Storm Financial Group

[Solly]

When matters are next in Court

Proceedings are being held in public so anyone interested may attend.


15 May 2012
ASIC civil penalty proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000

24 May 2012
ASIC unregistered managed investment scheme proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000

Source: https://storm.asic.gov.au/storm/storm.nsf/byheadline/Next Court Dates?opendocument

 

[Frank Ainslie]

Mindset Part 1

To best write about any disaster (and I think we can classify the collapse of Storm as a major disaster for many of the people that were its clients) and fully understand how people affected by such a disaster truly feel, people need to have experienced it themselves or something similar. Being one of those caught up in this I alone know how I truly felt at the time, my motivation for originally investing using the services of Storm, and my reasons for believing that we were doing the right thing in do doing. I (and I am certain many other ‘Stormies like me) don’t really want to listen to others telling us how it was when they weren’t involved themselves.

Certainly, people are entitled to their opinions but those opinions must be based on what actually happened as opposed to what they think occurred. Only by having the facts before them can they formulate views that I believe are worth considering.

To date this forum has discussed various issues relating to Storm and the Banks aligned to that company piece meal. I have therefore conducted this exercise so people can better recognize the full duplicity of Storm, and fully understand that our ‘beef’ with that firm and the Banks is not about bad advice, but rather about inappropriate and unlawful conduct that ultimately led to our losses.

Those that have actually read through IN FULL what I have written should now be mindful of what actually occurred and have some sense of the wrongdoings the directors of Storm, through their policies and misconduct, inflicted on the clients of Storm. Of course, ALL the facts will not come out until these matters are discussed in Court and there may be some vital ingredients I have missed. However, what we do know so far based on the evidence at hand should be sufficient for members of this forum to form some objective opinions. Not suppositions or assumptions based on personal opinions which can be self-serving, but rather on the events that actually took place.

There are some questions that have been posed to me along the way and I will attempt in my following comments to answer these in a general sense rather than deal with them individually. I’m sure that if I miss any particular point, I will be quickly reminded of this!

I think we can start by take “greed” as our prime reason for signing up with Storm out of the equation because it should be apparent by now that people signed up with Storm because they genuinely thought that Storm’s approach to their needs was in line with their primary desire to grow their assets over time and secure them financially. The fact that 75% of those clients were past retirement age and had worked hard all their lives to compile their asset bases just doesn’t support the notion that they had a gambling problem and knowingly became involved in a “high-risk” scheme that could put their assets in jeopardy. Storm’s SOA if nothing else supports this view.

“So why were people sucked in by Storm and why didn’t they do their homework?” some on this forum have asked of me. Why indeed! That’s something we ‘Stormies’ will be asking ourselves for the rest of our lives.

There have been many suggestions as to what ‘Stormies’ might have done before committing themselves to Storm. Some have said that any would-be investors should always acquaint themselves with the market place and learn something about investing first. Others have suggested trawling the Internet to see what options there are out there, and so on and so on!

There’s some truth in all of this because they are aimed at forearming investors against making the kind of mistakes that we made. However, not everyone has the interest, time, inclination or capacity to do this. Further, how many people past retirement age can use a computer to start with? I do not believe therefore that any of these suggestions (that seem reasonable to those on this forum that have taken the time to acquire investing knowledge and see these as solutions) are practical in the real world because would be investors come from all walks of life and have varied backgrounds. So what is the answer then?

Professional financial advisers have been much maligned on this forum and I am one of the culprits. However, much of my wrath has stemmed from my experiences of using Storm and anger, I know, can sometimes blur rational thinking. It is completely illogical to bracket all financial advisers together and assume that they are all from the same mould. It is therefore quite wrong to condemn all financial advisers because of what happened to us in Storm. Professionals are a necessary part of our society and they perform an invaluable function. We need professionals in various fields because we neither have the time or capacity in many cases to sit down and acquire knowledge about every facet of our lives because it is just not feasible.

Okay! Then how does one know whether what a financial adviser is telling you is in your best interests? You don’t which is why, I now firmly believe, we ‘Stormies’ should have sought a second and indeed a third opinion from other financial advisers as to the merit of Storm’s financial model and, for those that had an accountant, run it past him or her as well. Yes, it would have cost us more money and financial advice does not come cheap but with the amount of money we were investing, it would have made little difference to us. After all, if one can’t afford the small amount of money it would have cost, one shouldn’t be in investing anyway.

Often, when you consult with more than one professional you pick up some useful advice anyway in your search for the best solution to your particular needs, whatever they may be. This is commonsense after all! As it was, our failure to apply some commonsense and test Storm’s plan independently cost us all that we had in the end.

Even when dealing with tradesmen, you don’t accept the first quote submitted but obtain two or more others as well. We all know this! The fact that we ’Stormies’ never went down this path was a major failing on our part and one that is inexcusable

So my first first advice to any would-be investors out there is not to take anyone’s word for it but rather to get a second or third opinion. Someone said on this forum some time ago, “If something sounds too good to be true, it normally is!” It’s a well known maxim and one we should have been mindful of before we signed up with Storm.

Some people on this forum have said that Storm’s plan was an obvious con and we ‘Stormies’ should have seen through it. I don’t go along with this. I think it was ‘Doobsy’ that said Storm’s plan was legitimate and fell within the boundaries of financial advice that is permitted. Therefore, it was our choice to use the services of Storm. We were not to know then, of course, that when Storm was giving us such advice they were infringing on certain sections of the Corporations ACT and are now being duly charged for doing so. Certainly, if we had sought alternative advice, the ‘high-risk” nature of the scheme and its forecasts would have been exposed as being unrealistic; something that was not self evident to us then.

