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12 How was the settlement amount for each investor calculated? If an investor used monies from CBA and monies from BOQ and/or Macquarie to invest, how is their compensation amount determined?

12.1 ASIC has engaged external forensic accountants to develop a compensation model to measure the loss suffered by Storm investors. ASIC and its external 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 financed investment through Storm by monies borrowed through home loans and margin loans from banks ("the ASIC Compensation Model").

12.2 The ASIC Compensation Model calculates the loss suffered by Storm investors on an investor by investor basis (or investor group, if there is more than one investor who invested jointly in the Storm investment model), 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.

12.3 The ASIC Compensation Model uses investor-specific information obtained from Storm’s customer database, banks who lent funds to investors to finance investments through Storm, and from certain managers of index funds.

12.4 In calculating each investor’s loss, the ASIC Compensation Model compiles the various costs the investor incurred in investing through Storm and deducts from those costs the benefits the investor received from their investment.

12.5 The Model includes the following costs incurred by investors as result of investing through Storm:

  1. the portion of the purchase price of units in index funds purchased as advised by Storm (Units) which was sourced from a loan (both home and margin loans), or from the investor’s own assets (which is assumed to be any funding which is not able to demonstrated to have been funded by a margin loan or home loan, such as cash, superannuation etc) (Other Funding);
  2. the portion of interest charged by banks on the portion of home and margin loans used to purchase Units, including capitalised or pre-paid interest;
  3. fees paid to banks with respect to margin loans used to fund the purchase of Units (including break costs);
  4. commissions paid to Storm (an assumed commission rate is applied under the Model to all investors, being 6.6% on net investments for those investments made prior to 1 July 2000, and 7.26% on net investments made from 1 July 2000);
  5. reinvestment of cash distributions and proceeds of redemption of Units to fund further investment through Storm; and
  6. in respect of investments funded by sources other than borrowing from banks (that is, Other Funding), an amount representing the loss of opportunity to make a reasonable return from other investments (5.5% p.a.).

12.6 Against these costs of investment incurred by the investor, the Model sets off the following benefits to the investor as a result of their investment through Storm:

  1. the redemption price of Units (whether sold by the investor or sold or redeemed by the banks);
  2. cash distributions with respect to Units;
  3. the value of unsold or unredeemed Units as at 28 January 2009 (or the nearest available date if no value is available as at 28 January 2009);
  4. an amount representing the opportunity benefit to investors of extracting redemptions from the Storm investment model (i.e. redemptions used for purposes other than repaying margin loan borrowing) (5.5%p.a.); and
  5. a franking credit benefit (estimated by reference to the declared franking level for each income tax year of certain managed investment funds). Estimated franking credits received in association with dividends are credited at 100 cents in the dollar of the estimated franking credit amount. No other tax benefit or tax expense to investors has been estimated in the Model.

12.7 The date from which the Model calculates loss for each investor or investor group is the date of the first investment for that investor or investor group recorded in Storm’s customer database.

12.8 The Model ceases to calculate loss for each investor or investor group on the earliest of the following dates for each investor or investor group:

  1. 28 January 2009; or
  2. the date at which all margin loans have been paid out in full and Units in index funds have been fully redeemed (End Date).

12.9 The ASIC Compensation Model also allocates the loss suffered by each investor or investor group between the banks who funded that investor or investor group’s investments through Storm, on an investor by investor basis based upon each investment by the investor or investor group. The allocation is based upon:

  1. the actual interest and fees charged by a particular bank to that investor or investor group for loans used to invest through Storm; and
  2. the proportion of that investor or investor group’s total Storm-related borrowing that was provided by that bank.

12.10 This allocated compensation amount is the amount of compensation which the ASIC Compensation Model assigns to the bank in that investor’s case.

12.11 Where there is only one bank relating to an investor or investor group, all loss suffered by that investor or investor group as calculated by the ASIC Compensation Model is allocated to that bank.

12.12 Where an investor or investor group used more than one bank to fund investments through Storm, then the loss suffered by the relevant investor or investor group as calculated by the ASIC Compensation Model is allocated between the banks in accordance with the principles set out above.

