Storm Financial Group

[Trevor_S]

http://www.townsvillebulletin.com.au/article/2009/03/13/44395_news.html

THE signs came down at Storm Financial's office yesterday as the bank-appointed receivers and managers prepared the property for sale.

The plush Townsville headquarters of the failed national financial planning firm is one of six Storm-owned properties along the east coast that will be put to the market over the next few weeks to repay bank debts.

 

[Solly]

http://www.townsvillebulletin.com.au/article/2009/03/13/44395_news.html

THE signs came down at Storm Financial's office yesterday as the bank-appointed receivers and managers prepared the property for sale.

The plush Townsville headquarters of the failed national financial planning firm is one of six Storm-owned properties along the east coast that will be put to the market over the next few weeks to repay bank debts

Maybe gg could make a reasonable cash offer before auction and could add this well positioned property to his portfolio and make a quite reasonable yeild psm or maybe it could become the new Head Office of Garpal Inc...... although I believe he'd have to refit the "dunnies" as I hear he has an issue with the taps and the angle of the water jets on the bidets.

 

[nigel foxwell]

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 !).



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 ?

Trevor, the issue is not lengthening their leash - they can and must act independently. They have at their disposal a range of legislation and compliance tools, the issue at hand is how they use these. The insolvency is just one issue - please remember that ASIC are also the "regulators" of the financial services industry. A quick snapshot from Regulatory Guide 181 might be a good start:

Conflicts of interest: a definition
RG 181.15 For the purposes of this policy, conflicts of interest are circumstances where some or all of the interests of people (clients) to whom a licensee (or its representative) provides financial services are inconsistent with, or diverge from, some or all of the interests of the licensee or its representatives. This includes actual, apparent and potential conflicts of interest.

And, getting back to the insolvency issue, ASIC's behaviour in relation to OPES:

ANZ Bank and Merrill Lynch have reached an in principal $253 million settlement agreement with the liquidators of Opes Prime and the corporate regulator.

The agreement follows mediation between Australian Securities and Investments Commission (ASIC), ANZ, Merrill Lynch and the Opes Prime liquidators, Ferrier Hodgson, ASIC said in a statement.

ASIC said it had agreed not to pursue legal actions against secured creditors ANZ and Merrill Lynch should the proposal be approved by the federal court and Opes Prime creditors.

Its major objective in encouraging the mediation had been to recover compensation for investors without the need for costly litigation and multiple actions, ASIC said.

"The agreement is subject to approval by Opes creditors through a scheme of arrangement to resolve all outstanding claims by Opes creditors against ANZ and other parties,'' ASIC said.

ASIC chairman Tony D'Aloisio said a compromise settlement made commercial sense.

"And hence ASIC will provide the necessary releases to allow the settlement to move forward and be considered by creditors and the court,'' he said.

"In the event that creditors or the court do not approve the settlement, the releases do not apply and ASIC will reassess its position and weigh up public interest and other considerations to determine if it will commence any civil proceedings.''


Should ASIC not be working to both ends - recovery of financial losses as well as prosecuting to the fullest extent of the law? Should we continue to allow ASIC to let these organisations get away with their actions without ANY legal redress? Just because it is "commercially sensible"?

My point is - we cannot trust that SF has done nothing wrong until a full and proper investigation and legal proceedings have been completed, however ASIC appear to believe that it is more expedient to let the creditors do the work.

 

[bunyip]

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 !).

Good points there Trevor.
You're probably right about Storm not doing anything wrong is respect of the law....unless it can be proved that they fudged the figures on loan applications.
I doubt if their incompetence was illegal - if it was, damn near every stockbroker and financial advisor in the country would find themselves in court.
Screwing as much money as possible out of clients through high fees isn't illegal either.....as you say, every business does it.

Storm's business model had no chance of surviving indefinitely, due to the fact that it relied on a rising stockmarket. Storm clients had no chance of remaining unscathed long term either.....high gearing meant it was 'game over' just as soon as there was a decent correction in the market. And after four and a half years of bull market, a decent correction was inevitable and imminent.