Bunnyip has said, “However, there’s one thing you could have known that would have shown the Storm strategy to be a high risk con scheme that completely misrepresented the facts in regard to the safety measures that were supposedly going to protect your capital from major loss.
The ‘thing’ I refer to that you could have known about was past market crashes. In particular, I refer to the 1987 crash that wiped 20% off the market overnight, 25% in one day, and 50% in a little over a month.If you’d looked at the ‘87 crash and asked yourself ‘ OK, what effect would a similar crash have on my proposed portfolio’?...you would have discovered that the result of such a crash would be catastrophic loss of your capital before the market reached the trigger points that supposedly would safeguard the bulk of your capital.
If you’d done that, and discovered the enormity of the ‘87 crash and many others before it, and then considered the very real possibility of such crashes repeating, I believe you would have made the prudent decision to walk away from Storm without even bothering to look into their SOA.”

I’m not clear on your line of thinking here? Are you suggesting that people shouldn’t invest in the share markets because all share markets have a past history of crashing? If that’s the case, the economy would fall flat on its face tomorrow because people would simply stop investing.

The trigger-points that Storm put in place (but didn’t act on) were designed for major falls in the share markets. Clearly, when the markets fell, the activation of these trigger-points would have protected us from just this type of situation. Any share values we would have lost to that point were acceptable because these trigger-points were set at conservative levels. Or at least, we thought they were! First and foremost, the trigger-points were incorporated into Storm’s plan to protect us from just the sort of losses you mention. The fact that they were not acted on led to our final demise.

Julie has said that, “We've ad infinitum made the point that a few simple calculations would have allowed you to see that you could have just stuck the funds in the bank and still achieved your desired level of income, so no need to labour this again, especially as you now are obviously very aware of this.”

There was nothing simple about Storm”s financial model so I believe “a few simple calculations” is understating the complexity of it. Certainly, we wished now that we had stuck our money in the bank but it’s no good dwelling on what might have been.

(To be continued.)

 

[Frank Ainslie]

Mindset - Part 2

Some have said that borrowing against the house was a complete no-brainer. I’ll admit now that this was an unwise thing to do, but it is not a concept that is completely unheard of in financial circles. This type of advice was not only being handed out by Storm but by other financial advisers as well and was condoned by ASIC and the Banks. When Helen borrowed money to buy her shop, she mortgaged the house to do so which is a legitimate way of obtaining funds needed for a business venture. Today, people are amazed that we did this but they need to remember that this approach was neither illegal or restricted to Storm.

I am not recommending such a practice to anyone because it can prove lethal as we found out! Merely commenting on the legitimacy of such.

It’s easy now to say that Storm’s strategy was a con because their activities have been exposed to public scrutiny these last three years. There was no way of knowing then that Storm was being deceptive or misleading in its conduct or that they would not abide by their contractual obligations; namely to monitor and keep a tight rein on our portfolios and ensure that the safe-guards that they assured us were in place were triggered when the circumstances demanded it. People also need reminding that Storm had a data-base of thousands of clients, an impressive infra-structure that had been built over a number of years, a past history of success reflected in the fact that most of their business came from referrals and were handling hundreds of millions of dollars in client portfolios. They were not some shonky mob bailed up in a backroom in Shonksville with a shingle stating, “Financial Advice for Those that Want to Lose Their Lifesavings!” I think we therefore need to get real about this if we are ever to get to grips with the real story!

There is no question that what Storm offered and the way the directors of Storm went about their business was very slick. Here’s what Anne Lampse said about this in part of her article “Storm Lessons” published in the “Money” magazine in March of 2010.

“Storm Financial client Liz Watts acknowledges that her investment experience with Storm was a clever seduction. From the moment she and her Barrie walked into the glitzy top floor of Storm's North Sydney offices, with its 360-degree view of Sydney's skyline, and experienced the warm hospitality of Storm's friendly and attractive staff, Liz was hooked: ‘The overwhelming message was that this is the style in which we live and we can do the same for you.’
There is no doubt that Storm Financial's Emmanuel and Julie Cassimatis were masterful in their duchessing of clients, imparting comfortable and relaxed’ feelings and membership of a clever, wealth-generating group. ‘We knew we were being duchessed but the people were so genuinely nice,’ Liz recalls. ‘And they all said they were Storm investors too.’
Attending a couple of swish Storm cocktail parties where everyone appeared happy, content and shared their stories of investment success reinforced this view.
Liz was shown charts and statistics about sharemarket behaviour, figures on sharemarket recoveries from previous downturns, and verbally assured of the relentless rise in the real estate market and the continuing wealth of a fast-growing China.
All of this reinforced the investment strategy put in front of her. Her daughter, who also was with Storm, had originally asked to invest only part of her total assets in the scheme. She was told: "The Storm model is not for you then." The push-off worked, and both threw everything into the Storm investment model. Liz said there was never any pressure to invest or to force them to join the scheme. It just sounded almost too good to be true.
Previously a cautious investor who directed her savings into super and bank deposits, Liz and her husband ploughed all their savings into Storm, and borrowed more from the Bank of Queensland, using some home equity to build a bigger investment portfolio.
Soon they had a margin loan as well as a mortgage on a previously unencumbered home. This was all part of the Storm investment template.
Her aim was to have enough for a comfortable and independent retirement and for the first two years of the investment she couldn't have been happier with the result. Returns exceeded 30% a year; the share portfolio was growing with top-ups. They had holidays abroad.
It came to an end at the end of 2008 after the global financial crisis (GFC) tore through the sharemarket, wiping more than 50% of its value over a few months. Now their retirement savings are gone and the couple is left with a mortgage on their home, living on the pension and the odd bit of casual work…
With the wisdom of hindsight, Liz is stunned that she risked her house.
"But it was so slick, so slick. It just seemed to be that they were so into it; that they were such believers themselves."

Julie has said, “Why? Were people so impressed by Storm's gold plated bathrooms and the high flying lifestyle exhibited by those who were invested in the bull market, that they were intimidated out of trusting their own judgment?”

