Storm Financial
Encyclopedia
Storm Financial Limited was a financial advice company, based in Townsville, Queensland
, Australia
. The company was founded by Emmanual Cassimatis and his wife Julie Cassimatis in 2004. It went into administration in January 2009 and was placed in liquidation on 26 March 2009. The collapse came at a time when an estimated 2,000 to 4,000 investors had suffered the effects of the financial crisis, and were facing significant losses. This left any investors who felt that had been misled or misguided with limited financial recourse against the company.
$4.8 billion invested in the company's sponsored share funds. By October 2008, that had dropped to A$3.5 billion, primarily as a result of falling share values. In August 2008, approximately 37 percent of investments were being funded by margin lending
. In October 2008 it had 13 000 clients.
began investigation of Storm Financial's margin lending and related advice. Storm Financial was placed in administration
in January 2009. The company had A$88 million in debts at the time.
The company was placed in liquidation
by a Federal Court
decision on 26 March 2009, putting asset recovery in the hands of liquidators Worrells Solvency and Forensic Accountants.
Investors in Storm Financial were expected to face large losses, possibly getting none of their funds back. Many of Storm Financial's clients are expected to face economic hardship; a survey of one group of 400 clients indicated two-thirds would be unable to purchase a home after the forced sale of their existing house. The Commonwealth Bank held about 30 percent of the loan business when it collapsed.
High-profile victims of the collapse include Australian cricketer Andrew Symonds
, estimated to have lost approximately A$1.5 million in the company's failure. Former rugby league
player Wally Fullerton Smith
, an advisor working with Storm, lost his home and business.
, announced the Government's response to the inquiry. He set out a range of reforms including, notably, going further than the Inquiry recommendations by banning commissions for financial planners giving advice on retail investment products including superannuation, managed investments and margin loans. Other reforms included instituting a statutory fiduciary duty so that financial advisers must act in the best interests of their clients, and increasing the powers of the corporate regulator; the Australian Securities and Investments Commission
. The reforms were partially a response to the Joint Committee's Inquiry, but also reflected global concerns with financial governance following the Global Financial crisis of 2007–2010. The reforms are due to be fully implemented on 1 July 2012.
Townsville, Queensland
Townsville is a city on the north-eastern coast of Australia, in the state of Queensland. Adjacent to the central section of the Great Barrier Reef, it is in the dry tropics region of Queensland. Townsville is Australia's largest urban centre north of the Sunshine Coast, with a 2006 census...
, Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
. The company was founded by Emmanual Cassimatis and his wife Julie Cassimatis in 2004. It went into administration in January 2009 and was placed in liquidation on 26 March 2009. The collapse came at a time when an estimated 2,000 to 4,000 investors had suffered the effects of the financial crisis, and were facing significant losses. This left any investors who felt that had been misled or misguided with limited financial recourse against the company.
Business
In August 2008, Storm Financial's clients had AUAustralian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
$4.8 billion invested in the company's sponsored share funds. By October 2008, that had dropped to A$3.5 billion, primarily as a result of falling share values. In August 2008, approximately 37 percent of investments were being funded by margin lending
Margin (finance)
In finance, a margin is collateral that the holder of a financial instrument has to deposit to cover some or all of the credit risk of their counterparty...
. In October 2008 it had 13 000 clients.
Collapse
On 12 December 2008, the Australian Securities and Investments CommissionAustralian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...
began investigation of Storm Financial's margin lending and related advice. Storm Financial was placed in administration
Administration (insolvency)
As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – an alternative to liquidation – is often known as going...
in January 2009. The company had A$88 million in debts at the time.
The company was placed in liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
by a Federal Court
Federal Court of Australia
The Federal Court of Australia is an Australian superior court of record which has jurisdiction to deal with most civil disputes governed by federal law , along with some summary criminal matters. Cases are heard at first instance by single Judges...
decision on 26 March 2009, putting asset recovery in the hands of liquidators Worrells Solvency and Forensic Accountants.
Investors in Storm Financial were expected to face large losses, possibly getting none of their funds back. Many of Storm Financial's clients are expected to face economic hardship; a survey of one group of 400 clients indicated two-thirds would be unable to purchase a home after the forced sale of their existing house. The Commonwealth Bank held about 30 percent of the loan business when it collapsed.
High-profile victims of the collapse include Australian cricketer Andrew Symonds
Andrew Symonds
Andrew Symonds is a former Australian cricket team all-rounder. A two-time World Cup winner, Symonds is a right-handed middle order batsman and alternates between medium pace and off-spin bowling....
, estimated to have lost approximately A$1.5 million in the company's failure. Former rugby league
Rugby league
Rugby league football, usually called rugby league, is a full contact sport played by two teams of thirteen players on a rectangular grass field. One of the two codes of rugby football, it originated in England in 1895 by a split from Rugby Football Union over paying players...
player Wally Fullerton Smith
Wally Fullerton Smith
Wally Fullerton Smith is an Australian former rugby league footballer of the 1980s and 1990s. An Australian international and Queensland State of Origin representative back-rower, he played club football in Queensland, France, England and New South Wales.-Biography:The Redcliffe forward,...
, an advisor working with Storm, lost his home and business.
Inquiry
In 2009, the Parliamentary Joint Committee on Corporations and Financial Services conducted an inquiry into the collapse of Storm Financial and Opes Prime, as well as consideration of broader financial planning and governance issues. It released its report - Inquiry into Financial Products and Services in Australia - in November 2009. The report made 11 recommendations including increasing the powers of the regulator but did not recommend banning commissions. Storm Investors Consumer Action Group, which represents many of the victims of the company's collapse, blamed poor banking practices for the collapse and were disappointed that the inquiry did not bring bankers to task for their mismanagement.Government response
In April 2010, the Minister for Financial Services, Chris BowenChris Bowen
Christopher Eyles "Chris" Bowen , an Australian federal politician, is a member of the Australian House of Representatives, initially elected to represent the seat of Prospect in western Sydney for the Australian Labor Party at the 2004 federal election...
, announced the Government's response to the inquiry. He set out a range of reforms including, notably, going further than the Inquiry recommendations by banning commissions for financial planners giving advice on retail investment products including superannuation, managed investments and margin loans. Other reforms included instituting a statutory fiduciary duty so that financial advisers must act in the best interests of their clients, and increasing the powers of the corporate regulator; the Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...
. The reforms were partially a response to the Joint Committee's Inquiry, but also reflected global concerns with financial governance following the Global Financial crisis of 2007–2010. The reforms are due to be fully implemented on 1 July 2012.