General FAQs about Storm proceedings

1. Is ASIC seeking compensation for Storm investors in the UMIS proceedings?

ASIC is taking legal action against Macquarie Bank and Bank of Queensland arising from its investigation into the collapse of Storm Financial to seek compensation for investors who have suffered losses ("UMIS proceedings").

  

2. Has ASIC taken legal action against, or obtained compensation from, CBA?

The UMIS proceedings brought against Macquarie Bank and Bank of Queensland originally also included proceedings against CBA.

On 14 September 2012, ASIC entered into an agreement with CBA for CBA to make available up to $136 million as compensation for losses suffered on investments made through Storm by investors who borrowed from CBA. The compensation will be available to many CBA customers who borrowed from the bank to invest through Storm, including CBA customers who are members of the Sherwood class action that has been brought against CBA. The $136 million is in addition to payments of approximately $132 million, and other benefits, CBA has already provided to Storm investors under its CBA Resolution Scheme.

On 17 September 2012, this agreement became binding on ASIC and CBA, when ASIC's proceedings against CBA were dismissed by the Court. This agreement brings to a close ASIC's legal action against CBA.

Detailed information on the ASIC/CBA settlement

 

3. ASIC has banned a former Storm financial adviser from providing financial services. Will ASIC be taking action against other Storm advisers?

ASIC's investigations are continuing. Any action against other Storm advisers will depend on the outcome of ASIC's ongoing investigations.

 

4. Do I have to continue to meet monthly loan repayments while this matter goes through the Courts?

Commencement of proceedings by ASIC does not enable investors to cease their loan repayments. It is possible that when a Court makes a final determination (or a negotiated outcome is reached) investors will not have to make further repayments and will receive compensation in respect of repayments already made.

If you are having difficulties in meeting your loan repayments, you may wish to contact your bank’s financial hardship team to see if you can reach an arrangement to make it easier for you to meet your on-going loan commitments.

If you have legal representation, you may wish to seek legal advice on this issue. If you do not have legal representation, you may wish to get in contact with a lawyer from a local community legal centre, or a financial advising service (including a financial counsellor) to seek advice about the options you may have in meeting your loan repayments. You can visit ASIC’s consumer website ‘MoneySmart’ for more information on financial counselling.

 

5. Do I need to consent to ASIC’s actions?

The need to obtain consent from investors varies depending on the specific proceedings:

  1. No consent is required from investors in relation to the civil penalty proceedings in the Federal Court of Australia against Emmanuel and Julie Cassimatis as directors of Storm in relation to alleged contraventions of section 180 of the Corporations Act;
  2. Consent is only required from the two former Storm investors in relation to the compensation action against Bank of Queensland Limited (BoQ), the owner and franchisee of the BoQ's North Ward branch (Senrac Pty Limited ) and Macquarie Bank Limited in relation to alleged breach of contract, contravention of the statutory prohibitions against unconscionable conduct and liability as linked credit providers of Storm under section 73 of the Trade Practices Act 1974; and
  3. Consent may be required from investors in relation to the compensation action with respect to certain banks being allegedly involved in the operation of an unregistered managed investment scheme by Storm, if ASIC is successful in the first instance in obtaining declarations as to the existence and operation of the scheme and the parties who were involved in its operation. Assuming ASIC is successful and consent is necessary, those investors affected will be contacted by ASIC to obtain their consent.

 

6. Am I covered by ASIC’s compensation proceedings and is there anything I need to do?

In respect of ASIC’s proceedings with respect to the operation of an unregistered managed investment scheme, the first stage of those proceedings involves ASIC seeking a declaration as to the existence and operation of the scheme and the involvement of certain banks in its operation. If ASIC is successful at this first stage, it is intended that applications for compensation would then be made. The Storm investors most likely to benefit from this action are those investors who had a loan with one of the following banks and invested the borrowings in the Storm model:

  • Bank of Queensland
  • Macquarie Bank Limited

 

7. How long will the legal proceedings take?

Litigation is a complex process and it is not possible for ASIC to give a time frame for the completion of the legal proceedings. It could take some years. The likely delay in obtaining an outcome through legal proceedings was a major consideration behind ASIC’s efforts in the first instance to seek a resolution of compensation issues through the commercial resolution discussions.

The trial of the UMIS proceedings commenced in the Federal Court in Brisbane on 17 September 2012.

 

8. How will ASIC keep me informed about the progress of the compensation proceedings?

ASIC will provide updates on the Storm investor website https://storm.asic.gov.au. ASIC will also write to those investors who have sought postal updates rather than web-based updates when there is a significant development.

If you have not already done so, ASIC encourages you to apply for access to the Storm investor website and to complete the ASIC Storm investigation questionnaire. This will assist ASIC in getting in contact with you in the event that we need further information from you.