I must confess that I too was impressed by the Storm toilets in Storm’s Brisbane Office. But, then that was part of Storm’s sell. If I had walked into such and someone had handed me a pot beforehand to use, I don’t think I would have been too willing to listen to anything Storm told me. If you want to convey success to anyone, you need to be seen to be successful and this is conveyed by the wealth you exhude.

There was no question that an awful lot of brainwashing took place where Storm’s clients were concerned. Indeed, today there are still some that believe the Casimatises were not to blame for what happened to us despite what has now been revealed.

There are some on this forum that will never accept our explanation for signing up with Storm. They are not alone. When people pick up a newspaper and read about an event such as this, they are apt to remark, “How could people be taken in like this? Stupid buggers! They only have themselves to blame!” We ‘Stormies sometimes endure the same comments from friends or people we meet that learn of our involvement with Storm. I do not condemn them for their views because like many on this forum they are unaware (until now, that is) of all the facts.

Certainly, such epithets as ‘foolish’, ‘unwise’, ‘imprudent’, 'too trusting', or just ‘plain stupid’ can be ascribed to our behaviour because we made some fundamental mistakes. I can live with this! One of these mistakes was our failure to ensure that we understood every aspect of Storm’s plan. Our failure to do that and our failure to get alternative opinions as suggested earlier are things we must now live with and we do.

At the end of the day though the people that lost everything in Storm were not mindless automatons that marched like lemmings until they ran out of land and plunged into the sea. They were people that grew up in a time when trust and integrity meant something. A time when one could leave your door open and no one would steal everything you had. Today, we live in a "dog-eat-dog" world where all the old values have disappeared. People can no longer be trusted and ‘Stormies shortcomings were that they did not insulate themselves accordingly.

There are many ‘Stormies’ that now blame themselves for what happened to them. There is a difference, however, between making an honest mistake in good faith and laying the blame on yourself. The words ‘Mistake’ and ‘Blame’ have two completely different meanings The word ‘blame’ means "to hold responsible" whereas the word ‘mistake’ means 'to make an error in action, calculation, opinion, or judgment caused by poor reasoning, carelessness, insufficient knowledge, etc." Certainly we showed poor judgement when we employed the services of Storm, and this was a mistake on our part. We must therefore be honest enough to say so. We stuffed up big time and we are the ones that are now paying the ultimate price for doing so! However, we all also need to understand that to err is human! If I look back on my life, I have made many mistakes in both my private and business life because I’m fallible like everyone else. I am not the Pope as some suspect although I may come across like him.

The four thousand or so Storm clients that marched into Hell and found no heavenly cause when they arrived there were ordinary Australians from a cross section of our society. They could have easily been family members, friends or acquaintances and some well may have been.

Sometimes, we get lucky in life and our mistakes do not result iin our being hurt or do harm to others. Julia, I believe, had one such moment recently where luck played a part in her avoiding making a bad decision. We ‘Stormies’ should by now be well aware of our mistakes when it comes to Storm. We know many who are aware also, our families for instance -– it’s in our face every day. However, when we joined Storm, our intentions were pure and we never set out to harm anyone. The activities of Storm and the Banks in their dealings with us were neither pure or honest, and were conducted in an unconscionable and self–serving way that is unacceptable. They are the ones that are now being held to account, not us. If the Banks’ lawyers ever stood up in Court and declared, “Storm’s clients are partly to blame!” think how that would go down? You should therefore hold that thought!

That's it folks! I'll now give you some rest for a while!

 

[Garpal Gumnut]

Thanks Frank.

gg

 

[Julia]

Thank you, Frank, for an articulate account into which you have clearly put a lot of effort and thought. Certainly, I for one have found it enlightening.

Okay! Then how does one know whether what a financial adviser is telling you is in your best interests? You don’t which is why, I now firmly believe, we ‘Stormies’ should have sought a second and indeed a third opinion from other financial advisers as to the merit of Storm’s financial model and, for those that had an accountant, run it past him or her as well. Yes, it would have cost us more money and financial advice does not come cheap but with the amount of money we were investing, it would have made little difference to us. After all, if one can’t afford the small amount of money it would have cost, one shouldn’t be in investing anyway.

You perhaps were not aware at the time of the existence of several stock market forums such as ASF. Had you put up the Storm 'strategy ' and explained that you were considering it as a retiree, I guarantee that within 24 hours you'd have received several responses explaining why you should walk away.

Often, when you consult with more than one professional you pick up some useful advice anyway in your search for the best solution to your particular needs, whatever they may be. This is commonsense after all! As it was, our failure to apply some commonsense and test Storm’s plan independently cost us all that we had in the end.

Even when dealing with tradesmen, you don’t accept the first quote submitted but obtain two or more others as well. We all know this! The fact that we ’Stormies’ never went down this path was a major failing on our part and one that is inexcusable

So my first first advice to any would-be investors out there is not to take anyone’s word for it but rather to get a second or third opinion. Someone said on this forum some time ago, “If something sounds too good to be true, it normally is!” It’s a well known maxim and one we should have been mindful of before we signed up with Storm.

Hopefully your experience will at least save some others from a similar awful mistake.
That must be cold comfort at this stage.

Bunnyip has said, “However, there’s one thing you could have known that would have shown the Storm strategy to be a high risk con scheme that completely misrepresented the facts in regard to the safety measures that were supposedly going to protect your capital from major loss.
The ‘thing’ I refer to that you could have known about was past market crashes. In particular, I refer to the 1987 crash that wiped 20% off the market overnight, 25% in one day, and 50% in a little over a month.If you’d looked at the ‘87 crash and asked yourself ‘ OK, what effect would a similar crash have on my proposed portfolio’?...you would have discovered that the result of such a crash would be catastrophic loss of your capital before the market reached the trigger points that supposedly would safeguard the bulk of your capital.
If you’d done that, and discovered the enormity of the ‘87 crash and many others before it, and then considered the very real possibility of such crashes repeating, I believe you would have made the prudent decision to walk away from Storm without even bothering to look into their SOA.”