Storm's costs were huge - a quarter of a million dollars a month just for their Telstra bill. Cash out their clients, no more revenue to meet expenses.
Therein lies one of the fatal flaws of investing money through financial planners - their interests conflict with their clients interests when the market runs out of steam and clients should be moving to the safety of cash.
Clients and advisors are both making money in a bull market. Bear market, different story - clients should be out, but advisors need to retain the revenue stream by telling clients to hang in there.
This is precisely what happened to the relative I mentioned in an earlier post....she had a 200 grand gain on her portfolio when the market started looking shaky.
I told her to take the money and run, her advisor told her to stay in because 'slumps are only temporary and shares are a long term investment'.
All her gain has now gone, but that doesn't bother her financial advisor who is still getting fees for 'managing' her portfolio.
You wonder how anyone can charge fees for losing 200 grand of a client's money - but that's the financial planning industry for you!

 

[Garpal Gumnut]

Maybe gg could make a reasonable cash offer before auction and could add this well positioned property to his portfolio and make a quite reasonable yeild psm or maybe it could become the new Head Office of Garpal Inc...... although I believe he'd have to refit the "dunnies" as I hear he has an issue with the taps and the angle of the water jets on the bidets.

Not as silly as it sounds, a mate has approached me about getting in to a syndicate.

I haven't been through it all, just got a ladder and looked in the windows one night. The Real Estate Agents are talking it up, offers north of $5m are being sought.

To be honest the main part looks like a *****house I lived near in Atlanta as a young man, and the rest looks like dongers strung along the street beside it.

Townsville CBD of which it is on the edge looks pretty sick at present so it may go for a song. It would probably come to think of it make a good *****house but I wouldn't have the energy to run one.

gg

 

[Jifromoz]

Hi everyone,

An interesting media release on the ASIC website concerning Low Doc Loans that could potentially turn the whole "Low Doc Finance Industry " on it's ear. May have some bearing on those Stormified clients who received Low Doc Loans and it can be proven that figures were fudged or adjusted. I will follow with interest.

http://www.asic.gov.au/asic/asic.ns...enes+in+low+doc+loan+proceedings?openDocument

Cheers

 

[Trevor_S]

The insolvency is just one issue - please remember that ASIC are also the "regulators" of the financial services industry.

That's the thing though, Storm are doing what every other FP is doing in the non fee for service area. Unless they fudged figures (highly possible with those guys), I am willing to bet one of Garps cee-gars they haven't done anything wrong, legally, this leaves them clear of ASIC. Did they give shi_tty advice ? sure, is that illegal for an FP, no, they will always argue it suited the client at the time. eg I see huge ads in todays paper from Dalle Court FPs, doing some spruiking, with text in a large font espousing leveraging as the tool to use to get rich, does this sound like Storm to you ? If it was illegal, they would be shut down.

Ethically is a whole other ballgame.

And, getting back to the insolvency issue, ASIC's behaviour in relation to OPES:

Fair point about OPES. I agree, the whole Opes thing was dodgy. AFAIK, Opes maintained in their literature that the purchaser held ownership of the shares but that NEVER happens with a margin loan, they can and will and should be able to sell them out from under you if there is a margin call you do not correct. Same as those in here saying how can a guy on $50K per annum get a $1.5Mil loan, Easy, put your house into hock, use the money from that to buy shares, use those shares as security on a margin loan and buy a crap load of shares on the margin loan. It's easy and that's how it should be, if people want to do that and not have any serviceability, that's their own fault but don't make it hard for me, by making Margin Loans into some sort of full doc compliance thing, or scrapping them altogether.

Should ASIC not be working to both ends - recovery of financial losses as well as prosecuting to the fullest extent of the law?

Not to my mind, I want ASIC to keep it's nose out of my business. I am happy to take the hit for financial loss's from decision I make, because the other side of that is having ASIC make the whole process unwieldy by being given a longer leash by Government. You just have to know, if Government gets involved, it gets worse not better. You can never protect the gullible (like me) from charlatans, I say this with some alacrity, being an ex Pasminco shareholder (those bast_ards)

Should we continue to allow ASIC to let these organisations get away with their actions without ANY legal redress? Just because it is "commercially sensible"?

What would you propose to stop that ? Unlimited Liability is a possibility (it exists in the UK for example) I would be happy to countenance BUT that must be ubiquitous ie those who took out loans have to pay them back (ie the very ones complaining here) as well as Storm directors having everything but the shirt off their back taken .

As a shareholder of ANZ (with the Opes debacle) and CBA (with the Storm debacle) I encourage them to go after those who have taken on debts they don't want to pay and be ruthless in getting MY money back. You wanted my money to loan, to speculate on a continually rising ASX index ? well no problems but I want it back when we agreed.

however ASIC appear to believe that it is more expedient to let the creditors do the work.

Like I said, perhaps ASIC actually know more then you in this instance, and have made their current decision based on their knowledge ?

