Storm Financial Group

[Garpal Gumnut]

I met a bloke down at The Strand in Townsville today, just by chance, and he was distraught over his losses in Storm.

He felt he had let his kids and grandkids down. The effects of this debacle will last for generations.

He seemed without hope or a plan for the future.

You who are responsible need to realise the effects you have had on ordinary people.

gg

 

[Solly]

I met a bloke down at The Strand in Townsville today, just by chance, and he was distraught over his losses in Storm.

He felt he had let his kids and grandkids down. The effects of this debacle will last for generations.

He seemed without hope or a plan for the future.

You who are responsible need to realise the effects you have had on ordinary people.

gg

I spent Sat arvo with a couple who have been flattened by their Storm exposure, the affect on their teenage kids is enormous. I fully endorse your last sentence. They are just ordinary folk, who just had an absolute belief in Storm......maybe they would have been better just sending all their money to Benny Hinn instead..

 

[Jifromoz]

gg, Agree with your last comment as well. I hope that justice prevails and all of the people responsible go to jail for a very very long time.

Cheers

 

[Solly]

"Storm bound for liquidation"


"THE administrators of Storm Financial have recommended that creditors put the failed wealth adviser into liquidation...."

"A liquidator would have the power to overturn the $2 million dividend the Cassimatises paid themselves on December 15..."

"The $2 million payment was also illegal ........
The founders appointed Ms Cassimatis's sister Dawn Collette to the board on December 23 and reauthorised the payment on this date."

Full Story by Colin Kruger in the SMH is here;


http://business.smh.com.au/business/storm-bound-for-liquidation-20090316-8zxx.html

 

[stung]

I met a bloke down at The Strand in Townsville today, just by chance, and he was distraught over his losses in Storm.

He felt he had let his kids and grandkids down. The effects of this debacle will last for generations.

He seemed without hope or a plan for the future.

You who are responsible need to realise the effects you have had on ordinary people.

gg

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

I find your contrariness intriguing. Are we "ordinary folk' or "greedy, stupid and witless"?

 

[sqwark7600]

An excellent piece from Tony Boyd on Business Spectator on the structure of this tragic fiasco:

http://www.businessspectator.com.au/bs.nsf/Article/Storm-$pd20090317-Q7QJQ?OpenDocument&src=sph&alerts&loc=center

These two seem like the cons from hell with the hides of an elephant. I hope the desperate and the broken don't fall for their latest scam and the 1000 strong class action results in the same result for them as Bernie Madoff received. However, I don't see these two ever admitting to guilt as he did; they still have a following of clients. Unbelievable!
:sheep:

 

[Trevor_S]

I see I am not the only one advocating the banning of commissions for FP's.

http://www.smh.com.au/news/business...hose-bad-apples/2009/03/09/1236447130056.html

Commissions should be banned.

but I disagree with this part

Also, the law around what constitutes "appropriate advice" needs to be clarified and case law built up through the courts and the penalties for breaches increased.

Who makes the case as to what is appropriate ? We can ask 50 people on here about appropriate advice, and get a plethora of different answers. It's a nonsense to my mind because it itsn't and can't be empirical. Some older/retired investors may want to take a chance on speculative wealth accumulation, worst case scenario, they do the lot and go on a tax payer subsidised lifestyle (pension). The advise to them might be wholly inappropriate IF the metric is a safe steady income in retirement but if they are happy with the decision, who is anyone to query that choice ? Just because it is inappropriate advice, doesn't make it wrong. It seems this will only ever be evoked when people are loosing money, after all, they won't be complaining (ah la Storm) to anyone if they are making money and yet Storms advice for example was wholly inappropriate (as it never had any chance of success, at least putting it all on RED at Jupiters has some chance) from the get go, so by the time this is invoked, it's too late, the money has disappeared.

I despair of any changes being ineffective, after all we have been though all of this before with little to nothing achieved. Government is ineffectual in this regard, there track record proves this. They will screw around at the peripheries, make it much more complicated, leading to more friggin' paperwork and increased compliance costs that will need to be passed onto the end user.

 

[Trevor_S]

and the 1000 strong class action results in the same result for them as Bernie Madoff received.

There is a huge difference between the two cases, not philosophically between the two client bases though (unfortunately). I sure hope Storms clients thoughts of revenge aren't pinned on the Madhoff outcome ?