I’m not clear on your line of thinking here? Are you suggesting that people shouldn’t invest in the share markets because all share markets have a past history of crashing? If that’s the case, the economy would fall flat on its face tomorrow because people would simply stop investing.

I don't want to speak for Bunyip but I can't see where he ever suggested people should not invest in the share market because all share markets have a history of crashing.
He rather pointed out that your double gearing strategy certainly magnified profits in a rising market, but explained that when the market inevitably turned downward at some stage that same double gearing would hugely magnify your losses.

Let's say you had not engaged in any gearing at all, just invested your basic capital into the market. You would still need to have worked out a point at which you would sell to protect your profits (and your capital) when the market turned down.
Hundreds of thousands of people did not understand this when the GFC occurred, and as a result - even without any gearing - lost up to 50% of their investment.

So many people, Storm investors apparently included, seemed to just ignore the fact that markets fall, often severely, and therefore it's absolutely necessary to have a plan to cover this.

I think this is essentially what Bunyip was explaining. He will of course correct me if I'm wrong. It's certainly what I'd be saying.

 

[Julia]

The trigger-points that Storm put in place (but didn’t act on) were designed for major falls in the share markets. Clearly, when the markets fell, the activation of these trigger-points would have protected us from just this type of situation. Any share values we would have lost to that point were acceptable because these trigger-points were set at conservative levels. Or at least, we thought they were! First and foremost, the trigger-points were incorporated into Storm’s plan to protect us from just the sort of losses you mention. The fact that they were not acted on led to our final demise.

OK. They let you down badly here and it seems to be another area where you showed a trust that wasn't justified in the end.

Julia has said that, “We've ad infinitum made the point that a few simple calculations would have allowed you to see that you could have just stuck the funds in the bank and still achieved your desired level of income, so no need to labour this again, especially as you now are obviously very aware of this.”

There was nothing simple about Storm’s financial model so I believe “a few simple calculations” is understating the complexity of it. Certainly, we wished now that we had stuck our money in the bank but it’s no good dwelling on what might have been.

You are misinterpreting or misunderstanding what I said. I meant nothing to do with the simplicity or otherwise of Storm's model. What I was saying is that - long before you ever consulted Storm - if you'd just done some simple calculations on what X% offered on term deposit or at call funds on your available capital - you'd have seen in about one minute that you could easily have generated considerably in excess of your stated desired $45,000 p.a. income.
Alternatively you could have just bought e.g. bank shares with their excellent yield and franking credits, though this would have exposed you to the market fall along with almost all other stocks.

 

[Frank Ainslie]

Storm's mindset

"STORM FINANCIAL NEWS

Storm Financial Investor Newsletter September 2007

Market to Market

Bulls Keep Bears at Bay…

What a roller coaster month we have experienced on the Australian sharemarket.

The US sub-prime market collapse sparked major concerns throughout the globe recently, triggering sell-offs in most global equities markets, however the Australian sharemarket had already experienced a slight "cooling off' period in the week prior to
the US economic development.

Realistically, our sharemarket had already fallen slightly (approx. 5%) in the week leading up to the US sub*prime market downward spiral, which exacerbated Australia's already "cooling" sentiment. This caused further selling, taking our sharemarket to a new low of approximately -12% from record highs set on the 24th July 2007.

Below is an illustration of the share market's performance and its major sectors as measured by Storm's leading investable indices and Australia's leading sharemarket
indicator, the S&P/ASX All Ordinaries Index.

As you can see, our sharemarket as measured by the All Ordinaries Index (the blue line) has fallen approximately -2.60% in total. Much of the fall has been driven by our
inherently volatile resources and technology sectors, however both sectors have been trading blows as the best performing sector for the last 4-5 years and they often recover just as quickly.

The key insight is that our industrials sector (70% of the total sharemarket (capitalization) sentiment is not overly affected, having merely washed off approximately 3% of the gains in the past month.

Economically speaking, many expert analysts and economists (including Storm Financial) hold the view that economic fundamentals in Australia have not changed, remaining very strong and stable overall.

This means that it is highly unlikely that underlying upward trends have changed in the economy and by association, our sharemarket, which is a reflection of the best profitable part of the economy - Business Enterprise.

Yes, this was a bigger than normal blip relative to the past 5 years. Storm has always maintained that the further we get into this bullish cycle, the higher the volatility will become. This recent blip is therefore unlikely to be a fundamental change in economic/sharemarket trend.

What this blip is likely to mean, for those with foresight, is the opportunity to have invested relatively low and take advantage of one of Storm's unique approaches to wealth creation, which is to accept the market average but attempt to outperform it pockets of value present themselves, i.e. buying low to outperform the averages.

With relatively linear sharemarket growth over the last 5 years, it has been difficult to find these little pockets of value but as volatility begin to increase, falls such as these may continue to provide us with further opportunities.

Consider this, the normally conservative Reserve Bank of Australia (RBA) still finds our economy a little too hot for their liking, thus the recent 25 basis point hike in interest rates.

They would most certainly not want to be hiking rates in an economy that had fundamentally changed for the worse, especially leading into an election. So this brings us full circle, back to the US sub-prime development, which realistically is not materially relevant for Australia and even less so for the Storm style of investing.

Remember, we are investors and not speculators. We believe in economic investments and the material elimination of asset default risk and the elimination of the subjectivity of selection risk.

We attempt to focus on maximizing the right investment principals, which is why Storm is focusing as much as possible on advising clients to invest now, whilst the industry itself is reeling from a mere - 2.60% (12% at its worst point) aggregate sharemarket fall and receiving record numbers of margin calls. "

 

[Julia]

There was a story plus an interview with Bill Shorten on "7.30" this evening which I'm sure would be of interest to Storm investors.
It focused on Trio but much of what Shorten said has relevance to Frank's contention about the lack of appropriate action by ASIC/APRA.