At the end of the day it will come down to: did Storm do anything illegal ? and even if they did, there is no real redress. Though from what some are saying they were unable to sell out when they asked Storm to convert them to cash. Did the Bank do anything illegal ? if they did, the clients have some form of redress. If not, take the hit, get some financial education and move on.

 

[Garpal Gumnut]

I'm not sure whether its my glasses or not but the colour on Manny's website is fading , especially his mission statement.

gg

 

[nigel foxwell]

Trevor, I will be the first to admit that I have absolutely no insight into the detailed operations of Storm other than that which is reported in the media. I also have a higher than average but still limited working knowledge of legislation in this area.

The position I take is as member of the public and as such, I would like to see ASIC clarify their actions and inactions. To date their actions suggest that they act on the side of expediency and not in the public interest. For you to so lightly dismiss the issue of insolvent trading is to give a free pass to all those who would be too big or expensive to take to court, and reinvigorate the bleeding ulcers of all those smaller, but no less innocent, business operators who have faced the full force of the act.

In relation to your view on the operation of all non fee-for-service FP's, you are absolutely correct. They all do have an amount of conflict of interest, but what must be recognised and corrected for ever, is that SF operated a model that would not have stood up to any scrutiny (this scrutiny was beyond and not the responsibility of clients), and that is where ASIC, as the regulator, I repeat, REGULATOR, of those with an AFS licence has utterly failed.

It became quite apparent in the early days of this mess, that SF clients were not to blame. The number and frequency of irregularities in all aspects of the operations of all parties involved (SF, unnamed financial institutions) cannot be overlooked by ASIC. I don’t think you are gullible Trevor, but you find it easy to let this go and carry on, putting it down to experience, but I think that there are many people who have been failed by those in question, who would like to see the law and associated regulations enacted.
Have a look through the content on the link below, and let me know if you feel that SF, and unnamed financial institutions operated within the letter and intent of these requirements.

www . asic.gov.au/asic/ASIC.NSF/byHeadline/financial%20services%20compliance

(sorry for the disjointed URL, not enough XP yet..)

This is about justice, and trusting those who are charged with protecting us. I know that there can never by 100% prevention, and I do not want a nanny-state, however when repeated warnings go unheeded, and investigations are quit, what are we to do? There is redress Trevor – it is called Jail. It is a deterrent, a disincentive for those that go after us to repeat this kind of mistake. I hear it is even successful in some instances.


“… it is not merely of some importance but is of fundamental importance, that justice should not only be done, but should manifestly and undoubtedly be seen to be done.”
Lord Hewart from Rex v Sussex Justices

 

[Solly]

I'm not sure whether its my glasses or not but the colour on Manny's website is fading , especially his mission statement.

gg

gg, it doesn't appear to have faded when viewed on my crackberry but the hue does seem to have changed from a feint grey to tinge of "dark brown", somewhere aroung PMS 732. I could get the guys in post production to confirm this on monday...

 

[Glen48]

Won't be long before it turns Sepia and fades to Black then R I P you show

 

[Trevor_S]

For you to so lightly dismiss the issue of insolvent trading

? My issue is that insolvent trading IS the only real power they have in this respect, the rest of it is perspective. Do the best by your clients etc is all a load of hot air, designed to obfuscate.

is that SF operated a model that would not have stood up to any scrutiny

Agreed.

(this scrutiny was beyond and not the responsibility of clients),

Disagree. I could see it, most of the world is smarter then I.

and that is where ASIC, as the regulator, I repeat, REGULATOR, of those with an AFS licence has utterly failed.

Disagree, Storm were investigated by ASIC, Madhoff was investigated by the SEC etc etc Don't you think ASIC would be under enormous pressure from their politically opportunistic masters to do something to save the "battlers" ? The regulator failed because it is set up to fail, the same way the Storm business model was set up to fail. You can't legislate against gullibility nor against well versed charlatans, attempting to do so results in the mess we are in, where those hard done by are surprised when the white knight of the regulator doesn't give them a refund for example. eg Do I want ASIC checking the veracity of loan documents I lodge ? NO ! image they staff they would need and the taxes I would be paying ! If I lie and it all falls over, gaol me. If Storm clients lied, they should be gaoled, if Storm staff lied, gaol them and if vicarious liability can be proven gaol the directors. If bank staff lied, gaol them ... but you know what, no one seems to be looking into the activities of the Storm clients to see if there was any malfeasance on their part ?