Madhoff was an illegal ripoff. Storm was a legal ripoff (pending discovery into dodgy financials with the banks and even then, they probably have to prove vicarious liability if it was carried out by staff, if they want to nail the principals or other directors)

 

[Trevor_S]

http://www.townsvillebulletin.com.au/article/2009/03/17/45011_hpnews.html

EMMANUEL and Julie Cassimatis have appealed to devastated clients and creditors of Storm Financial to join them in the fight against the `common enemy' _ the Commonwealth Bank.

 

[sqwark7600]

There is a huge difference between the two cases, not philosophically between the two client bases though (unfortunately). I sure hope Storms clients thoughts of revenge aren't pinned on the Madhoff outcome ?

Madhoff was an illegal ripoff. Storm was a legal ripoff (pending discovery into dodgy financials with the banks and even then, they probably have to prove vicarious liability if it was carried out by staff, if they want to nail the principals or other directors)

With respect we do know what Madoff was about as all the evidence is out and he has been sentenced. We don't know what the cons at Storm were about because they have not been tried yet - except in your mind (but 54 litigants are about to).
:sheep:

 

[Farencue]

"We have a common enemy _ let us work together to defeat the CBA for what it has done to all of us," the Cassimatises said in documents accompanying the DOCA.

They claimed this would be a better outcome for creditors and clients because they would not have to pay for the court action.

However, clients also have to abandon any claims against Storm, its employees and its officers, including the Cassimatises, for the advice they gave that led to their $1 billion losses.

"We believe as a collective group, working with us rather than against us, you will get a better outcome," they said.


Ive read this whole thread with great interest as a resident of FNQ but have had no dealings with Storm myself.
I hope that no Storm clients reading the Townsville Bulletin are suckered in further by what is written above. Absolutely unbelievable, as if Mr Cassimatis has anyone's best interests but his own in mind.
In the world of scamsters this is called reloading.

 

[Jifromoz]

Hi everyone,

The following note is on the Cassimatis website :

17.3.09
Please continue to send in your DOCA votes:
The FIGHT IS NOT OVER! Only people power
will win this fight! Do not believe the reports
that it is all over..its not over until YOU and the creditors say so!

It appears that it's all coming home to roost and Mr & Mrs Cassimatis are getting more frantic.

Also a good article at http://www.smartcompany.com.au/fina...ail-to-back-up-claims-of-bank-conspiracy.html
Cheers

 

[MarginLoanLoss]

STORM INVESTORS MAY NOT BE ALONE
By Tony Martin SC​

Mr Martin is an experienced commercial barrister practising at the Sydney Bar

The hapless plight of the Storm clients is distressing. They are facing significant losses and, in many cases, financial ruin as a consequence of an aggressive gearing strategy recommended to them by their financial adviser, Storm.

If the reported settlement with the margin lender, CommBank, proceeds, hopefully that will restore some sense of financial stability and dignity in their otherwise shattered lives.

But is this disaster confined only to the Storm investors? Probably not.

The core problem is to be found in the aggressive gearing strategy promoted by Storm that involved margin lending. A margin loan enables you to borrow money to invest in shares, using existing investments as security. Borrowing money to invest in shares in this way, also known as “gearing”, can result in higher returns relative to your equity in the share portfolio, but it can also magnify the your potential losses if the value of the share portfolio falls.

When an investor enters into a margin loan to buy shares, the margin lender takes security (i.e. a mortgage) over the share portfolio so that in the event of default the shares can be sold to repay the loan. The investor is exposed to the risk the shares might fall in value because the share market can rise and fall frequently and rapidly.

If this happens, as it has occurred in the current financial crisis, the shares would be worth less than the loan creating a shortfall in the security for the margin lender.

To protect themselves against the possibility of a shortfall, margin lenders limit the borrower’s level of gearing to a set percentage (known as the loan-to-value ratio or LVR) of the value of the share portfolio. Usually, the LVRs are set at a maximum of 70%. This means that the borrower has to contribute the difference (i.e. 30%) from their own money. This difference is called the “margin”.

The aggressive gearing strategy employed by Storm amounted to “double gearing”. It involved the investor borrowing to buy shares using the equity in their homes as the security for that loan. They would then use those shares as security for entering into a margin loan to buy additional shares; that is, to effectively “double up” the gearing. This had the effect of further increasing the gains and further magnifying the losses that would otherwise have been obtained under a normal margin loan.