I'd have put up a link but this evening's program is not yet up on the ABC website.
Should be there by tomorrow.

If you just do a search on the ABC website for "7.30" you should be able to access the program in Archives.

 

[DocK]

Frank,

I've just read your "Mindset" posts and want to congratulate you for your honesty. It takes guts to admit to failings and mistakes when posting under your real name, and I commend you for it.

 

[basilio]

Thank you Frank for your ongoing education/explanation of how the Storm fiasco evolved.

It was a very convincing story wasn't it ? In my view the overall story of financial planners and most investment advisors follows similar if not such extreme lines. I think that many people on this forum can point to their own experience or friends where the returns on investing with planners and super funds just havn't eventuated and in effect ended up being meal tickets for the salesmen and the funds. Hence the role of ASF.

A bigger problem IMO is whether the whole stock market and financial system is capable of offering smaller investors a fair return. The more I see the more I become aware of the sheer amount of gambling that is being done on various indices and shares. The risk is that simply using stock market as a casino risks the money we have tied up in super funds and individual companies.

I'm also noting just how much money seems to flow to company directors in terms of wages and shares. Again in my view there it seems unbalanced and the real money in the stock market comes from continually setting up new companies attracting capital and then redistributing it to directors and self appointed majority shareholders (they give themselves 10-40% of the shares before IPO)

The rest of us are reduced to trying make bucks from short term rises and falls dominated by promotion, some actual activity and the aggressive work of the stock market industry that want to see turnover rather than long term investment.

This is not a good way to run industry, a country or our financial future

 

[Garpal Gumnut]

I would agree with the comments about ASIC. They are quite muppets when it comes to protecting investors and pursuing criminals.

Frank, if you do not get any joy out of suing the banks and the Storm principals and advisers, I'd have a go at ASIC, if I were you.

gg

 

[Frank Ainslie]

I would agree with the comments about ASIC. They are quite muppets when it comes to protecting investors and pursuing criminals.

Frank, if you do not get any joy out of suing the banks and the Storm principals and advisers, I'd have a go at ASIC, if I were you.

gg

Hi GG,

The biggest scandal is ASIC's going soft on the CBA who were the biggest culprits. I have just written to ASIC reminding that organisation of Storm's role in all this I will shortly be writing to ASIC outlining the part CBA had in sending their Storm customers into financial oblivion. This follows on from numerous letters to ASIC requesting its reasons for not pursuing the CBA for anything other than that of possibly operating an unregistered management scheme in conjunction with Storm.

What is really needed is for '4 Corners', '60 Minutes' or some such show to run with this. There is nothing like public exposure to get the Government off it backside!

One never knows! If I keep banging away, someone may eventually open the door.

There is no doubt that ASIC has fallen down on the job and continues to fall down. We 'Stormies' are leading the way by suing the banks and ASIC is content to follow in our footsteps. No wonder we tear our hair out sometimes. You only get justice if you can afford it. That's probably why the banks have had a free rein until now.

 

[maccka]

I've been a bit unwell lately and haven't been out much. I decided to go for a virtual stroll around some of the places I visit from time to time and was quite surprised to see the remake on the Commonwealth Bank Deception website and quite interested to find that they also have a twitter handle @theplaintruth1

Have to say that they are obviously attempting to gear themselves up.

Cheers
Maccka

 

[Frank Ainslie]

I've been a bit unwell lately and haven't been out much. I decided to go for a virtual stroll around some of the places I visit from time to time and was quite surprised to see the remake on the Commonwealth Bank Deception website and quite interested to find that they also have a twitter handle @theplaintruth1

Have to say that they are obviously attempting to gear themselves up.

Cheers
Maccka

Hi Macca,

According to THE PLAIN TRUTH it was all the CBA's fault and the Casimatises are innocent! ? I wonder if the Courts will buy that? Certainly the CBA is as guilty as Hell but something tells me that Storm had a part to play as well! Just joking!

The PLAIN TRUTH site is touting the Cassimatis line. It just doesn't wash. How does that equate with what we now know about Storm and the way it operated? It doesn't!

Accusations must be based on clear evidence. Our lawyers have the evidence. THE PLAIN TRUTH hasn't produced anything that backs up its claims.

I think this site may be useful for gathering information about the CBA but claims without proof is purely supposition.

Here are some extracts which indicate that's site's aims:

"Faceless and nameless individuals within the CBA made the unlawful decisions that led to the destruction of thousands of former Storm clients, the destruction of Storm itself, its advisors and staff and the good reputations of Storms advisors and staff. The contemptible behaviour of these CBA individuals was so pervasive that it was able to taint other organisations such as the Financial Planning Association (FPA), Macquarie Bank, Wesptac, National, ANZ, Bank of Queensland etc?

A typical example of this phenomenon became apparent when The Plain Truth did an analysis on the frequency of negative press about Storm. We found that there was a statistically significant correlation between when negative Storm press was published and the inclusion of large expensive Commonwealth Bank advertising spots?

They did this by lobbying Ralph Norris’ mates within the Labor Party and government and in particular induced Bernie Ripoll to hijack the inquiry from the Senate and make it a Parliamentary Joint Inquiry which he as a member of the Labor government chaired, rather than a Senate Inquiry which the more impartial opposition would have chaired?

Clearly had the Cassimatis’ formalised this undertaking by signing, it would have eventually rendered Storm insolvent given that Storm would have been prevented in doing business with most of their clients by volume of business. We understand that although Storm had approximately 14,000 clients overall, something like 90% of Storms revenue was derived from approximately the 3,000 clients who would have been subjected to this undertaking.

These differences between the CBA’s claims to the borrower and the reality of the borrowers situation made the difference between financial life and death. The CBA was completely responsible for this, not the borrower, not the advisor and not Storm as the CBA attempted to make this borrower believe?

