Storm Financial
| Company type | Unlisted public company (from 15 June 2007) |
|---|---|
| Industry | Financial services |
| Founded | May 23, 1994 in Townsville, Queensland, Australia |
| Founder | Emmanuel Cassimatis, Julie Cassimatis |
| Defunct | March 26, 2009 |
| Fate | Went into administration and liquidation |
| Headquarters | Townsville , Australia |
Area served | Australia |
Key people | Emmanuel Cassimatis (CEO) |
| Products | Financial planning, investment advice, unit trusts, superannuation schemes, life insurance policies, margin lending facilities |
Number of employees | 146+ (2007) |
Storm Financial Limited was a financial advisory firm headquartered in Townsville, Queensland, Australia. Established by Emmanuel Cassimatis and Julie Cassimatis under the name Cassimatis Securities Pty Ltd on 23 May 1994, the company expanded beyond its original location and adopted the name ozdaq Securities Pty Ltd on 10 April 2000. Following trademark disputes raised by the US Nasdaq stock exchange, it underwent a further rebranding to Storm Financial Pty Ltd on 2 February 2004.
On 15 June 2007, Storm Financial transitioned into an unlisted public company as part of its preparations for an initial public offering (IPO) planned for December that year. The IPO prospectus was submitted to the Australian Securities & Investments Commission (ASIC) on 14 November 2007. The business continued operations until administrators from Worrells Solvency and Forensic Accountants were appointed on 9 January 2009. Subsequently, its principal creditor, Commonwealth Bank, engaged receivers and managers from KordaMentha on 15 January 2009.
Business
When Storm Financial was set to list publicly on 17 December 2007, it employed more than 146 personnel distributed across 13 branches located in Queensland, New South Wales, and Victoria. The firm specialized in financial planning services, offering advice across a diverse range of products including investments, unit trusts, superannuation schemes, life insurance policies, and margin lending facilities.
By mid-2007, Storm Financial catered to roughly 13,000 clients nationwide with a combined portfolio of $4.5 billion in funds and loans under advice (FLUA). Approximately 3,000 clients—representing about 23%—held leveraged investment portfolios that had been recommended by the firm.
A central element of Storm’s growth strategy involved acquiring and integrating other financial planning entities to form a cohesive group characterized by standardized procedures, rigorous quality assurance, and consistent advisory services.
In August 2008, clients had invested A$4.8 billion in index funds branded under Storm Financial and managed by Colonial First State and Challenger, among other fund managers. By October of the same year, this amount had decreased to A$3.5 billion primarily due to falling equity market values. Approximately 37% of these investments were financed through margin lending arrangements. Throughout this period, Storm maintained a client base close to 13,000.
Client fees
Leveraging its substantial funds flow, Storm Financial negotiated considerable discounts with financial product providers such as fund managers and margin lenders. This enabled the company to pass on wholesale pricing benefits to clients for both retail advice and investment products.
Storm offered two distinct fee models: one was a fee-for-service arrangement featuring a higher initial fee coupled with lower ongoing trail commission payments; the other omitted any upfront fee but charged higher ongoing trail commissions, mirroring more traditional advisory fee structures.
According to Storm’s Statement of Advice documents, the total expense incurred by clients under both fee options typically converged after approximately four and a half years. Prior to this crossover point, the no upfront fee option generally proved more economical; beyond it, the fee-for-service model tended to deliver greater cost advantages.
Details regarding fees were broadly described in Storm’s Financial Services Guide ("FSG") and elaborated specifically within each client’s individual statement of advice.
History of ASIC & Storm up to December 2007
On 12 December 2008, after consultations with the Commonwealth Bank, the Australian Securities & Investments Commission (ASIC) initiated an inquiry into the client advisory services provided by Storm Financial. From its foundation, Storm actively collaborated with ASIC to ensure adherence to Corporations Law.
1 October 1993: Storm seeks guidance from ASC on regulations Emmanuel Cassimatis, Storm's CEO, proactively requested clarification from the Australian Securities Commission (ASC) regarding forthcoming regulatory requirements, illustrating early commitment to compliance. The ASC responded by providing relevant guidance and practice notes related to Corporations Law.
8 October 1993: ASC questions Storm's advisory approach Following a newspaper article authored by Cassimatis, the ASC sought further details about Storm’s advisory methods. After a comprehensive reply from Storm, the ASC confirmed that no additional follow-up was necessary.
19 August 1994: Storm confirms client fee arrangements with ASC Storm verified that it was authorized to collect fees under its own name, with clients investing directly into managed funds, thereby maintaining a clear administrative separation.
9 October 1995: Standard ASC review After an inspection by the ASC, Storm addressed all issues raised in full. The ASC expressed no dissatisfaction and did not require enhanced risk disclosure measures.
March 2005: ASIC conducts audit ASIC performed another audit during this period and did not raise any significant objections regarding Storm’s advice or operational procedures.
November 2007: ASIC evaluates Storm’s educational and procedural framework Storm submitted a prospectus for a public share offer outlining its business model and financial advisory processes. Senior ASIC officials visited Storm’s Sydney office to assess its advisory framework, client education programs, documentation practices, and software tools. Following this review, ASIC confirmed that the prospectus accurately represented Storm’s business operations and commended its procedures as exemplary within the sector.