 

9. Will ASIC be bringing any legal proceedings against other banks?

ASIC has announced the proceedings it is currently taking arising from the collapse of Storm. Otherwise its investigation into the conduct of other parties and the availability of other actions remains open. In the event ASIC decides to bring any other proceedings then it will again make a public announcement.

 

10. Why hasn't everyone involved been sued?

Based on ASIC’s investigation to date it has been decided to issue proceedings against these parties because it believes that there are reasonable grounds to pursue claims against these parties.

Claims against those parties, if successful, are likely to benefit the greatest number of Storm investors who suffered loss.

Further action may be taken against other entities depending on the outcome of ASIC’s on-going investigation.

The UMIS proceedings originally also included proceedings against CBA. On 17 September 2012, these proceedings were dismissed by the Court. See above question 2 for further information.

 

11. Will I have to pay legal fees or obtain a lawyer to participate in ASIC’s proposed legal actions?

ASIC will not be asking investors to contribute any money prior to commencing legal proceedings or during the course of any legal proceedings it brings on behalf of investors.

If the litigation is successful, ASIC will apply to the court for an order for payment of its costs by the unsuccessful parties. In the event ASIC’s proceedings are not successful, ASIC will not seek to recover its costs from investors. If the outcome of ASIC’s proceedings is a negotiated settlement that delivers payments to Storm investors ASIC may seek a contribution to its costs from the parties to the settlement (but not from the investors).

 

12. Has ASIC done a deal with the banks?

Before commencing the UMIS proceedings, ASIC had not reached a commercial resolution with any bank.

ASIC allowed a short further period before filing the proceedings to test whether the commercial resolution discussions could achieve an acceptable compensation outcome for Storm investors.

On 14 September 2012, ASIC entered into an agreement with CBA for CBA to make available up to $136 million as compensation for losses suffered on investments made through Storm by investors who borrowed from CBA. The compensation will be available to many CBA customers who borrowed from the bank to invest through Storm, including CBA customers who are members of the Sherwood class action that has been brought against CBA. The $136 million is in addition to payments of approximately $132 million, and other benefits, CBA has already provided to Storm investors under its CBA Resolution Scheme.

On 17 September 2012, this agreement became binding on ASIC and CBA, when ASIC's proceedings against CBA were dismissed by the Court. This agreement brings to a close ASIC's legal action against CBA.

 

Detailed information on the ASIC/CBA settlement

 

13. Can I participate in ASIC’s compensation proceedings and in other legal proceedings that have been commenced or may be brought on my behalf claiming compensation against the same parties?

As a general principle an investor will not be entitled to compensation for more than the amount of loss they can prove and will not be entitled to be compensated twice for the same loss. ASIC is not able to provide any legal advice to investors, however, the extent to which an investor may obtain a benefit from more than one proceeding can depend upon a number of factors and it is a question upon which independent legal advice should be obtained. (Also, see below on the "carve out" from the CBA scheme.)

 

14. Why has ASIC commenced proceedings alleging an unregistered managed investment scheme (UMIS) when a law firm has already commenced court proceedings alleging an UMIS?

The proceedings ASIC commenced in relation to the operation of an unregistered managed investment scheme are different in scope to the UMIS proceedings that it is aware of that have already been commenced by a private law firm. In respect of proceedings brought by ASIC on behalf of investors against CBA (which have now been settled – see above), investors also have the benefit of the ASIC carve out (described in the answer to the question below).

 

15. What is the “ASIC carve out” and how does it work? Does the carve out mean that I can still benefit from ASIC’s actions or any settlement negotiated by ASIC?

CBA has established a resolution scheme for Storm investors. The scheme includes an "ASIC carve out", the intention of which is to enable investors who resolve claims with CBA to have the benefit of any additional compensation which may result from action taken by ASIC, including from the confidential commercial negotiations that ASIC was engaged in or as a result of any proceedings commenced by ASIC.

On 14 September 2012, ASIC entered into an agreement with CBA for CBA to make available up to $136 million as compensation for losses suffered on investments made through Storm. The compensation will be available to many CBA customers who borrowed from the bank to invest through Storm, including CBA customers who are members of the Sherwood class action that has been brought against CBA. The $136 million is in addition to payments of approximately $132 million, and other benefits, CBA has already provided to Storm investors under its CBA Resolution Scheme.

On 17 September 2012, this agreement became binding on ASIC and CBA, when ASIC's proceedings against CBA were dismissed by the Court. This agreement brings to a close ASIC's legal action against CBA. For more information on the ASIC/CBA settlement, click here.