The Plain Truth has conducted hundreds of similar analyses on Storm client portfolios showing that CBA’s data was wrong in all cases. For the purpose of clarity and to remove all doubt The Plain Truth stands behind the view that each and every CBA borrowers margin loan data details was profoundly defective?"

 

[bunyip]

GG....You’ve stated that you don’t like long posts. In that case son, you’d better stop reading right now – this one is not for you.

Well Frank – what a difference a month or two of reflection combined with some clear thinking has made in your attitude. Now you’re agreeing with some of the views which only a short time ago you to reacted to with hostility and derogatory comments towards the people who expressed them.

It’s heartening to see you now agreeing that investors should have taken the precaution of checking out a number of Financial Planners rather than plunging right in with Storm – this is a pleasing departure form your former statement of ‘investors don’t need to be prudent and cautious’.
As you now acknowledge......Even when dealing with tradesmen, you don’t accept the first quote submitted but obtain two or more others as well. We all know this! The fact that we ’Stormies’ never went down this path was a major failing on our part and one that is inexcusable.

Also pleasing is to see you finally agreeing that you should have used more common sense. In fact you put it much better than I ever could have by saying ‘Often, when you consult with more than one professional you pick up some useful advice anyway in your search for the best solution to your particular needs, whatever they may be. This is commonsense after all! As it was, our failure to apply some commonsense and test Storm’s plan independently cost us all that we had in the end.’

I and others have copped a regular blasting on here for daring to suggest that it was largely a lack of common sense that brought you undone. But when you think about it, all the dishonesty and immorality and incompetence of Storm, all the alleged illegality of the banks, all of that could have been easily avoided by Storm investors if only they’d used a decent measure of common sense when checking out what Storm was offering.
We’ve heard often enough ‘But we weren’t experienced or sophisticated investors – how were we to know’?
The fact is that seeing through dodgy planners and dangerous advice requires common sense and independent thinking rather than sophisticated investment knowledge. Of all the successful investors I know (and there are quite a few) none of them are using sophisticated or high-tech methodology, they’re all just using very basic common sense stuff that anyone can use to invest profitably and safely.

It’s good to see you’ve changed you attitude towards Financial Planners, now acknowledging that your anger blurred your rational thinking. You have now, quite rightly, acknowledged the valuable role of Financial Planners.
I recall you saying several months ago that you were scheduled to give an address to a gathering of retirees, and you stated your intention of advising them to steer clear of all Financial Planners. If you did in fact address that meeting and give that advice, I hope you will now, as a matter of principle and integrity, contact those same retirees and tell them that you were a little hasty in condemning all planners on the basis of what Storm did.

On the subject of investors forearming themselves with the sort of knowledge that could have helped them to avoid the pitfalls of investing through the likes of Storm............
I note your comments that many Storm investors were past retirement age and may not have had the interest, time or capacity to learn about investing. I must, however, completely disagree. We make time for the important things in life – or we suffer the consequences of neglecting them. Health and fitness, family, finances, personal relationships......neglect them at your peril!
Most Storm investors had more than six decades to avail themselves of the wealth of information and resources that are freely available to anyone who wants to equip themselves with some basic investment knowledge. Those who were computer illiterate had the opportunity to learn computers through free TAFE courses and adult education courses, same as I did. Those without access to an internet connection could have availed themselves of free ASX courses, stockbroker information sessions, and public libraries (which always carry a good selection of investment books). Suffice to say that plenty of resources have been available to anyone who chose to make use of them. Nobody has any excuse for arriving at retirement age without knowing anything at all about investment and finance. If they don’t know the basis, then they should stay away from investment. Sometimes we should just admit our limitations, and accordingly stay away from particular activities.
I know absolutely nothing about sailing a boat, so there’s no way I’m going to suddenly decide to buy a boat and sail up the Queensland coast. I’d soon get into trouble if I tried it.
There are many Storm investors who should have simply realized their limitations, and stayed away from investing, particularly in the stock market.

The stock market does funny things to people – it seems to convince them that the normal rules of running a business don’t apply to stock investment, that they can safely invest in the market without any knowledge of the business. These same people wouldn’t dream of investing in a paper mill if they had no knowledge in that area, they wouldn’t dream of investing in a tourist park without first putting in considerable effort to learn something about that industry. Yet in the stock market business they think they can just jump in without any prior knowledge or experience. Well they probably can......IF they poke in slowly with only small amounts of capital which they can afford to lose. That’s how I learnt to invest in stocks and currencies myself.
But to charge into the stock market with mega bucks, most of it borrowed, without any knowledge of the business, is just inviting disaster. Even if you put a manager on to run the business for you, you still need some knowledge and input yourself, same as you would with any other business. My grandfather had a saying ......’The best fertilizer for any business is the footprints of its owner’.
This of course applies even if you employ a manager to operate your business.

I note your repeated efforts to convince this forum that Storm investors didn’t have a gambling problem. Well Frank, nobody of this forum has ever suggested that Storm investors did have a gambling problem. We have, however, quite correctly pointed out that Stormers took a number of gambles, apparently without realizing it.
They took a big gamble in not bothering to get themselves financially and investment literate.
They took a big gamble in placing blind trust in Storm, rather than consulting a number of planners to compare against each other.
They took a big gamble in mortgaging their homes when they were at retirement age.
They took a big gamble in throwing massive amounts of borrowed money at an investment which they clearly didn’t understand.

And so on and so on......I could go on but I’m sure you get my point. I’m not suggesting that Storm investors are the sort of people who were always throwing money at the horses or the pokies. Nevertheless, they gambled in a big way. The tragedy is that they appear to have had little understanding of the gambles they were taking. If they had understood, most of them would have avoided Storm like the plague.