The strategy worked like this: an investor would borrow $50,000 to buy shares using the equity in their home. They would then use those shares as security to take out a margin loan for another $50,000 to buy further shares. As a result, they would have shares at a value of $100,000 but funded by a corresponding debt of $100,000, which required servicing.

To say the least, this “double gearing” strategy was inherently risky. It was riskier than just entering into a normal margin loan. By increasing the “gearing” level, the “risk” of the investment was also correspondingly increased. These increased risks were at least threefold.

Firstly, there would usually be no equity in the investment from the outset. The investor would have usually borrowed 100% of the value of the share portfolio. This meant that the investor was exposed to the risk that any fall in the initial value of the shares would put the investor immediately in a “negative equity” position.

Secondly, the “double gearing” strategy increased the risk for the investor of their losses being magnified in a market downturn beyond that which they would have suffered if they had just entered into a normal margin loan.

Thirdly, the “double gearing” strategy increased the impact on the investor of a margin call received in the event of a market downturn. The investor would need to meet the call from their own additional financial resources or otherwise sell part of their underlying share portfolio. The selling of any part of their portfolio in a falling market would immediately crystallise their losses.

ASIC has recently stated that it believes that the “double gearing” strategy used by Storm has “not been widely used”, but nonetheless is “directing resources to assessing other planners and advisers” to confirm this. Perhaps it will be found that there are relatively few investors in the position of the Storm clients who had margin loans using the “double gearing” strategy. However, in the light of past experience in circumstances where opportunities for financial gain existed in an unregulated market, it would be surprising if these gearing practices were not more widespread than is currently apprehended.

The fundamental problem in Australia is that margin lending is unregulated as a financial product. However, what is clear is that any investor embarking upon a margin loan needs to be fully aware of the risks involved before entering into that transaction. When the risks of the margin loan are further compounded by the use of the “double gearing” strategy, the need for the investor to be aware of the additional risks associated with that strategy is exacerbated.

In Australia, a large number of investors who entered into margin loans did so on the advice of their financial advisers. As part of their obligations to their clients, the financial advisers must warn the investor of the risks involved before entering into such a transaction. This is particularly so when the investor employed the “double gearing” strategy. The investor must warn of all of the additional risks associated with such a strategy. The investor must also be advised that they should have available other financial resources to meet any margin call in the event of a market downturn. If those other financial resources were not readily available, this type of investment would probably not have been suitable for that particular investor.
If the financial adviser did not give these warnings, that would probably constitute a breach of their duty of care to the investor. In those circumstances, the financial adviser would be liable to compensate the investor for any losses that result from that breach. The question now is how long it will take before these actions begin to surface for determination in the courts.

 

[Garpal Gumnut]

STORM INVESTORS MAY NOT BE ALONE
By Tony Martin SC​

Mr Martin is an experienced commercial barrister practising at the Sydney Bar

The hapless plight of the Storm clients is distressing. They are facing significant losses and, in many cases, financial ruin as a consequence of an aggressive gearing strategy recommended to them by their financial adviser, Storm.

If the reported settlement with the margin lender, CommBank, proceeds, hopefully that will restore some sense of financial stability and dignity in their otherwise shattered lives.

But is this disaster confined only to the Storm investors? Probably not.

The core problem is to be found in the aggressive gearing strategy promoted by Storm that involved margin lending. A margin loan enables you to borrow money to invest in shares, using existing investments as security. Borrowing money to invest in shares in this way, also known as “gearing”, can result in higher returns relative to your equity in the share portfolio, but it can also magnify the your potential losses if the value of the share portfolio falls.

When an investor enters into a margin loan to buy shares, the margin lender takes security (i.e. a mortgage) over the share portfolio so that in the event of default the shares can be sold to repay the loan. The investor is exposed to the risk the shares might fall in value because the share market can rise and fall frequently and rapidly.

If this happens, as it has occurred in the current financial crisis, the shares would be worth less than the loan creating a shortfall in the security for the margin lender.

To protect themselves against the possibility of a shortfall, margin lenders limit the borrower’s level of gearing to a set percentage (known as the loan-to-value ratio or LVR) of the value of the share portfolio. Usually, the LVRs are set at a maximum of 70%. This means that the borrower has to contribute the difference (i.e. 30%) from their own money. This difference is called the “margin”.

