ASIC decision on Storm litigation today
The Australian Securities and Investments Commission (ASIC) will meet with a number of financial institutions subject to its investigations into failed financial planning firm Storm Financial today, where it will decide whether to pursue litigation against parties associated with the group.
It’s been nearly two years since ASIC began its investigations into Storm Financial — around the same time many Storm clients had their Storm-branded/Colonial First State-managed margin loan portfolios sold down, often without warning, amid extreme market volatility. Since then ASIC has been investigating a range of issues relating to Storm Financial’s collapse, including the aggressive investment loans given to clients, the inflated home loans offered by the Commonwealth Bank of Australia (CBA) to support those margin loans and the advice given to investors to embrace the strategy.
ASIC has long stated that it prefers a commercial resolution to the matter rather than litigation. In March this year the regulator said it would enter confidential discussions with the parties it had been investigating to determine whether adequate investor compensation arrangements could be reached.
While CBA was Storm’s most prominent business partner, it was not the only one — the Bank of Queensland and Macquarie Bank also had relationships with the group, although CBA is the only bank to have publicly admitted liability.
At a meeting today, the regulator will decide whether an acceptable in principle outcome between the banks and investors has been reached. If not, the regulator said it would consider litigation to recover compensation for Storm investors.
If the regulator pursues litigation against any of the banks, it may pursue an argument that states Storm and its associated parties were operating an unregistered managed investment scheme. Another possible avenue is that of unconscionable conduct under the ASIC Act and under general law.
The regulator has said it is also continuing to investigate possible contraventions of corporations legislation, which could lead to enforcement action against “certain individuals or companies connected to the operation of the Storm system”, with those investigations not directly related to investor compensation.
Recommended for you
The month of April enjoyed four back-to-back weeks of growth in financial adviser numbers, with this past week seeing a net rise of five.
ASIC has permanently banned a former Perth adviser after he made “materially misleading” statements to induce investors.
The Financial Services and Credit Panel has made a written order to a relevant provider after it gave advice regarding non-concessional contributions.
With the election taking place on Saturday (3 May), Adviser Ratings examines how the two major parties could shape the advice industry in the future.