Greed.......I notice, Frank, that you’re at pains to point out that you weren’t greedy. The definition of greed is..... An excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth:
You acknowledged that you had more than enough money to provide you with a very comfortable retirement. From memory, you stated that one of the reasons you aimed for more money was because your partner wanted to provide something for her children (I can’t think what it was).
I’ll let you work out whether you think you were being greedy or not. To be perfectly honest, I don’t care why you invested with Storm, or whether you were greedy or not. I don’t entirely oppose greed, it’s a great motivating force to help us to higher achievements, as long as we don’t become silly and imprudent in our efforts to achieve more.
Nobody on this forum that I’m aware of has tarred all Stormers with the same brush by saying ‘YOU WERE ALL GREEDY’. But we have pointed out that some people were already wealthy pre-Storm, and therefore had no reasonable justification for mortgaging their homes and borrowing heavily at retirement age in an effort to greatly boost their wealth. For these particular people, greed appears to have played a part in their decisions.
One woman on this thread stated that through Storm she got up to a net worth of 12 million dollars. Yet even at that level of wealth she kept investing with Storm in an effort to make even more money, rather than shifting some of her wealth into safe secure assets that were out of reach of the banks.
Readers of this thread can make up their own minds as to whether greed was a factor in her case.

Frank – you’ve gone to considerable effort to convince us that Storm was a dodgy outfit. But we already knew that – we were saying it long before you started posting on this thread – I don’t know why you felt the need to convince us all over again.

In summary, Frank, it’s good to see that you’re now starting to get some balance in your thinking. I must confess that at one stage I had formed the view that you lacked the capacity to comprehend even the simplest things. I’m pleased that your recent posts have given me cause to modify that view. Not that I think you and I are ever going to agree on everything, but at least now we agree on some things.

 

[bunyip]

Mindset


Bunnyip has said, “However, there’s one thing you could have known that would have shown the Storm strategy to be a high risk con scheme that completely misrepresented the facts in regard to the safety measures that were supposedly going to protect your capital from major loss.
The ‘thing’ I refer to that you could have known about was past market crashes. In particular, I refer to the 1987 crash that wiped 20% off the market overnight, 25% in one day, and 50% in a little over a month. If you’d looked at the ‘87 crash and asked yourself ‘ OK, what effect would a similar crash have on my proposed portfolio’?...you would have discovered that the result of such a crash would be catastrophic loss of your capital before the market reached the trigger points that supposedly would safeguard the bulk of your capital.
If you’d done that, and discovered the enormity of the ‘87 crash and many others before it, and then considered the very real possibility of such crashes repeating, I believe you would have made the prudent decision to walk away from Storm without even bothering to look into their SOA.”



I'm not clear on your line of thinking here? Are you suggesting that people shouldn't invest in the share markets because all share markets have a past history of crashing? If that's the case, the economy would fall flat on its face tomorrow because people would simply stop investing.

No Frank, I’m not suggesting that people shouldn’t invest in the stock market.

What I’m suggesting is precisely what I said......that if you’d looked at what happened in the ‘87 crash, and then considered what effect a similar crash would have on your proposed heavily geared portfolio, you would have been forewarned that you were setting yourself up for catastrophic losses if the ‘87 crash was repeated.
And that these losses would have occurred long before Storm’s safety triggers were supposed to kick in and save you from big losses.

Not everyone who invested in the market was setting themselves up for catastrophic losses, but then again, not every market investor mortgaged their home and geared themselves to the eyeballs to triple or quadruple their market stake, as you Stormers did.
And not every market investor chose the stock market as their sole investment, like you Stormers did. Prudent investors spread their money over different assets classes, and used conservative levels of borrowing.

Stock market investment is for prudent people who spend as much time considering the downside risk as they spend considering the profit potential.
You Stormers failed to do that. You saw how much money you could potentially make, you spoke to Storm investors who told you how well they were doing, but you just didn’t do your homework on the downside risk.

 

[SJG1974]

Been some good stuff on this site recently. Thanks everyone.

Frank, been an interesting read about the inner goings on. I too admire your honesty in these recent posts concerning your mindset.

I also agree about the PLAIN TRUTH stuff. Very one sided.

Storm get away scott free in all of that. A heap of garbage in my opinion.

 

[Solly]

When matters are next in Court

Proceedings are being held in public so anyone interested may attend.


15 May 2012
ASIC civil penalty proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000

24 May 2012
ASIC unregistered managed investment scheme proceedings
Federal Court, Brisbane
Justice Reeves
Level 7, Harry Gibbs Commonwealth Law Courts Building
119 North Quay
Brisbane QLD 4000

Source: https://storm.asic.gov.au/storm/storm.nsf/byheadline/Next Court Dates?opendocument

Are there any Stormers who wish to comment on the recent Directions Hearings at the Federal Court, regarding Mac Bank, Comm Bank & ASIC's action?

I believe that there is quite an air of confidence around.

S

 

[Frank Ainslie]

Hope for mortgage 'victims' with homeowners winning battle against banks
by: Anthony Klan
From:The Australian
June 04, 201212:00AM