The aggressive gearing strategy employed by Storm amounted to “double gearing”. It involved the investor borrowing to buy shares using the equity in their homes as the security for that loan. They would then use those shares as security for entering into a margin loan to buy additional shares; that is, to effectively “double up” the gearing. This had the effect of further increasing the gains and further magnifying the losses that would otherwise have been obtained under a normal margin loan.

The strategy worked like this: an investor would borrow $50,000 to buy shares using the equity in their home. They would then use those shares as security to take out a margin loan for another $50,000 to buy further shares. As a result, they would have shares at a value of $100,000 but funded by a corresponding debt of $100,000, which required servicing.

To say the least, this “double gearing” strategy was inherently risky. It was riskier than just entering into a normal margin loan. By increasing the “gearing” level, the “risk” of the investment was also correspondingly increased. These increased risks were at least threefold.

Firstly, there would usually be no equity in the investment from the outset. The investor would have usually borrowed 100% of the value of the share portfolio. This meant that the investor was exposed to the risk that any fall in the initial value of the shares would put the investor immediately in a “negative equity” position.

Secondly, the “double gearing” strategy increased the risk for the investor of their losses being magnified in a market downturn beyond that which they would have suffered if they had just entered into a normal margin loan.

Thirdly, the “double gearing” strategy increased the impact on the investor of a margin call received in the event of a market downturn. The investor would need to meet the call from their own additional financial resources or otherwise sell part of their underlying share portfolio. The selling of any part of their portfolio in a falling market would immediately crystallise their losses.

ASIC has recently stated that it believes that the “double gearing” strategy used by Storm has “not been widely used”, but nonetheless is “directing resources to assessing other planners and advisers” to confirm this. Perhaps it will be found that there are relatively few investors in the position of the Storm clients who had margin loans using the “double gearing” strategy. However, in the light of past experience in circumstances where opportunities for financial gain existed in an unregulated market, it would be surprising if these gearing practices were not more widespread than is currently apprehended.

The fundamental problem in Australia is that margin lending is unregulated as a financial product. However, what is clear is that any investor embarking upon a margin loan needs to be fully aware of the risks involved before entering into that transaction. When the risks of the margin loan are further compounded by the use of the “double gearing” strategy, the need for the investor to be aware of the additional risks associated with that strategy is exacerbated.

In Australia, a large number of investors who entered into margin loans did so on the advice of their financial advisers. As part of their obligations to their clients, the financial advisers must warn the investor of the risks involved before entering into such a transaction. This is particularly so when the investor employed the “double gearing” strategy. The investor must warn of all of the additional risks associated with such a strategy. The investor must also be advised that they should have available other financial resources to meet any margin call in the event of a market downturn. If those other financial resources were not readily available, this type of investment would probably not have been suitable for that particular investor.
If the financial adviser did not give these warnings, that would probably constitute a breach of their duty of care to the investor. In those circumstances, the financial adviser would be liable to compensate the investor for any losses that result from that breach. The question now is how long it will take before these actions begin to surface for determination in the courts.

What an enlightened post and well worth a read by Storm victims, SICAG, and Manny, and CBA and BOQ.

I'll show it to my mates whose lives have been ruined.

gg

 

[swazee]

Here is interesting case against Monitor Money back in 2006 which has some similarities....

http://www.austlii.edu.au/au/cases/cth/federal_ct/2006/1716.html

1 The applicants are retired school teachers. In July 1992, the applicants consulted the respondents to obtain financial and investment advice about their future retirement. At all material times, the first respondent was a licensed securities dealer and securities adviser, and the second respondent acted as its representative. The applicants say they told the second respondent that they wanted to be in a position of having, during their retirement, an annual income of $40 000 indexed for inflation. The respondents provided financial and investment advice to the applicants over a period of 11 years. A central part of the advice given to the applicants was that they should enter into margin loans and use the money so borrowed to build up their investment portfolios. Relying on that advice, the applicants borrowed money on margin loans and made investments.

2 In 2002, the applicants were required to dispose of a substantial portion of their investment portfolios to meet margin calls which were made on the margin loans. In 2003, the applicants terminated their relationship with the respondents.

 

[swazee]

****NEWS FLASH****

ASIC puts Storm into liquidation
Deed of arrangement flawed

By Christine St Anne
Wed 18 Mar 2009

The regulator has applied to the Federal Court to wind up the embattled group.

