the banks didn't get it pre collapse.

I agree with Ferret, Julia, I think that you know that I admire your investment skills, unfortunately I'm a bit like friends of yours, my eyes do indeed glaze over sometimes. However I do appreciate the offer, and wish that I was game to try. We are both interested in learning about shares and the site that you've given me really is brilliant, however after storm, I'm just too wary and untrusting.

I have other personal reasons for not caring too much about investing at the present time. I'm not going to bore anyone with the details, but a member of my immediate family has major health issues and that is taking up a large proportion of my time. I've come a very long way in two years and in time I hope that I can change my mindset, for the present though it's going to have to go on the backburner.

You did make a comment about yesterdays news item, I don't place any faith in what they are saying, in fact I'm of the opinion that neither political party has any real idea how to approach the problems in the financial industry. Everyone has an opinion but no one has any concrete answers. I'm getting more answers on this forum, and not just this thread, than from government policies on the subject.

Thank you for your PM Julia and appreciate your comments, I tried to reply however have obviously made a mistake in doing so. I'm happy to lay my comments open on the forum.

SJG1974, I've just re read some of your comments and I can't comment for all storm clients but most of us would certainly agree with you that the double gearing strategy, which we now understand, was indeed the problem. The margin loans were the problem. The level of borrowing against the family home was risky enough but to compound this with another loan was disasterous.

SF advised us to borrow up to sixty percent of our assets telling us that they had a system in place to ensure that this type of investment would be quite safe. I'm told by someone else who worked with a financial planner that that company also borrowed against the family home and other assets but always said that anything over twenty percent would be too risky.

In our case we've figured. with help, that without a margin loan, we would have been ok. Down but not out and capable of rebuilding. It was the margin loan that killed us. I believe that it's time that we asked the banks some hard questions and were given some decent answers. This is something that they've all been short on.

All banks employ financial planners, accountants, auditors and other experts in the financial field who would have seen through the shortcomings of storms strategy. Clients paperwork, which I understand SF had to provide to the bank, and the bank have to legally ask for, does not 'match up', SOA were basically all the same.

Anyone with any financial qualifications could see at a glance what SF were doing and yet the banks 'fell over backwards to align themselves with SF' In the words of one storm employee 'they were throwing money at us' Why? Do they have any Duty of Care/ do they have to have any Duty of Care or is it just a free for all out there in the land of the banker?

I don't have enough financial or legal know how to know what is right or how we stand financially or legally, but morally and ethically, it isnt' right. Not that this always stands for a great deal in todays world.

I agree with the QANTAS employees, why should the CEO's earn millions of dollars per annum while so many are out there working hard and doing it tough. The average working man needs a break too. I disagree with the banks paying their CEO's outrageous millions in wages, why, because CEO's in other countries are paid this sort of wage. Most of these CEOs come from countries outside of Australia. Surely we have decent Aussie workers who are well qualified or capable of being trained to do a decent job of CEO. If the banks offered half a million dollars pa that would be a decent wage in anyones estimation.

We hear time and time again that they can demand that sort of wage in other countries and so they have to pay them accordingly in Australia, if they want the best person for the job. That's rubbish. Why should we follow what other countries do like a herd of sheep traipsing down the same old disgusting garden path.

It's 'corporate greed' and greed is certainly what caused the Storm Financial collapse. Many banks overseas are proof that in todays economic climate that the CEO with the millions isn't always doing such a wonderful job.

IMO If storm has taught us something it's this:
'You don't get the best person for the job just because they charge the most.'

Igetit,

Didn't mean to offend or sound obnoxious or whatever. And macca, point taken.

Anyway, we are going around in circles. I have said ad nauseum that if the banks can be proven to have been at fault, then they should pay. But again, they weren't there putting on seminars about this low risk strategy which was anything but- Storm were. If it wasn't for Storm, this wouldn't have happened.