THOUSANDS of struggling homeowners could walk away from their mortgages as a series of court cases helps to expose widespread improper lending practices involving some of the nation's biggest financial institutions.
Finance industry giants are spending millions of dollars on legal fees fighting homeowners who have successfully exited their mortgages because they were stung by sub-prime-style lending practices during the last property boom. An investigation by The Australian has revealed several mortgage providers and mortgage brokers engaged in improper lending practices in the years before the global financial crisis hit in 2008, including inflating borrowers' income and ability to repay debts to secure so-called "low-doc" loans.
Courts in several states have sided with homeowners who have defaulted on their loans, extinguishing their mortgages. The rulings have encouraged other lenders to reach settlements with borrowers that are saving homeowners hundreds of thousands of dollars. And the issue could be tested in the High Court in coming months.
MAY has transformed the global economic outlook like no other month since September 2008 brought the collapse of Lehman Brothers.
Award-winning consumer advocate Denise Brailey, who runs the Banking and Finance Consumers Support Association, said she was dealing with more than 100 alleged victims of improper lending. "What this means is that if you are a struggling homeowner and the bank comes knocking you may well not have to hand over your keys," Ms Brailey said.
The declining health of loans could have ramifications for the federal government, which has put about $14 billion into securitised mortgage investments - packages of home loans known as "residential mortgage backed securities" - since the GFC.
In October 2008, Wayne Swan announced the government would invest $4bn to shore up the RMBS market, but that figure has ballooned and in April last year he increased the obligation to $20bn.
Australian Office of Financial Management chief executive Rob Nicholl said the government had invested in superior-quality loans with relatively low defaults rates and that it was "very cognisant of all the risks involved".
However, default rates among some mortgage securities, which include low-doc loans, have surged to as much as 7 per cent of loans.
According to Fitch Ratings, low-doc loans comprise about 8-10 per cent of every mortgage in the Australian securitised mortgage market.
Fitch analyst James Zanesi said that proportion of low-doc loans was similar in the wider, $1.2 trillion Australian mortgage market.
According to Fitch, low-doc loans were more than four times as likely to be in default than standard loans, with 5.5 per cent of all "prime" low-doc loans in default compared with 1.26 per cent of all standard loans.
The group said low-doc loans were experiencing "considerable deterioration" and there was "no relief in sight" for low-doc loan delinquencies.
The Australian has amassed evidence of widespread improper lending activity based around abuse of low-documentation lending products.
In the race to provide credit - and earn commissions - major lenders such as Macquarie, Suncorp and GE Money spruiked imprudent lending practices to mortgage brokers, highlighting loopholes in their own lending requirements.
Low-doc or "no-doc" loans were supposed to be only for self-employed business owners who could not provide standard loan information. Borrowers typically pay a higher interest rate to reflect their lack of a regular credit and income history.
But in scores of emails those lenders - and many others - told mortgage brokers that borrowers needed only to register an Australian Business Number "for one day" to secure low-doc or no-doc loans.
One email from a Macquarie Bank business development manager to brokers says: "Why not try Macquarie for the below reasons . . . No docs - Client only needs to be self-employed for 1 day or more . . . No assets and liabilities required, no income needs to be stated!!!"
Macquarie Bank and GE Money declined to comment. Suncorp spokesman Jamin Smith defended similar emails sent by Suncorp staff, saying business development managers did not have the power to authorise loans.
The Australian has also discovered cases of mortgage brokers, loan originators and others inflating borrowers' stated incomes on loan application forms without their knowledge.
Precedent-setting court cases have recently found that, where borrowers were given loans they could never afford, lenders must extinguish part or all of those mortgages. Nine judges before six courts have to date found in favour of homeowners affected by improper loan applications, and in almost all cases courts have ordered lenders to fully extinguish mortgages within 30 days.
The most clear-cut cases have occurred in NSW because of the 1980 Contracts Review Act in that state. However, courts in Victoria and Western Australia have found in favour of borrowers under existing legislation. Major mortgage securitiser First Mac - which has issued $9.5bn in Australian mortgages since 2003 - lost a NSW Supreme Court bid to repossess the family homes of three borrowers on the grounds those borrowers were victims of loan application schemes.
The judges found lenders had acted inappropriately by engaging in "asset lending" - that is, lending money based solely on the fact that the loan is secured by an asset, usually a person's home, and paying little or no regard as to whether the borrower could afford the loan.
First Mac appealed against the decision and in December the judges again sided with borrowers, ordering that mortgages against two family homes be rescinded completely, and reduced by three-quarters in a third case. First Mac was ordered to pay court costs.
In light of those judgments, lenders such as Westpac are scrambling to settle with borrowers who claim to have been wronged. In many cases, hundreds of thousands of dollars are being wiped from mortgages.
In every court case heard, lenders had failed to make simple checks, such as calling prospective borrowers to verify their stated incomes or employment status.
First Mac, based in Brisbane, has now sought to take its case to the High Court, and a hearing as to whether the case will be heard will take place later this month.
A High Court spokesman said between 8 per cent and 10 per cent of applications for such "special leave to appeal" applications were granted.
First Mac founder and managing director Kim Cannon did not respond to calls last week.
In most instances, the precedent-setting cases against the deep-pocketed financial institutions are being funded by consumer groups or lawyers working for little or no pay because the borrower victims are often close to bankruptcy. Lawyers said the vast majority of the thousands of homeowners affected by improper or unconscionable lending activities had no idea they could legally walk away from their mortgages.
"Lenders have been throwing everything they have at these cases because they know there are thousands, probably tens of thousands, of people who have been affected," said Geoff Roberson of Champion Legal, who has run the cases against First Mac. "The problem for many borrowers is they don't know they have been wronged and simply roll over when the banks come knocking."
Consumer advocates said borrowers who believed they had been affected should approach their lender for a copy of their loan application form, which they were entitled to by law, and check the income levels stated.
Ms Brailey said not being provided with a copy of the loan application form was a key indicator borrowers may have been subject to loan application irregularities.
"In every single case of the 100-plus I am dealing with, the person has not been provided with a copy of their loan application form by their mortgage broker or lender," she said.
She said borrowers were entitled to such information by law. However, banks and other lenders had "stonewalled" such requests.
"Every time the borrowers receive the forms they are blown away," Ms Brailey said. "Incomes have been grossly exaggerated, false employment job descriptions have been entered or they have been stated as being employed when they're not.
"In one case, a lowly-paid deckhand was described as a ship's captain and described as earning $150,000 a year."
Ms Brailey, who has been tracking low-doc loans and loan application issues with The Australian for several years, said she had uncovered examples of loan application irregularities in loans approved by 14 banks and other lenders.
She obtained emails illustrating imprudent lending practices by 36 banks and non-bank lenders, including all of the major banks.
"We're about to see a major train wreck," she said.

 

[Glen48]

Its USA sub prime all over again post it in Aus property poast as well Frank