A rescue plan proposed by Storm Financial’s chief executive was rejected by the Commonwealth Bank of Australia (CBA) just a month before the financial planning firm entered voluntary administration, according to court documents.
Storm entered voluntary administration on January 12.
On December 4, 2008, Storm Financial’s Emmanuel Cassimatis approached CBA with a proposal to borrow a “sufficient sum” to recover Storm clients’ lost funds due to defaults on margin loans, documents filed in the Australian Federal Court showed.
It was Cassimatis’ suggestion that Storm would then provide financial assistance to the relevant clients in the same amount so they could recover the negative equity positions, without selling their own assets, and in the period of a year or two work to recover the shortfall, the documents said.
“We are all in this situation, we clearly see it is both Storm’s and the CBA [sic] responsibility … we all should participate in the recovery process and then we all will benefit again from those relationships when this crisis passes, as it inevitably will,” Cassimatis said.
The proposal was rejected by CBA.
“You will appreciate that, although they are Storm’s customers … they are also Colonial Margin Lending customers, in that, while we have not provided them advice we have provided lending facilities to them,” the banking institution said.
ASIC commenced an investigation into Storm on December 12, 2008, in connection with margin loans and related advice to Storm’s clients.
The corporate watchdog’s investigation found about 3000 of Storm’s clients had entered into a margin loan for market-linked investments. ASIC found over 450 clients owed their margin lender more than the value of their portfolios, equating to about $30 million.