Negative equity, whilst it shouldn't have got to that, wouldn't have happened if:

* cleints were more conservatively geared from the get go.
* had equity outside of their margin loan facilty as a buffer to be able to reduce the LVR as they approached the margin call limit (investing all of your assets in shares is ludicrous. Gearing up these assets to the hilt and then investing them in the market is criminal IMO.
* their advisers had have done what they said they would, and what their clients paid them for, which was to monitor their investments and protect them. If they had have done this, they wouldn't have waited until clients were in margin loan territory.

These clients should never have been allowed to have their portfolios get to margin loan territory in the first place, let alone negative equity, because they had no way to recover. And their robust systems which clients paid for were supposed to prevent it from getting that bad. Perhaps rather than buying his jet Manny should have put more funds into his software.

Allowing them to get to that level is Storms fault, beyond that, well that seems to be the bank's fault.

I don't know if the bank is required to check on the source of funds that are put into a margin loan. If so, then they were obviously reckless in allowing people to double gear into margin loans and should be held accountable. However, from my understanding, they aren't required to do this. Perhaps you can clarify???

And there seem to be suggestions that Storm meddled with the documentation from the get go. Again, perhaps the bank was required to forensically check every home loand applications as well. I don't know.

Based on this, it is therefore Storm's fault that they were as highly geared as they were. this was the case both before and after the GFC....it was a house of cards.

Sure, the margin call limits were set high, but again my understanding is that the initial limit, when they invest, wasn't. Wasn't it about 60% or something like that as the maximum LVR when you start off (my margin loan knowledge is limited, just like most clients of Storm evidently)?

Again, many advisers would be more conservative from the get go, particularly given the market was in the midst of a 20 year bull market. It is the adviser's recommendation to the client as to how much they gear from the start, not the margin loan provider's. The provider provides the limits, the adviser and the client work within them. These limits seem to be your major issue, and the fact that even these weren't adhered to which saw clients go into negative equity. Again, the truth will come out about exactly who is to blame for margin calls not being made. And whoever is at fault should be penalised.

But even if they were adhered to, the clients were screwed. Just say the process was rigid, and margin calls were made when they should have been, what were clients' options at that time? Sell out, which would have made it impossible to get back in given the mountains of debt they had, or contribute more equity, which again was near impossible as many had no equity and would have had to borrow? As I and others have said, they were screwed even if the margin calls were made at the right time. The timing of the calls just made them more screwed.

Clients were screwed well before the issue of margin calls (or lack thereof) occurred. And it was Storm who screwed them up to then.

You have your views of who is to blame and I have mine. To this stage, I know what Storm did, via the hundreds of client submissions to the PJC. That much I know. The whole reponsibility of margin calls is the issue at hand which we seem to be debating. The trusth will come out.

Lets agree to disagree on whose MORE to blame, because this is getting repetitive and I am sure the other posters are getting sick of it. I am happy to leave it at that. we can let the courts decide who is right, or "more right" than wrong. But I have a feeling we will be a little more grey and long in the tooth before the truth all comes out. Still, I will continue to watch with keen interest until then.

Cheers.

Harleyquin said:

IMO If storm has taught us something it's this:
'You don't get the best person for the job just because they charge the most.'

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Quite so. In fact the outfits whose fees are significantly higher than their competition are just the ones that should be viewed with the most skepticism.
Likewise for firms who appear to offer substantially better client performance than their competition.

Storm Financial proved both these points in no uncertain manner.

Harleyquin said:

In our case we've figured. with help, that without a margin loan, we would have been ok. Down but not out and capable of rebuilding. It was the margin loan that killed us. I believe that it's time that we asked the banks some hard questions and were given some decent answers. This is something that they've all been short on.

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Did the same bank which provided the loan on your home also provide the margin loan?
As I understand the provision of a margin loan, it's based on the value of the shares you hold. Try to remember, HQ, that it's not the bank's responsibility to oversee your whole financial situation, that's Storm's responsibility. If the value of your shares was XXX, then a margin loan would have been provided on that basis, as far as I know.

All banks employ financial planners, accountants, auditors and other experts in the financial field who would have seen through the shortcomings of storms strategy.

