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A Federal Court has confirmed the directors of Townsville-based Storm Financial breached their duties in advice to clients that led to losses of more than $1 billion in 2008.
Emmanuel and Julie Cassimatis ran a financial advice model whereby clients took out home loans and margin loans that were then put into index fund investments.
The pair had sought to have a 2016 decision overturned that had deemed them responsible for the day-to-day significant decisions of the firm, which concluded they had not shown enough care and diligence to prevent Storm from giving inappropriate advice.
That appeal has today been rejected.
Australian Securities and Investments Commission (ASIC) Commissioner John Price says he hopes this decision will mean "the aftermath of the Storm Financial collapse is now at an end".
"This important decision reaffirms ASIC's view of the importance of directors' duties and the obligations on financial services licensees," he says.
The firm's clients were "Stormified" and encouraged to take "step" investments over time. Once the company collapsed in early 2009, around 3,000 of its 14,000 clients had been "Stormified" with many sustaining heavy losses.
The funds were managed by Commonwealth Bank (ASX: CBA) subsidiary Colonial First State, Challenger and other non-Storm branded funds.
In the aftermath CBA provided $132 million to Storm investors, and in 2012 ASIC entered a settlement agreement with the bank to make a further $136 million available as compensation for losses suffered.
In May 2013, an $82.5 million settlement was reached with Storm investors who had launched a class action against Macquarie Bank in relation to Storm. Earlier that month, ASIC had secured $1.1 million in compensation on behalf of two former Storm investors, Barry and Deanna Doyle.
In September 2014, ASIC entered into a settlement agreement with the Bank of Queensland Limited to pay approximately $17 million as compensation for losses suffered on investments made through Storm.
The Federal Court ultimately found against the Cassimatises in August 2016, and penalties were applied in 2018.
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Business News Australia
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