As I said, if you are looking to a solution, then I could only support banning commission based FP's as the first step forward and look towards unlimited liability as another step. Having more regulation won't work and the current system doesn't work, you protesting that won't change those glaring facts.

Storm seemingly have complied with the current regulation otherwise ASIC would have been all over them. That doesn't discount things like Storm and their clients (or the banks !) perhaps presenting dodgy financials for example, and if any party has done that, and it can be proven, they should have their World caved in.

It became quite apparent in the early days of this mess, that SF clients were not to blame.

I disagree vehemently with that, the buck stops with them.

The number and frequency of irregularities in all aspects of the operations of all parties involved (SF, unnamed financial institutions) cannot be overlooked by ASIC.

Like you, I can only speculate, to my mind it sounds like investors putting dodgy financial to the banks rather then the other way around. Just look to the Sommersoft forums for people all the time trying to figure out ways to circumvent banks approval process to get themselves higher into debt, I smell a whif of a Storm strategy in that as well Once Storm clients start wondering why there was no checking by Banks on how come they got large margin loans, I just know the clients have no idea what they are talking about !

but you find it easy to let this go and carry on, putting it down to experience, but I think that there are many people who have been failed by those in question, who would like to see the law and associated regulations enacted.

I lost money in the current downturn (if your fond of mark-to-market as a measure of your wealth. me, not so much), about a 16% loss but that's because I didn't pay way over the money for stocks and didn't really buy much in the last 2 years where I accumulated cash, waiting for a correction. Does that make me a genius, no, frugal, yes. I am not looking to blame anyone for where I am at. If I am right, things will pick back up again in the years to come. if I am wrong, I will pack my swag and head out

Have a look through the content on the link below, and let me know if you feel that SF, and unnamed financial institutions operated within the letter and intent of these requirements.

Fixed it for you, use the "Insert Link" icon up near the fonts etc above the edit window where you are typing.

I don't know, I am guessing based on my observations and the actions of ASIC... because Storm were audited previously AND ASIC has backed away they don't have much of a case, who knows for sure though. Like I said, unless SF did something illegal that can be proved comprehensively (not a he said she said scenario) or they traded while insolvent, then ASIC will leave them to collapse and move on. At the end of the day the clients won't get anything out of Storm, as the directors are protected by the limited liability laws. The banks are dammed if they do (look after the most needy, it gets thrown in the in their face as covering up) dammed if they don't (heartless bastards).

Business can do things that are illegal in the best interest of staff, for example , I had a couple staff come to me and beg me to give them a few extra hours for a short time to get by. I said I can't pay overtime, they said they would work at normal time, saves them getting another job etc (about another 6 hours a week) so I didn't employ an extra staff member on part time and let them work it. They left and one complained to the Workplace Ombudsmen and I was audited and done for it... Who was wrong vs who broke the law ?

This is about justice,

Nothing to do with justice, all about fear, greed and gullibility.

and trusting those who are charged with protecting us.

See above. Your espousing ethereal concepts as a solutions, to my mind. I would hazard a guess most clients don't want justice, they want their money back.

I know that there can never by 100% prevention, and I do not want a nanny-state, however when repeated warnings go unheeded, and investigations are quit, what are we to do? There is redress Trevor – it is called Jail. It is a deterrent, a disincentive for those that go after us to repeat this kind of mistake. I hear it is even successful in some instances.

I appreciate what you are saying and you have made some excellent points, my point boils down to the fact the system doesn't work and Storm clients have to accept most (some ?) of the responsibility, (not doing so will leave them bitter) it's no use screaming at ASIC to do something when they (probably) can't, so, change the system....

I am just starting to repeat myself, so hows about I leave it there, stop choking this thread and let Solly continue his good work. It is seemly actually appreciated as opposed to my drivel

 

[Solly]

On cassimatis.com.au there is now an "URGENT NOTICE TO ALL STORM CLIENTS, STAFF AND CREDITORS" regarding the proposed DOCA (Deed of Company Arrangement) from E&J C that will be put to creditors at the second Creditors meeting on 23/3/09.

On the link http://cassimatis.com.au/urgent you will find, the DOCA terms, a 'simple english' explaination of the DOCA, Formal Proof of Debt or Claim Forms for both General & Employees and an Appointment of Proxy Form to appoint Stephen Russell of Russell and Company Solicitors.

E&J C state on the link;

"We understand fully that the Storm collapse has had devastating effects oneveryone – we are part of that group and are in the same boat. Most of us have been together as a group for many years – we are best placed to work together to fight this battle – not drawing our swords separately against each other. We have a common enemy – let us work together to defeat the CBA for what it has done to all of us."

