Late last month, the corporate watchdog handed down it’s ruling on the failed advisory firm, spreading the blame for the multi-million-dollar losses.
As part of the ruling, ASIC has signalled its intention to file compensation proceedings against banking institutions Commonwealth Bank of Australia (CBA), Macquarie Bank, and Bank of Queensland.
ASIC intends to allege the banks breached their contracts and banking codes of practice as well as contravened statutory prohibitions against “unconscionable conduct” as well as being liable as linked credit providers of Storm under section 73 of the Trade Practices Act 1974.
The regulator also intends to bring civil proceedings against the former founders of Storm, Emmanuel and Julie Cassimatis, claiming the pair breached their duty as directors by causing and permitting Storm to be “exposed to legal liability arising from the implementation of a financial services business model (Storm model) which involved providing commoditised financial advice to investors that failed to take into account the personal circumstances of individual investors”.
As part of the orders, ASIC is seeking to have the Cassimatises each pay substantial “pecuniary penalties which can be imposed in respect to each breach of duty”.
The regulator also plans to push for both directors to be disqualified from managing corporations and be restrained from providing financial services.
While the decision to turn to the courts came as little surprise, the length of time the regulator took to reach its decision is a little more curious.
It has been noted by many that the process to solve the collapse of Storm has been drawn out.
There have been many delays, many arguments over money and compensation and who is ultimately to blame.
There have been individual and class action legal proceedings started and stalled, and resolution schemes formed and potentially folding.
There has been talk of client compensation contracts signed under duress, banking staff fired as scapegoats, and potential loss of life and financial and emotional stress to end happy families.
Amid the growing mess, there has not been a seemingly workable solution for any party involved.
ASIC has been accused of lacking basic understanding, with participants feeling unduly pressured during interview processes at both the initial administrator level and again when the watchdog called for follow-up interviews.
The banking groups are also believed to be throwing their hands up in the air with CBA questioning if the regulator has taken into consideration its attempts to provide compensation through its resolution scheme ahead of its decision to seek legal action against it.
ASIC’s decision also raises concerns for the remaining Storm litigation.
Will the hard arm of the regulator spell the end of separate class actions and ultimately mean the thousands of dollars ex-Storm clients have given resolution schemes and external legal parties are now for nought?
Others have felt the situation is too similar to the reaction the corporate regulator had in response to Westpoint.
More than five years later and that situation is not entirely resolved, with some believing it was simply a PR exercise for ASIC.
Is this another case of ASIC being a Johnny-come-too-lately?