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Again, you're not properly understanding the role of such people. If you had wanted one of the bank's financial planners to look at your proposed strategy, they would have been happy to arrange this, I'm sure. I've seen such people, free of charge of course, from time to time when I wanted to bounce off an idea I had to make sure I wasn't missing something.

But banks do not employ these people as a sort of quasi ASIC, charged with overseeing the wisdom or otherwise of clients financial strategies unless they are specifically asked to do so.

Clients paperwork, which I understand SF had to provide to the bank, and the bank have to legally ask for, does not 'match up', SOA were basically all the same.

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Yes, much mystery seems to surround the question of who entered what onto the paperwork. Obviously this is crucial to the whole blame apportionment.

I don't have enough financial or legal know how to know what is right or how we stand financially or legally, but morally and ethically, it isnt' right. Not that this always stands for a great deal in todays world.

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Correct. We are unlikely to change this. So we simply have to be aware of it and ask questions accordingly.
There are still some decent, honest people out there.

I agree with the QANTAS employees, why should the CEO's earn millions of dollars per annum while so many are out there working hard and doing it tough. The average working man needs a break too.

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Agree that at the very least, the timing of such a massive increase in Mr Joyce's salary is unwise.

However, there seems to be quite some misinformation being peddled by the unions about some of the Qantas situation. Apparently, with the newer aircraft, they simply require much less servicing than the older ones, hence some redundancies are going to occur. Qantas is not a charity. It's a for-profit business.
I expect there is right on both sides, but I doubt that it's as simple as the poor working bloke being screwed. Qantas staff in many capacities are paid quite a lot more than their counterparts in other airlines.

Re bank CEO's being paid high salaries: if the shareholders are happy to accept this, what's the problem? Again, the banks are not charities. One of the reasons Australia as a country is in such a decent situation is because our banks have been well capitalised and well run. If paying the CEO a decent salary so as to attract the most competent people ensures this continues, then I'm all for it.

Remember, HQ, Qantas and the banks are public companies, not taxpayer funded organisations. If you compare their management with the woeful waste exhibited by governments, I know where I'd be the most outraged.

Julia said:

Did the same bank which provided the loan on your home also provide the margin loan?
As I understand the provision of a margin loan, it's based on the value of the shares you hold. Try to remember, HQ, that it's not the bank's responsibility to oversee your whole financial situation, that's Storm's responsibility. If the value of your shares was XXX, then a margin loan would have been provided on that basis, as far as I know.

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Exactly Julia. I think the roles and responsibilities of the bank are misunderstood to a large degree by some.

A client goes to a margin loan provider with say $100,000 in shares and wants to use that as security for a margin loan. The bank doesn't need to find where that equity has come from, they just need to have evidence it exists.

The gearing issue which is unclear is the basis for which clients were able to borrow against their homes in the first place, when many didn't have the income to service it. As you point out, mystery surrounds how clients with no income suddenly had a salary of say $100,000 put on to their application documents. I remember Manny on one of the current affairs shows unable to explain how this occurred. Fraud I think it is called...if it was the banks who did it then they should pay, but again it seems uncertain just who is to balme. Either way, Storm as the adviser allowed it to go through and being the gatherer of information on the clients, would have known whether they had the ability to service their debts or not.

And another thing, I realise I replaced "margin call" with "margin loan" a couple of times in a previous post. A problem of the brain working more quickly than the fingers unfortunately...but the premise of my post remains the same

I've resisted contributing to this "debate" as I really don't have the energy to get sucked into an internet argument (again), however:

One aspect that I haven't seen addressed by posters recently is the actual relationship between the banks and storm. I agree that normally a bank providing a margin loan would neither know nor care, (or be required to) where the funds/shares had originated from - they simply advance a set lvr against security held and issue a margin call (let's not worry who to in this instance) if the lvr is exceeded. Likewise a bank lending against a home held as security will usually lend up to 80% lvr provided servicing can be proven (again, let's not worry about whether it was or not) and is not obliged to know or care what the funds are to be used for.