Summary Throughout numerous inspections and audits, both ASC and ASIC had unrestricted access to Storm’s client files, manuals, templates, analyses, Financial Services Guide, and Statements of Advice. Regulators became well-acquainted with all facets of Storm's advisory processes and never indicated any breaches of financial services legislation. Communications consistently affirmed that Storm’s conduct was appropriate and compliant, apart from minor matters.
Collapse
The Commonwealth Bank compelled Storm into administration on 9 January 2009 by calling in its lending facilities, citing a default on margin lending arrangements. Although the alleged default occurred on 10 October 2008, bank records demonstrated that Storm was not actually in default; approved and funded loans exceeding $44 million were granted between October and December 2008.
Previously, the Commonwealth Bank had issued margin call notices directly to Storm clients or their advisors; however, its failure to do so during critical periods in late 2008 significantly contributed to Storm's downfall. This omission, coupled with inaccurate financial data reconciliation by the bank, caused many clients to breach margin call thresholds and enter negative equity positions.
In November 2011, Roger Gyles QC conducted an assessment identifying these data inaccuracies and confirming that Commonwealth Bank personnel were aware of such errors. These inaccuracies played a key role in the severe losses incurred by Storm clients.
On 8 December 2008, the Commonwealth Bank dispatched letters to clients reportedly in negative equity based on flawed data. This misinformation prevented clients from effectively managing their portfolios and resulted in substantial financial harm. The bank also wrongly claimed that Storm had sole control over clients' margin loans throughout this period.
The Federal Court of Australia ruled on 24 December 2008 that the Commonwealth Bank engaged in misleading or deceptive conduct under the Corporations Act 2001. Subsequent correspondence from the bank reiterated false statements about Storm’s management role and alleged instructions from its CEO to liquidate portfolios exceeding a 90% loan-to-value ratio—claims also deemed deceptive by the court.
Following these judicial findings, on 29 December 2008—the first business day after Christmas—the Commonwealth Bank issued demand notices calling up all of Storm's commercial credit facilities. This action ultimately forced Storm into administration on 9 January 2009. The timing coincided with a scheduled court mention for setting a trial date, which the bank effectively circumvented by precipitating administration.
On 12 December 2008, the Australian Securities & Investments Commission commenced an investigation into Storm Financial's margin lending and advisory practices. At administration, Storm owed A$88 million. The company was placed into liquidation by Federal Court order on 26 March 2009; asset recovery was overseen by liquidators Worrells Solvency and Forensic Accountants.
Investors suffered considerable losses; many clients faced severe financial hardship, with surveys indicating that two-thirds would be unable to purchase homes following forced sales. At collapse, approximately 30% of Storm’s loan portfolio was held by the Commonwealth Bank.
Among notable affected individuals were Australian cricketer Andrew Symonds, who lost around A$1.5 million, and former rugby league player Wally Fullerton Smith, an advisor who lost both his home and business.
Inquiry
In 2009, the Parliamentary Joint Committee on Corporations and Financial Services undertook an investigation into the failures of Storm Financial and Opes Prime, examining wider concerns related to financial planning and corporate governance. The resulting document, titled Inquiry into Financial Products and Services in Australia, was published in November 2009. It presented 11 recommendations, including proposals to strengthen regulatory authority, but stopped short of suggesting a prohibition on commissions. The Storm Investors Consumer Action Group, representing many affected parties, condemned inadequate banking practices and expressed dissatisfaction that the inquiry did not hold bankers responsible for their mismanagement.
Government response
In April 2010, Minister for Financial Services Chris Bowen revealed the Government’s reply, implementing reforms that exceeded the Inquiry’s suggestions by outlawing commissions for financial advisers dealing with retail investment products such as superannuation, managed investments, and margin loans. Additional initiatives included establishing a statutory fiduciary duty obliging advisers to prioritize clients’ interests and enhancing the enforcement capabilities of the corporate regulator, the Australian Securities & Investments Commission. These changes were partly influenced by the Joint Committee’s findings and mirrored international concerns about financial oversight following the 2008 financial crisis. The reforms were set to take full effect from 1 July 2012.
Class-action lawsuits
In July 2010, Stewart Levitt, a Sydney-based lawyer from Levitt Robinson, initiated a class-action suit against the Commonwealth Bank of Australia. The claim alleged that its subsidiary Colonial First State operated an unauthorized Managed Investment Scheme and engaged in deceptive trade practices affecting investors linked to Storm Financial. This lawsuit triggered numerous client grievances against Levitt Robinson, as the bank had offered a similar settlement three years prior, with Levitt’s firm reportedly billing $10 million in fees and expenses.
Following this, multiple class actions were filed by Storm Financial investors targeting other Australian banks such as ANZ, Westpac, Bankwest, and notably Macquarie Bank. In March 2013, Macquarie resolved a lawsuit brought by investors with margin loan arrangements advised by Storm Financial for $82.5 million.