ASIC has applied to the Federal Court to put Storm Financial into liquidation, saying it is in the best interests of creditors and retail investors.

The regulator's application was prompted by information published on the Cassimatis website, which ASIC believes is misleading.

This information concerned the proposal for a deed of company arrangement (DOCA) to be voted on at the creditors' meeting.

The Federal Court had adjourned the meeting of creditors to 30 March 2009 and fixed ASIC's application for a full hearing on 24 March.

"The issues raised by the proposed DOCA are complex and concern the conduct of potential future litigation by Storm as well as releases of liability of the directors of Storm," the ASIC statement said.

ASIC's application to the court also raises the issue of whether the DOCA is so flawed that it could ever be in the interests of creditors.

The regulator is investigating all of the circumstances around the collapse of Storm, which include possible actions against Storm, its directors and officers.

 

[Solly]

****NEWS FLASH****

ASIC puts Storm into liquidation
Deed of arrangement flawed

By Christine St Anne
Wed 18 Mar 2009

The regulator has applied to the Federal Court to wind up the embattled group.

ASIC has applied to the Federal Court to put Storm Financial into liquidation, saying it is in the best interests of creditors and retail investors.

The regulator's application was prompted by information published on the Cassimatis website, which ASIC believes is misleading.

This information concerned the proposal for a deed of company arrangement (DOCA) to be voted on at the creditors' meeting.

The Federal Court had adjourned the meeting of creditors to 30 March 2009 and fixed ASIC's application for a full hearing on 24 March.

"The issues raised by the proposed DOCA are complex and concern the conduct of potential future litigation by Storm as well as releases of liability of the directors of Storm," the ASIC statement said.

ASIC's application to the court also raises the issue of whether the DOCA is so flawed that it could ever be in the interests of creditors.

The regulator is investigating all of the circumstances around the collapse of Storm, which include possible actions against Storm, its directors and officers.

If you want to see the full letter from ASIC to E&J C.... just go to ASIC it's quite a good read plus there's some other interesting docs there as well.....

 

[swazee]

If you want to see the full letter from ASIC to E&J C.... just go to ASIC it's quite a good read plus there's some other interesting docs there as well.....

IMO this is the last nail in SF's coffin. SF has still not removed the DOCA from its website under ASIC orders, either they feel that it does not breach the law or they are still in denial. The pattern of misleading behaviour is disturbing albeit not surprising. It is almost a forgone conclusion that it will be put into liquidation. The Slater and Gordon class action will be probably the best avenue to 'try' and recover something from the wreckage.

If there are any Storm clients on here that have been interviwed by ASIC/FOS, I would be interested in the feedback you have been given, only in broad terms of course.

Until the next chapter......

 

[bunyip]

What an enlightened post and well worth a read by Storm victims, SICAG, and Manny, and CBA and BOQ.

I'll show it to my mates whose lives have been ruined.

gg

Absolutely.

Cassamatis can rave on all he likes about how it was all the CBA's fault. And Storm clients can choose to believe him if they're gullible enough.

But the core of the problem was that.....
1. Storm advised their clients to gear to highly risky levels in the highly risky stockmarket.
2. Clients accepted and acted on this advice without adequately considering the risks of the strategy, or whether it was suitable for their individual situation.
3. Clients stayed in the stockmarket as it plunged, rather than following the more prudent strategy of converting to cash before suffering catastrophic damage to their accounts. Their accounts should never have been allowed to even come close to margin call.

On point 3, the argument will rage forever about whether it was Storm's responsibility or the clients responsibility to decide when to move to cash. I'd say they both had a responsibility. And once made, the decision should have been implemented without hesitation. Nobody should have allowed Storm to fob them off or talk them out of it.
When you employ people to do a job for you, they do what you say, not the other war around.

Cassamatis would start having some credibility if he faced up to these facts, rather than hiding behind the excuse that it's all the banks fault.

 

[sqwark7600]

In regard to ASIC's application in the Federal Court for liquidation of Storm, I think this is their most telling statement:
"The issues raised by the proposed DOCA are complex and concern the conduct of potential future litigation by Storm as well as releases of liability of the directors of Storm," the ASIC statement said." My tint.
Con people to the end; and for those stupid enough to be hoodwinked a second time don't worry your proxies won't be used and hopefully you heed the second wakeup call.
:sheep: