Storm Financial Group

Steve Borden · 12 March 2009

Glen48 said:
Does any one know if Storm altered the info on victims forms forcing them to end up more highly geared?
IF Storm had authorisation from Victims to do as Storm liked on their behalf and the Banks were aware of the scam then you could understand the Banks wanting to talk.
I can't see any banks lending $1.8M to a Victim on $50K PA...

The point is that the 'Bank' didn't know they were lending $1.8m to a client, the local home loan lender did the home loan in happy ignorance of what may happen with a future margin loan, this margin loan may have been with their Bank or with another Bank.

The margin lender then approves a margin loan simply on the basis of the amount of security they have, no credit assessment, no assessment of income or assets and liabilities position.

So when it all fails the Bank finds it has a $1.8m exposure to the one client with the only assessment done for the home loan. This assessment was based on projected income from the investment portfolio provided to the Bank by Storm and given the investment is gone the client is now in an untenable position.

We then find ourselves at this point of time, many hundreds of people will loans they can't service, the Bank's owed millions in outstanding margin calls that can't be repaid and hundreds of millions in home loans where clients have nearing negative equity.

The Bank knows they can't pursue all these loans, for one pursuit of the debt may not yield anything, secondly the there is the expense of the pursuit and lastly there is the Brand damage from the pursuit. Good luck to the first lender that forecloses on a disabled pensioner with no equity in his home, I know where the court of public opinion will make its judgement, swing enough opinion and the opportunistic politicians get involved.

The only course is a negotiated settlement and the CBA's first offer is a life tenancy with a 0% interest rate. We have effectively gone from we did nothing wrong to foregoing tens of millions of dollars in revenue in the space a month.

Pretty logical business sense from the CBA, can the BoQ afford to do the same?

carey ramm · 12 March 2009

hi guys a couple of comments as have been away for a few days:

steve borden i think u r pretty much on the money in your assessment of the issue with the settlements - but hey if people are happy with the deal then that is great and it means the storm campaign may have achieved something

bunyip - the legal action is already well underway - y do u think the banks are running round trying to do settlements (certainly not out of the goodness of their hearts!!!! roflmao !!!!) - they know what is coming and they know what will come out - i could speculate that maybe even some of their own audit reports may have highlighted this issue in the past but were ignored maybe because the profits were so good. more speculation could be that the actual agreements between the banks and storm actually used the term agent....

In regards to the CBA it is very encouraging that they recognise there is a problem and have come to the negotiating table.

interesting to see that ANZ are wanting to settle opes prime - that certainly wouldnt have happened without slater and gordon - it was also very very very intersting to see the ASIC enforceable undertaking placed on a major bank (this happens very rarely i am informed) - i am pretty sure the storm banks would have read this very very closely

bunyip - will also be very interesting to see whose handwriting actually filled out the 60 minutes female retirees loan application stating a 100k per month income - anyone want to guess??

bunyip - if i could speculate again - there will be former storm advisors having informative chats to the lawyers and ASIC - maybe even the odd bank johny as well - sinking ships generally leak.... even spoke to a few myself - charming people.

glen this is very much about responsibility - if u sell a lemon claiming it is an orange then the consumer has every right for redress - bunyip u had plenty of govt agencies (inlcuding a lemon law for cars) to help your toyota car issue

On a last point ASIC cant be very far from taking action... now this should be quite interesting.

Trevor_S · 12 March 2009

carey ramm said:
i could speculate that maybe even some of their own audit reports may have highlighted this issue in the past but were ignored maybe because the profits were so good.

Would this be the same Storm "investors" who were happy to take profits and ignore supposed irregularities in the paperwork themselves when times were good ?

I used to have enormous empathy for this who speculated with Storm, this empathy is wearing away with their constant bleating in the press from their "representative" about how the banks are too blame, the speculators themselves playing the naive card is wearing rather thin.

Ironically, once again it reeks of greed on their part, the banks being the only people with money and relying on a gullible public believing banks are inherently evil and greedy politicians riding the back of that sentiment.

pilots · 12 March 2009

Trevor_S said:
Would this be the same Storm "investors" who were happy to take profits and ignore supposed irregularities in the paperwork themselves when times were good ?