Best of luck to all the "Storm" Troopers in your quest........

 

[nigel foxwell]

Thanks for the great volly Trevor - its good to see someone rebut me! Yep, agreed, I'll let this bone go.


But just as a general question to all - does anyone know if the Action Group will be helping to encourage or support submissions to the Senate Inquiry? The terms of referencce look very interesting...

 

[Julia]

I am just starting to repeat myself, so hows about I leave it there, stop choking this thread and let Solly continue his good work. It is seemly actually appreciated as opposed to my drivel

On the contrary, Trevor. Your comments above are about the best summary of the Storm situation on this thread. Drivel it is not.

 

[Garpal Gumnut]

On the contrary, Trevor. Your comments above are about the best summary of the Storm situation on this thread. Drivel it is not.

I'd agree Julia, an apt summary Trevor.

By the way it sounds as if sicag.info, the Storm folks self help group are trying to oust the Mannymen from their deliberations.

gg

 

[Garpal Gumnut]

Anyone know anything about these guys. A few of my mates are clients. They are Townsville based . I don't use advisers.

gg

I'd agree Julia, an apt summary Trevor.

By the way it sounds as if sicag.info, the Storm folks self help group are trying to oust the Mannymen from their deliberations.

gg

One of my mates called me just now, concerned about the attached message on the SICAG.INFO site.

He was concerned that SICAG might not be working on his behalf.

SICAG need to clarify and declare any conflicts of interest they have on their committee otherwise they will lose credibility and may themselves be open to litigation.

gg

 

[Trevor_S]

Yep, agreed, I'll let this bone go.

I thought this interesting, albeit about Madhoff, it has a sentiment that might sound eerily familiar ?

http://www.nytimes.com/2009/03/14/business/14nocera.htm

I suppose you could argue that most of Mr. Madoff’s direct investors lacked the ability or the financial sophistication of someone like Mr. Hedges. But it shouldn’t have mattered. Isn’t the first lesson of personal finance that you should never put all your money with one person or one fund? Even if you think your money manager is “God”? Diversification has many virtues; one of them is that you won’t lose everything if one of your money managers turns out to be a crook.

“These were people with a fair amount of money, and most of them sought no professional advice,” said Bruce C. Greenwald, who teaches value investing at the Graduate School of Business at Columbia University. “It’s like trying to do your own dentistry.” Mr. Hedges said, “It is a real lesson that people cannot abdicate personal responsibility when it comes to their personal finances.”

And that’s the point. People did abdicate responsibility ”” and now, rather than face that fact, many of them are blaming the government for not, in effect, saving them from themselves. Indeed, what you discover when you talk to victims is that they harbor an anger toward the S.E.C. that is as deep or deeper than the anger they feel toward Mr. Madoff. There is a powerful sense that because the agency was asleep at the switch, they have been doubly victimized. And they want the government to do something about it.

But just as a general question to all - does anyone know if the Action Group will be helping to encourage or support submissions to the Senate Inquiry? The terms of referencce look very interesting...

It will be interesting to see what eventuates, the cynic in me suggests it will be mostly puffery and nothing of any real substance will come out of it.

 

[Solly]

"Axe poised to fall on Storm Financial"

"THE axe could fall on Storm Financial today.......a report to the failed financial adviser's creditors could decide whether it puts Storm into liquidation or lets creditors make that decision....."

"It is understood that there are concerns the founders will use the DOCA to head off any legal action against themselves as directors of Storm, as well as against the company itself."


Story in The Age by Colin Kruger is here;

http://business.theage.com.au/business/axe-poised-to-fall-on-storm-financial-20090315-8yzx.html

 

[nigel foxwell]

Yeah, the Senate Inquiry sounds interesting, will be a lot less so in practice, and the practical outcomes? Probably will be less than 50% of any recommendations and about five years away.

On the Madhoff scam (shouldn't they change it from Ponzi scheme to Madhoff scheme? He should get some recognition for his hard work...) .. people did abdicate their responsibility to a mysterious reputation... not a solid foundation of investment knowledge. Also, there were many voices for many years that called for investigation by the SEC, which was brushed aside. The reason people are calling on the Government to act is because they (SEC) did fail in their duties, if this guy was just incompetent, and acted in good faith and within the letter of the law, people would have no basis for asking the Gov' to correct their or his errors of judgment.