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7 How has this further amount of compensation offered by CBA been calculated?

7.1 ASIC has (in conjunction with external forensic accountants) developed a compensation model to calculate the loss suffered by Storm investors. The forensic accountants have reviewed investor data held by Storm in its databases, as well as data obtained from banks and fund managers, to identify investors who made investments through Storm by money borrowed using margin loans and, in many cases, home loans (the ASIC Compensation Model).

7.2 ASIC and CBA have subsequently worked together to identify those investors who used a CBA home loan and/or a CBA margin loan to finance investments through Storm.

7.3 The ASIC Compensation Model has been used to calculate the loss suffered by all Storm investors on an investor by investor basis (or investor group, if there is more than one investor), by calculating the profit and loss for each investment made by the investor or investor group, based upon the income and realisation proceeds received on that particular investment and the cost of financing or otherwise acquiring the investment.

 7.4 The ASIC Compensation Model also contains a method of allocating the loss suffered by an investor or investor group between the banks who funded that investor or investor group’s investments in Storm. The allocation is based on interest and fees charged by the bank to that investor or investor group for loans used to invest through Storm, and the proportion of that investor or investor group’s total Storm-related lending that was provided by that bank.

7.5 ASIC has used its Compensation Model to calculate the loss suffered by each CBA Customer as a result of investing through Storm, and has allocated part or all of that loss to CBA in accordance with the principles in the Model.

 7.6 CBA and ASIC have agreed that CBA will make available further compensation sufficient to provide, when benefits already provided by CBA to CBA Customers under the CBA Resolution Scheme (or prior to our outside of it) are taken into account, each CBA Customer who participates in the settlement with compensation that will equate to 55% of that part of their loss which ASIC has allocated to CBA in accordance with the ASIC Compensation Model (“ASIC Compensation Amount”). Some investors have already received compensation of 55% or more through CBA’s Resolution Scheme. They will not receive any additional compensation as a result of this agreement.

7.7 Refer to Question 12 for more information about the ASIC Compensation Model as it applies to individual CBA customers.

[Current 19 September 2012.]

8 What if an investor has already obtained compensation from CBA under the CBA Resolution Scheme?

8.1 If a CBA Customer has already been provided with an amount of compensation under the CBA Resolution Scheme:

  1. if that compensation is more than the ASIC Compensation Amount, then the CBA Customer will not obtain any further compensation under the settlement agreement between ASIC and CBA (and that CBA Customer gets to keep the compensation already provided to that investor); or
  2. if that compensation is less than the ASIC Compensation Amount, then the agreement between ASIC and CBA will provide compensation that will bring the total amount of compensation made available by CBA with respect to that CBA Customer to the ASIC Compensation Amount for that CBA Customer (provided the CBA Customer is not an Excluded Person).

8.2 CBA Customers who are eligible to receive additional compensation through the ASIC settlement will be notified of their additional compensation amount by CBA.

8.3 The participation of any group members of the Sherwood Proceedings in the compensation made available as a result of the agreement reached between ASIC and CBA may be subject to Federal Court directions or orders.

[Current 19 September 2012.]

9 Will investors who borrowed from CBA to fund investments through Storm, and also from BOQ and/or Macquarie, obtain compensation under the agreement reached between ASIC and CBA?

9.1 The ASIC Compensation Model apportions investor loss between lenders. If a CBA Customer also borrowed from BOQ or Macquarie or another bank to fund investments through Storm, CBA will make available compensation for that CBA Customer that is equivalent to 55% of the amount of loss which ASIC has allocated to CBA under the ASIC Compensation Model (taking into account compensation already provided by CBA as part of, or prior to or outside, CBA’s Resolution Scheme).

9.2 ASIC is continuing the ASIC UMIS Proceeding as against BOQ and Macquarie, so it is possible that CBA Customers who also borrowed money from BOQ and/or Macquarie to invest through Storm may obtain further compensation as a result of the ASIC UMIS Proceeding from BOQ and/or Macquarie.

[Current 19 September 2012.]

10 Will investors who did not borrow from CBA to fund investments through Storm, but did borrow from BOQ and/or Macquarie, obtain compensation under the agreement reached between ASIC and CBA?

10.1 Investors who borrowed monies from BOQ and/or Macquarie to invest through Storm, but did not borrow from CBA, will not obtain any compensation under the agreement reached between ASIC and CBA.

10.2 However, ASIC is continuing the ASIC UMIS Proceeding against BOQ and Macquarie, so investors who borrowed from BOQ and/or Macquarie may obtain compensation as a result of the ASIC UMIS Proceeding in the future.

[Current 19 September 2012.]

11 Who are 'Excluded Persons'?

11.1 ASIC and CBA have agreed that certain persons will not benefit from the agreement between CBA and ASIC, because they fall within a category of persons who were closely associated with the design, implementation or promotion of the Storm investment model, or because they invested through Storm jointly with such a person.

11.2 For example, a person who was a director of Storm or one of Storm’s subsidiaries, or was a Storm financial adviser, or was a senior Storm employee who held a role with Storm that related to the design, implementation or promotion of the Storm investment model, will be an Excluded Person.

11.3 Specifically, Excluded Persons include the following 4 categories of person (or entity):

  1. A natural person who (except where that person was a Storm investor in the capacity of a trustee):
    1. was a director of Storm or one of Storm’s subsidiaries; or
    2. was a Storm financial adviser;
    3. was a senior Storm employee whose role related to the design, implementation or promotion of the Storm investment model;
  2. A company of which, at any time at which that company invested through the Storm investment model:
    1. at least one shareholder was a person to whom paragraph (a) applies,
    2. each shareholder was a person to whom paragraphs (a) or (d) apply; and
    3. no shareholder was a shareholder in their capacity as trustee of a trust, except as trustee of a trust which is an Excluded Trust;
  3. A trustee of an Excluded Trust, which is a trust of which, at any time at which that trust invested through the Storm investment model:
    1. at least one beneficiary was a person to whom paragraph (a) applies;
    2. each beneficiary was a person to whom paragraphs (a) or (d) apply; and
    3. no beneficiary was a beneficiary in their capacity as trustee of a trust, except as trustee of a trust which:
      A. at least one beneficiary was a person to whom paragraph (a) applies;
      B. each beneficiary was a person to whom paragraphs (a) or (d) apply; and
      C.no beneficiary was a beneficiary in their capacity as trustee of a trust, except as trustee of a trust which is an Excluded Trust by virtue of a further application of this definition; and
  4. a natural person who invested jointly with an Excluded Person referred to in paragraphs 2(a) or (c) above, to the extent that they invested in Storm jointly with that Excluded Person.

11.4 Nothing in the agreement reached between ASIC and CBA affects the right of an Excluded Person to bring (or continue) a Storm-related claim against CBA.

11.5 Additionally, CBA is not obliged under the agreement with ASIC to pay compensation to an investor who, at or after 17 October 2012, is conducting active court proceedings (other than the Sherwood proceedings) against CBA or a person associated with CBA in relation to Storm.

[Current 19 September 2012.]

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Last updated: 16/09/2014 05:40