I used to have enormous empathy for this who speculated with Storm, this empathy is wearing away with their constant bleating in the press from their "representative" about how the banks are too blame, the speculators themselves playing the naive card is wearing rather thin.

Ironically, once again it reeks of greed on their part, the banks being the only people with money and relying on a gullible public believing banks are inherently evil and greedy politicians riding the back of that sentiment.

Yes, it was all 100% AOK when it was on the way up, but now!!!. IT IS ALL THE FAULT OF STORM AND THE BANKS. Some people want it both ways.

stung · 12 March 2009

pilots said:
Yes, it was all 100% AOK when it was on the way up, but now!!!. IT IS ALL THE FAULT OF STORM AND THE BANKS. Some people want it both ways.

No it was not AOK when things were on the way up. It was never OK. I did not profit take. I tried but my advisor blocked me with excuse after excuse. I believed him of course because I thought he had my financial interests at heart. Now I know this was not the case. He was just being a slime.

Trying to get out proved to be even more difficult. This was blocked also. "We lost your STOP/LOSS form: so sorry" followed by more excuses.

If anyone is greedy in this it is my advisor who put his own interests above mine.To think I paid the maggot for the privelege.

How many times do you need to be told -we were lied to?

I work in an intensive care unit. If after your open heart surgery I tell you to go home and lift as many heavy objects as possible to build up your strength and you do, who do you blame when your sternum rips apart? Is it your own fault for trusting someone in the medical profession?

Same goes. I went to Storm for advice. That advice was on the nose and metorphorically speaking my sternum is now gaping.

Have a heart.

pilots · 12 March 2009

stung said:
No it was not AOK when things were on the way up. It was never OK. I did not profit take. I tried but my advisor blocked me with excuse after excuse. I believed him of course because I thought he had my financial interests at heart. Now I know this was not the case. He was just being a slime.

Trying to get out proved to be even more difficult. This was blocked also. "We lost your STOP/LOSS form: so sorry" followed by more excuses.

If anyone is greedy in this it is my advisor who put his own interests above mine.To think I paid the maggot for the privelege.

How many times do you need to be told -we were lied to?

I work in an intensive care unit. If after your open heart surgery I tell you to go home and lift as many heavy objects as possible to build up your strength and you do, who do you blame when your sternum rips apart? Is it your own fault for trusting someone in the medical profession?

Same goes. I went to Storm for advice. That advice was on the nose and metorphorically speaking my sternum is now gaping.

Have a heart.

Are you telling me that you tried to get out b4 the crash???????

stung · 12 March 2009

pilots said:
Are you telling me that you tried to get out b4 the crash???????

No. I tried to get out when the All Ords was at 5500 points and several times thereafter.

Pindibog · 12 March 2009

stung said:
No. I tried to get out when the All Ords was at 5500 points and several times thereafter.

Stop putting all Storm clients in one basket. We all didn't realise our profits from our portfolios or go on lavish holidays etc. I have not touch mine in 18years. We did not all mortgage houses, borrow too much money. But hey we were still told lies which impacted on decisions and the Storm badged indexed funds closed. Even to those that were not at margin call. They were forced to realise their loss. I had other shares not storm badged but they were sold out from under me when I gave strict instuctions not to sell at this low point. All the time being told I was not at MC. I WAS able to inject more capital and had so in an associated CMT account??? But no they sold everything without my approval or knowledge at the time.

Glen48 · 12 March 2009

Looks like the banks must have got caught up in the greed as well to think some one could repay 1.8M on 50K PA even with returns from the stock I would assume they would have had a margin fo0r error????
Did the victim know he was up for 1.8M?
I must be too old as 1.8 is still a lot of money to me and i would be wearing brown clothing all my life if I know I was geared for that much.

swazee · 12 March 2009

Guys, there has been a lot of speculation regarding the state of Storms financial position and general state of the business leading up to the collapse. If you have not see this before, it is an intersting summation up to the period of the court hearing in early Feb. If the link does not work let me know.

http://www.austlii.edu.au/cgi-bin/s...FCA/2009/70.html?query=" storm and financial"

Judd · 12 March 2009

As well, have a read of this. Love it. Especially paragraphs 14 to 18.

