Storm Financial directors Emmanuel and Julie Cassimatis were originally found to have breached their duties in August 2016, with the newest proceedings being an appeal by the husband and wife founders.
ASIC had sought to dismiss the appeal with costs.
But in its 150-page judgement, the Full Federal Court, by a majority of two to one, dismissed the appeal.
ASIC reported that since around 1994, Storm Financial operated a system created by the Cassimatis couple in which “one-size-fits-all” investment advice was recommended to clients.
The advice required clients to invest substantial amounts in index funds, using “double gearing” (Storm Model). It also involved taking out both a home loan, as well as a margin loan in order to purchase units in index funds. Once initial investments took place, “Stormified” clients would be encouraged to take “step” investments over time.
By the time of Storm’s collapse in early 2009, approximately 3,000 of its 14,000 clients had been “Stormified”. In late 2008 and early 2009, many of Storm’s clients were in negative equity positions, sustaining significant losses.
ASIC commenced the original civil penalty proceeding against the couple in late 2010. The trial took place in 2016, when the Federal Court then found against them before it imposed civil penalties in 2018.
The case that the regulator advanced centered around specific investors who were advised to invest in accordance with the Storm Model.
ASIC alleged that the advice Storm provided to those investors was inappropriate to their personal circumstances.
“The majority of investors 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,” the regulator said.
ASIC alleged that the Cassimatises were responsible for the day-to-day significant decisions in relation to the provision of financial services to Storm’s clients and exercised a high degree of control over its systems and processes.
“Their failure to take reasonable steps to prevent Storm from giving this inappropriate advice meant that they had not exercised their powers as directors with the degree of care and diligence that a reasonable person would have exercised in that situation,” the watchdog stated.
ASIC commissioner John Price commented, “This important decision reaffirms ASIC’s view of the importance of directors’ duties and the obligations on financial services licensees.
“We hope that, with this decision, the aftermath of the Storm Financial collapse is now at an end.”
In 2012, ASIC entered into a settlement agreement with CBA to make available up to $136 million as compensation for losses suffered on investments made through Storm.
The $136 million was in addition to payments of approximately $132 million, and other benefits that CBA had already provided to Storm investors under its Resolution Scheme.
In May 2013, ASIC secured $1.1 million in compensation on behalf of two former Storm investors, Barry and Deanna Doyle.
The regulator also then intervened in an application for court approval of a settlement for a related class action brought against Macquarie Bank in respect of Storm. ASIC had concerns about the fairness of the settlement arrangements.
In August 2013, the Full Federal Court agreed that the distribution of the settlement sum was not fair and reasonable to all group members and under a revised settlement, Macquarie Bank agreed to pay $82.5 million by way of compensation and costs.
In September 2014, ASIC entered into a settlement agreement with the Bank of Queensland to pay approximately $17 million as compensation for losses suffered on investments made through Storm.
So that’s it. No banned for life, sent to HM hotel for a few years or even fined. Just told they have been bad people. Same protected species as senior management of the big boys clubs. It just sucks.
there is another STORM brewing with many advisers moving to a well know dealership that takes all the rubbish and non compliant advisers, so how do we eradicate this NOW?
so all the banks had to cough up to get Storm out of trouble..luck they have deep pockets. Shame for their shareholders. Also shame the real culprits, Storm directors and their advisers just move on (except this is small win many years later).
Stormified, more like petrified when these clients realised what they had done. These guys put skaife in a shadow. They deserve everything they get. They live the good life up there in qld in the mansion built from clients sweat and tears. Leeches
Ahhhgh yes Storm Financial.
The FP industry equivalent of the corona virus.
that’s taking it too far and far too insulting to Corona Virus.
Stormified sounds like “AMPlified” – as in what a lot of AMP advisers who were sold crap books at 4x with debt from the parent company underwritten by a buy back promise at 4x and their own equity only to be fired by a bully who then maliciously abandoned their promise by reducing it to 2.5 tines – leaving them in negative equity. Then the same company AMPlified is disgraceful behaviour by writing off the negative equity position in its own books but refusing to do same for its (some literally suicidal) victims instead with a chairman (according to the manager of their bank) insisting – I don’t care what it takes – get the money back – you’ve just been AMPLIFIED- by David Murray none less – that great and wonderful champion of what is righteous in financial services – shame on you AMP and David Murray and all that sail with you
do the individual AMP advisers have any responsibility? serious question. I dont like AMP though not many cases are a one way street…
So have any of the bank or amp directors breached their duties?
Good. Justice served
[i]ASIC commissioner John Price commented: “This important decision reaffirms ASIC’s view of the importance of directors’ duties and the obligations on financial services licensees.[/i][i][/i]
Except if you’re a Director of a Bank. The Cassimatis should have just blamed those uneducated, unethcial financial planners. Then called for higher education standards, pay a professional body $100K, then send those bodies an excel spreadsheet listing new members names and a cheque, in return for their support,…. and all would have been ok. Oh wait that’s what CBA and the FPA did. CBA + FPA =FASEA
sharks