Court confirms wealth directors breached duties

The Federal Court has dismissed the appeal from two directors of a collapsed financial planning business, confirming they breached their duties.

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.

Court confirms wealth directors breached duties
Court confirms wealth directors breached duties
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