14 Under clause 4, the Bank is entitled to give a borrower a notice of a margin call in circumstances where the current ratio is equal to or exceeds the margin call ratio and on receipt of such a notice the borrower must act to restore the position. By clause 4.3, the borrower agrees that the Bank may provide notice of margin call to the borrower or to the borrower’s client adviser either in writing, orally or by updating the Bank’s website. Clause 4.3(b) provides that:
It is your obligation to keep your or your Client Adviser’s contact details up to date.

15 Clause 4.4 provides that the borrower is responsible for monitoring the borrower’s portfolio and determining when the borrower’s loan might be subject to a margin call. The borrower is required to be in a position to receive any communications from the Bank and to act within the time limits specified in clause 4 and to ensure that a margin call does not occur. By clause 4.5, if the borrower fails to meet a margin call, the Bank may but is not obliged to, sell any or all of the security supporting the borrower’s loan and reduce the amount owing; sell more security than the minimum required to satisfy the margin call; sell the securities without first contacting the borrower, any "margin call contact, or agent you may have nominated"; and sell the securities in the order the Bank chooses.

16 Clause 5 deals with "administering your loan" and provides that the Bank will send the borrower an account statement every quarter, among other things.

17 Storm contends that the completion of the application document subject to the terms and conditions brought into existence an orthodox banker/customer relationship which called upon the borrower to discharge certain obligations and created rights and entitlements in the Bank to take a number of steps and, relevantly here, issue margin call notices under the terms and conditions and exercise any or all of the rights conferred by clause 4. Storm says that there is nothing in the arrangements reflected in the letter of 18 May 2007 between the Bank and Storm which casts an obligation upon Storm to manage the margin loan borrowing by any particular customer who applied for and took up a loan with the Bank. Moreover, there is nothing in the application document or the terms and conditions which recognise as between the banker and its customer, an obligation on the part of Storm to manage the margin loan on behalf of the Bank. Storm says that, objectively viewed, such an obligation if it was to subsist would be manifest and extant in the documents.

18 Storm says that it did not provide monitoring or management for its clients of margin loans, in the ordinary course. From time to time where a client failed to maintain a borrowing within the margin ratio, Storm became involved in discussions with the Bank and the client about that circumstance. Those examples of such engagement by Storm are said to be simply transactional examples of Storm playing a role of assisting the client in its dealing with the Bank and they do not reflect the orthodoxy of the systemic arrangement. Storm says that a reason for Storm having no role to play in the management of margin loan accounts was that it did not obtain any commission, described as a "trail commission" by reason of the client taking up a margin loan with the Bank which in turn led to the Bank being in a position to offer more favourable interest rates to clients of Storm since that additional cost was not involved.

http://www.austlii.edu.au/au/cases/cth/FCA/2008/1991.html

Garpal Gumnut · 12 March 2009

Am I correct in assuming that the

Greedy
Stupid
Witless

folk have been thrown a lifeline by CBA.

What a joke.

I might get on to my margin lender and claim all my losses back over the last 12 months.

I am

Greedy
Stupid
Witless

What a great end to this financial crisis.

Roll over and get it all back

gg

bunyip · 12 March 2009

Pindibog said:
Stop putting all Storm clients in one basket. We all didn't realise our profits from our portfolios or go on lavish holidays etc. I have not touch mine in 18years. We did not all mortgage houses, borrow too much money. But hey we were still told lies which impacted on decisions and the Storm badged indexed funds closed. Even to those that were not at margin call. They were forced to realise their loss. I had other shares not storm badged but they were sold out from under me when I gave strict instuctions not to sell at this low point. All the time being told I was not at MC. I WAS able to inject more capital and had so in an associated CMT account??? But no they sold everything without my approval or knowledge at the time.

