ASIC’s battle with banks over Storm Financial collapse to resume today
Sunday, September 9, 2012/
ASIC’s long-running action against three banks over their alleged involvement in an unregistered managed investment scheme operated by failed financial planning firm Storm Financial will resume on Monday, but the actual start of the trial could be delayed by a week following an 11th-hour meeting of lawyers representing the parties.
A spokesperson for ASIC confirmed to Property Observer that the parties would next appear before the Brisbane Federal Court on Monday, September 10, but that “subject to the outcome of that appearance, it may well be that the opening of the trial will not take place until Monday 17 September”.
The trial is expected to take up to five months, with ASIC expected to call up to 80 witnesses to testify.
The emergency meeting sought to narrow down the issues to be contested, with the hope that the trial would be concluded by Christmas with a view to earlier compensation for thousands of investors, who have endured a wait of more than four years.
Investors suffered losses totalling around $3.6 billion when the Townsville-based financial services company’s highly leveraged investments were hit by market volatility in December 2008.
ASIC’s case against the three banks, which provided loans to Storm clients, dates back to December 2010, when the corporate watchdog alleged that an unregistered managed investment scheme was operated by Storm and that the Commonwealth Bank, Bank of Queensland and Macquarie were “knowingly involved in the operation of that scheme”.
At the time of its collapse in 2008, Storm Financial, which was based in Townsville and founded by Emmanuel and Julie Cassimatis, had over 13,000 client portfolios and advised on investment home lending and margin lending.
High-profile investors included cricketer Andrew Symonds.
If the court finds in favour of ASIC, it could open the way to investors recovering more than $1 billion from the three banks.
Since the collapse of Storm in 2008, ASIC has alleged that Storm operated a managed investment scheme (MIS) that should have been registered under the Corporations Act 2001 and was not registered.
“Generally in an MIS people are brought together to contribute money to get an interest in the scheme; money is pooled together with other investors or used in a common enterprise; and a ‘responsible entity’ operates the scheme,” explains ASIC.
“Investors do not have day-to-day control over the operation of the scheme.
“An MIS must generally be registered with ASIC if it has more than 20 members or is promoted by someone who is in the business of promoting investment schemes.”
In December last year ASIC claimed an initial victory for investors against the banks over their alleged involvement with Storm when Federal Court judge Lindsay Foster rejected challenges by Macquarie Bank, Bank of Queensland and Senrac, the operator of a BoQ branch, against ASIC’s representative action on behalf of two former Storm investors.
Despite this procedural win, Mark Weir, co-chairman of the Storm Investors Consumer Action Group, told the Australian Financial Review the wait for compensation would be prolonged.
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