However - in most situations my banker is not operating from an office within my financial planner's building, and is not providing my financial planner with details as to my "untapped equity" so that I can be prompted to borrow more - to the advantage of both. In most situations my banker has not been made so familiar with the strategy employed by my financial planner, and indeed have advanced them huge loans of their own, not to mention badging funds with their name etc. Nor do they revalue my home in a manner they have now admitted was wrong in order to squeeze a bit more equity out of it - in theory.

Storm always (to me, at least) made a big deal of the fact that they had such a close relationship with the banks they dealt with (especially CBA). There was no doubt that CBA were aware of the strategy used by Storm. There was no doubt that when my loan was approved the CBA did know what the funds were for. While it may not have any legal bearing, it is not unreasonable, I think, for Storm clients to see the closeness of the relationship between Storm and the banks and to assume that the banks endorsed the model employed by Storm. This is where I feel let down by my bank. Yes, the model was designed by Storm and most ex-clients would now agree was flawed, but not only did the banks fund it - I think they "tacitly" endorsed it. Would ex-clients have proceeded with Storm's recommendations if we had needed to arrange our own finance/loan/margin loan etc with bankers who were not "hand-in-glove" with Storm, but completely unrelated?? - that's a question only those concerned can ponder and wonder about. For myself - I think at the very least it would have made me stop and think a little harder. I used to trust my bank (more than I ever trusted Storm) and had faith that they wouldn't tarnish their reputation with anything dodgy. I know the strategy sucked, but without funding it's just a poorly thought out scheme - not the complete disaster that transpired. To borrow someone else's analogy - who is more to blame - the person running the gas chamber or the one who led you to it?

And no, I'm not absolving myself of my share of responsibility for my circumstances. nor am I letting Cassimatis & crew off the hook (far from it!). I just feel there is more to the banking relationship in this case than is usual - more than just who should issue margin calls to whom, and when, and whether loans should have been advanced in the first case.

Someone (Bunyip probably) asked Frank if he'd accept having his loan repaid in the unlikely event the bank were ordered to extinguish it - something along those lines at least. I assume he meant to imply it would be somehow wrong or immoral to do so. I don't know about Frank - but I sure as hell would accept it. If such an unlikely order were to be made by a court it would hardly be made without reason. Regardless of who else should or could be "blamed" for my situation - I don't have the luxury of wrapping myself in selfrighteousness and claiming the high moral ground. Pride won't keep the roof over my head and able to provide for myself in retirement. Saying "mea culpa" won't help my family one little bit. I'd grab it with both hands. If it came from the Cassimatii instead/as well, then so much the better.

Margin loans issues

Up to now the Banks have been a law unto themselves when it comes to margin loans. They set out the conditions and you followed them or else! The Banks have perpetuated their “you can’t touch us” myth when it comes to margin loans and few have dared to challenged them. Indeed, few had the money to do so. You see, margin loans have flown under the radar and are not governed by statute law. Up to now, that is, because the new regulations, following the Storm Financial disaster have rectified this situation.

Because the margin loans did not fall under any statutory regulations does this help the banks to defend their position in relation to Storm investors who were their customers? In my opinion it does not because any margin loan is a legal contract. Therefore, the issues must therefore fall back on common law and equity.

Doobsy is of the opinion that the banks cannot be held liable where margin loans are concerned. This is a common view widely held by the financial sector. Indeed, even ASIC and members of Parliament have echoed these sentiments at various times. This is about to be challenged in Law.

Also people for the most part in the financial sector are under the impression that Banks do not have to effect margin calls because the conditions of the margin loans contain clauses that state the banks can act at their discretion when so doing.

Let’s look at a Macquarie Bank matter that will be discussed in Court when our cases are heard next year (bearing in mind Judge Greenwood's comments in a previous posting).

A document exists which reveals that Macquarie had an omission in its internal procedures that led to greater losses for its Storm customers as sharemarkets crashed in late 2008. This operational failure has never been made public by the bank despite its executives giving evidence before a parliamentary joint committee inquiry.

The document states that Macquarie failed to "accelerate" calls on its margin loans, contrary to a secret alliance the bank had forged with Storm. The document also states Storm customers were exposed to greater potential losses because of the omission in procedures.