 

[Current 31 October 2012.]

 

 

13 Does the ASIC Compensation Model calculate interest?

13.1 The ASIC Compensation Model makes allowance for the period that has elapsed between the time that CBA customers suffered loss and the time of receipt of compensation. It calculates a notional interest amount for each CBA Customer based upon the ASIC Compensation Amount for that CBA Customer, as follows:

  1. from the End Date for that CBA Customer, being the date up to which the ASIC Compensation Model calculates that CBA Customer’s compensation amount to be provided by CBA (being either 28 January 2009 or the date at which all of the investor’s margin loans have been repaid in full and all units in index funds have been fully redeemed, whichever is the earlier);
  2. to the date which is the last day of the month preceding the month in which any notification of payment or potential payment is made to the CBA Customer;
  3. at the rate of 4.5% per annum, compounding yearly

("ASIC Interest").

13.2 The ASIC Interest calculated by the ASIC Compensation Model will be set-off against any CBA Moratorium Amount calculated for that CBA Customer.

 

[Current 19 September 2012.]

 

 

14 What is a set-off of CBA Moratorium Amount?

14.1 In around June 2009, CBA granted a payment moratorium to some CBA Customers with respect to interest on their loan(s) (the amount of the interest the subject of the moratorium is the "CBA Moratorium Amount"). The CBA Moratorium Amount has been or, for CBA customers who participate in the settlement, will be, written off by CBA.

14.2 Where a CBA Customer has a CBA Moratorium Amount, the amount of any ASIC Interest calculated for that CBA Customer under the ASIC Compensation Model will be reduced (not below zero) by the amount of the CBA Moratorium Amount of the CBA Customer ("Net Interest Amount").

 

[Current 19 September 2012.]

 

 

15 Will interest be paid to CBA Customers?

15.1 ASIC and CBA have agreed that an amount equal to the combined Net Interest Amounts (of those CBA Customers who participate in the settlement and for whom the ASIC Compensation Model calculates a Net Interest Amount) will be allocated to an 'Adjustment Fund'. If an adjustment is required to a CBA Customer’s ASIC Compensation Amount (either because CBA and ASIC have agreed that an adjustment is required, or the expert has determined that an adjustment take place – see Question 21), then the monies allocated to the Adjustment Fund, to the extent available, will be used to meet those adjustments. Any monies remaining in the Adjustment Fund after any adjustments have taken place will be distributed among those CBA Customers for whom the ASIC Compensation Model has calculated a Net Interest Amount pro rata to their Net Interest Amount.

 

[Current 19 September 2012.]

 

 

16 How will the settlement affect CBA Customers who are also group members of the Sherwood Proceedings?

16.1 If a CBA Customer who is also a group member of the Sherwood Proceedings receives a notification of an offer of payment from CBA and chooses to take part in the settlement reached between ASIC and CBA, the group member will be required to provide a release to CBA which will prevent the group member from continuing to be a part of the Sherwood Proceedings against CBA.

16.2 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.]

 

 

17 How will the settlement affect CBA Customers who have not previously provided a release to CBA and who are not group members of the Sherwood Proceedings?

17.1 CBA Customers who are not group members of the Sherwood Proceedings and have not previously provided a release to CBA (through the Resolution Scheme or prior to or outside of the Scheme) will, if they wish to receive compensation, be required to provide a release to CBA which will prevent the CBA Customer from continuing, or bringing, any claims or proceedings against CBA with respect to Storm.

 

[Current 19 September 2012.]

 

 

18 Can a CBA Customer obtain compensation under the agreement between ASIC and CBA and still take part in the Sherwood Proceeding?

18.1 A CBA Customer who is a group member in the Sherwood Proceeding and who wishes to receive compensation will be required to provide a release to CBA which will prevent the CBA Customer from bringing or proceeding with any Storm-related claims. A CBA Customer who chooses to obtain compensation under the agreement between ASIC and CBA will therefore not be able to continue to take part in the Sherwood Proceeding.

 

[Current 19 September 2012.]

 

 

 

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Last updated: 16/09/2014 05:40