The Federal Court has found that the directors of Storm Financial breached their duties under the Corporations Act and allowed for inappropriate advice, ASIC has said.
In a statement last week, the corporate regulator said Emmanuel and Julie Cassimatis had created a system through Storm Financial that provided ‘one-size-fits-all’ investment advice.
By the time Storm collapsed in 2009, many of the firm's clients were in negative equity positions and sustained significant losses, ASIC said.
ASIC had advanced a case against the Cassimatises based on a sample of investors who were advised to invest with the Storm model.
The regulator alleged that the advice was inappropriate to the investors’ personal circumstances, “considering that each of the investors were alleged to be over 50 years old, were retired or approaching and planning for retirement, had little or limited income, few assets and had little or no prospect of rebuilding their financial position in the event of suffering significant loss".
ASIC also alleged that the Cassimatises had caused Storm to contravene its obligations under the Corporations Act and that they “did not exercise their powers as directors of Storm with the degree of care and diligence that a reasonable person would have exercised in that situation”, the statement said.
Last week, the Federal Court determined that Storm did in fact provide inappropriate advice and that the Cassimatises would have known about it.
ASIC commissioner Greg Tanzer said: “This is an important decision which emphasises the importance of directors' duties to ensure that they do not cause the companies that they control to breach the law.
“The decision also highlights the significant obligation on financial services licensees to provide financial advice that is appropriate to the persons to whom it is given.”
The matter will be listed for a further hearing to determine what civil penalties and disqualification orders should be imposed on the Cassimatises as a result of their breach of their directors' duties.
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