This bank has stated that its margin call processes generally worked as they should have. Its concessions have been limited to "administrative errors" not associated with margin calls.

The omission in procedures occurred when Macquarie failed to "accelerate" the margin call satisfaction process from 10 days to 24 hours when customers' loan-to*value ratio went past 90 per cent.

The document states that because the acceleration did not occur it potentially increased customers' losses. The problem was fixed by mid- November 2008.

Jose Isnard, from Townsville, said: "We could have been $60,000 better Off had they sold us off at the 90 per cent on the margin call but we got sold at 97 per cent like many others."

The Macquarie spokeswoman said their margin loan conditions did not bind the bank to accelerating the margin call process. "There was a mechanism whereby if the loan-to-value ratio exceeded 90 per cent then we could reduce the satisfaction period to 24 hours from that point ...

This was not an obligation of Macquarie under the terms of the lending documents but was action that Macquarie could take at its discretion."

Although the ‘Goodridge v Macquarie’ case was overturned on appeal, there were some aspects of Justice Rares findings that were not challenged. I shall now relate some of these to the last statement by Macquarie, namely that "This was not an obligation of Macquarie under the terms of the lending documents but was action that Macquarie could take at its discretion." I shall also include the issue of the banks’ assumptions that the responsibility for such could be assigned to Storm:

(a) NON·ENFORCEABILITY OF MARGIN CALL NOT MADE IN TIMELY MANNER

The Bank claims that because a clause in their margin loan contract states "MAY” it is within their discretion whether to effect margin calls or not. Of course this clause is designed to give them an out!

Judge Rares in his ruling in the 'Goodridge v Macquarie' case said,

"The various contractual rights given to the Borrower to satisfy a margin call elsewhere in Clause 5 would be negated if the Bank could act independently of anything the Borrower had done to comply with the time fixed by Clause 5.2 (to comply with the margin call). The parties were aware that the market could move favourably or unfavourably to the borrower during that period."

Notably, and of particular relevance to CBA customers, His Honour referred to the NSW Court of Appeal decision in Morgan v BNP Paribas Equities (Aust) Limited [20061. NSW, CA 197, in construing the Clause in margin loan documents, namely that:

"BNP may notify you of the margin call and of details of the actions which can be taken to satisfy the margin call," by finding that in that context: "may" in effect means "shall", when it comes to making a margin call in terms of the loan agreement."

A similar clause occurred in the later version of the Colonial Margin Call Agreement.

"Otherwise the client would simply not know what were the actions which should be taken to satisfy the margin call. Nor would the client know, in the absence of knowing a margin call existed, that actions were required to be taken in the first place." (per: Santow JA, with whom Gyles and McCole JJA, agreed).

(b) OBLIGATION TO MAKE CALL NOT ASSIGNABLE

Rares J. found that because "obligations" as opposed to "rights" are not assignable, the obligation to make a margin call could not be assigned either.

As to whether Banks could assign to Storm the obligation to make a margin call, His Honour's finding with regard to the non-assignability of obligation is important.

Notably, too, at para. 149, His Honour found that a notice on a webpage was insufficient notice - para. 149:

"Therefore, I am of the opinion that the webpages could not be notice to him of any assignment of his loan at law, by statute or in equity. It mostly invited speculation."

Justice Rares quoted from Griffith CJ with approval in Anning v Anning [1907J 4 CLR 1049 at 1060:

“…written notice means a document addressed to, and intended to be retained by the debtor."

So, you see, the issue here are not clearcut and the assumptions by some forum members that the Banks involved with Storm acted legitimately are not based on the evidence to hand. That is why I am now presenting part of our case against the banks so that they, forum members, can then give consider the facts and give fair and impartial opinions. I believe that we can only have an open and robust debate when the facts are fully known.

One last point to consider. I am not in the legal loop. Therefore, I can only work on the evidence that has presented itself. Our legal eagles have millions of documents to sift through and their evidence will be far more telling than mine. Whatever, I wouldn't be putting my money on the banks at this stage!