Yeh, I think there has been an unfair tendency to blame every Storm client for being greedy. Certainly there was greed in some cases, such as those who were already wealthy and financially set up for life when they joined Storm, yet they risked it all by gearing to levels that were just downright silly. Some of these people were not exactly new to investment either, having been in business for many years, and having invested in both stocks and real estate.
Nor were they ignorant of what the stockmarket can dish out, having seen what happened back in the 1987 crash.
I find it pretty damned hard to feel sorry for these people.

But I can see there were others whose circumstances were entirely different, and greed wasn't a factor in them getting into strife.
I feel sorry for these people.....the same thing could have happened to me 15 or 20 years ago when I didn't have much experience or knowledge.

bunyip · 12 March 2009

carey ramm said:
bunyip - will also be very interesting to see whose handwriting actually filled out the 60 minutes female retirees loan application stating a 100k per month income - anyone want to guess??

Yes Carey, that will be interesting.
But whoever filled in the details can claim that they did so before the client signed it, and that they (the client) signed it only after they had perused the document and verified that the details were correct.
Of course that may all be outright lies, but proving it would surely be difficult.

bunyip · 12 March 2009

stung said:
I wanted to know how the $1880 in the extra monthly income was derived.
This was apparently the monthly return on investment that I was expected to receive ( 4 percent) once I signed with storm. So as far as I can ascertain my ablility to pay the loan included income from potential future earnings!! Since when has a person been able to apply for a loan and add possible earnings to their income figure?

Yes I know its all my fault but I did have a smidge of help from the banks and from storm.

A projected gain of 4% a month or 48% a year sounds a trifle unrealistic, considering that the All Ords averaged a 34% annual gain during the bull market from March 2003 to November 07.

Glen48 · 13 March 2009

In a twist of Fate most of these victim could have lost their house anyway due to the depression....and the Banks will be stuck with houses which $100K owing on them...I see the Fire victims will get $60K towards a house and $15K for contents ...the un-insured will get more ..as you do.
Me I am going to sue Graham Bell for inventing the phone and allowing me to place a trade on Gold and loose $$$

Steve Borden · 13 March 2009

bunyip said:
A projected gain of 4% a month or 48% a year sounds a trifle unrealistic, considering that the All Ords averaged a 34% annual gain during the bull market from March 2003 to November 07.

Without wishing to speak for stung, I think you will find that he/she meant 4% pa paid monthly, of course if that doesn't suit your agenda then you could draw the other conclusion.

Solly · 13 March 2009

ASIC has decided not to wind up Storm at this stage. They have asked Worrells to provide a report to creditors on 16/3 regarding Storm's financial circumstances and also an opinion on whether or not the DOCA or liquidation would be in the best interests of creditors..... more to come....

nigel foxwell · 13 March 2009

ASIC have continued their standard operation of errors or omission and commission - ANZ and OPES, now Storm. Can we interpret this inaction of theirs that SF did not contravene any corporations law? Or possibly that, as with Opes (by their own admission), any action would not be a commercially acceptable risk? How much faith can we possibly have in this organisation?

Trevor_S · 13 March 2009

nigel foxwell said:
Can we interpret this inaction of theirs that SF did not contravene any corporations law?

Unless they traded while insolvent, I doubt they did anything untoward in respect of corporation law. Ripping off gullible customers ("getting the maximum revenue out of each customer") is what all business do, from the Banks, through Storm, to Maccas and the corner store... it's a core strategy of all business. The only thing that keeps it in check is decent competition.

Storm were let down because their business model was fundamentally flawed, this is not against the law as far as I know. It's unlikely that even without a so called "black swan" event, their customers would have made money in the long term, the market tends to regress to the mean, and over swing down (and up) while they do. Storms customers needed massive leveraging (the fatal flaw) to overcome the huge fees Storm charged and Storm could not get them to switch out to cash without going bankrupt (no more fees to sustain them !).

nigel foxwell said:
How much faith can we possibly have in this organisation?

They have as long a leash as their political masters give them. That aside, why do you think ASIC should be involved, do you have some insite not available to ASIC ?

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