It is important to understand that ASIC was not a party to the CBA resolution scheme or any resolution scheme of any other lender. If an investor is contemplating accepting a settlement offer under a lender's resolution scheme, then independent legal advice on the effect of that settlement on the investor’s legal rights should be obtained.

 

16. What amount did ASIC seek in commercial discussions prior to commencing legal proceedings?

As part of ASIC’s commercial resolution discussions we entered into confidentiality agreements with the parties with whom we have, and are continuing, to negotiate. These agreements facilitated negotiations being conducted in good faith. Under theterms of the confidentiality agreements, ASIC is not able to comment on the content of the discussions, including any amounts of compensation sought by ASIC.

 

17. What about the CBA resolution scheme?

CBA has established a Storm resolution scheme under which many of its customers have received some compensation in respect of their Storm investments. CBA has agreed to a 'carve out' from the release from liability under its scheme to enable its customers to benefit from any compensation agreement made with ASIC or any successful compensation action taken by ASIC.

 

18. Why didn't ASIC commence proceedings earlier?

The time that it has taken ASIC to decide to commence proceedings is not unusual given the number of parties involved and complexity of the legal and factual issues that have been identified during the course of the investigation.

During the course of its investigation, which remains on-going, ASIC has obtained and reviewed very significant quantities of documents, interviewed or examined using its evidence gathering powers a large number of people and liaised with many relevant stakeholders.

ASIC had been attempting to negotiate a commercial resolution with certain institutions in an effort to achieve an acceptable compensation outcome for Storm investors, which would avoid the expense, uncertainty and delay that would otherwise be involved in commencing legal proceedings.

 

19. Who is covered and who is not by these proceedings?

The separate proceedings ASIC has commenced are as follows:

a) The ASIC civil penalty proceedings against Emmanuel and Julie Cassimatis, based on alleged breaches of their duties as directors of Storm Financial Limited (In Liquidation)(Receiver and Managers Appointed)(Storm), is a regulatory action, that if successful, could result in pecuniary penalties, disqualification from managing a corporation and being restrained from providing financial services;

b) The ASIC and Doyle proceedings against the Bank of Queensland Limited (BoQ), the owner and franchisee of the BoQ's North Ward branch (Senrac Pty Limited), and Macquarie Bank Limited (MBL), based on alleged unconscionable conduct, alleged breach of contract and liability as a linked credit provider under provisions of the Trade Practices Act 1974 is a compensation action being taken on behalf of two former Storm investors, that if successful, would result in them alone obtaining compensation but which may establish some legal principles of application to a wider group of Storm investors; and

c) The ASIC UMIS proceedings against BoQ and MBL in relation to them allegedly participating in the operation of an unregistered managed investment scheme based on the Storm Model, are also compensation proceedings, that if successful, would lead to a claim for compensation that would probably be confined to those investors who borrowed from those banks.

No decision has been made at this time by ASIC to commence proceedings against any other entities or persons.

ASIC’s enquiries with respect to whether parties other than BoQ and MBL also participated in the operation of any unregistered managed investment schemes continues, as does ASIC’s work in connection with other investigations into the collapse of Storm, preparation of further potential legal proceedings and possible administrative action against former Storm advisers.

 

20. What are civil penalty proceedings?

Civil penalty proceedings are a type of proceeding that ASIC can commence in relation to certain breaches of the Corporations Act 2001, including a breach of certain statutory directors’ duties. These proceedings are not criminal prosecutions. A person found by a Court to have breached a civil penalty provision can have various orders made against them, including the following:

a) A declaration that they have breached a civil penalty provision – the benefit of this is that an effected party may be able to rely on the declaration to obtain their own relief;

b) A penalty payable to the Commonwealth of up to $200,000 for each breach; and

c) Disqualification from managing a corporation.

 

21. How do I make a complaint to ASIC?

Details about how you make a complaint appear on the ASIC website.

 

22. I have sent in an update form to update my personal particulars but the information on my private web page is still the same?

Please be assured that any updated information you have provided to ASIC has been recorded on our internal systems and will appear on your private web page in due course.

Regular updates to the website are no longer being made as the frequency of investors providing update forms to ASIC has declined.

 

23. Will the information that I provide on ASIC's questionnaire be updated on the "My Storm Investment" secure web page?

The information that you provide in the questionnaire will not be updated on the "My Storm Investment" secure web page.

 

24. How can I get advice about my financial situation?

Investors can seek further information and assistance from the Financial Planning Association.

ASIC’s dedicated consumer website, www.moneysmart.gov.au has contact details for financial counsellors.

 

25. How do I find out what I owe the bank?

You should contact your bank directly.

 

26. I haven't heard anything. Who do I contact?

You should contact the Storm Investor Team on 1300 300 630 if you have any questions, or email your question to storm.investor@asic.gov.au.

 

Last updated: 16/09/2014 04:59