The Australian Securities and Investments Commission (ASIC) has informed the public that the Federal Court has imposed civil penalties of $70,000 each on the directors of Storm Financial, Emmanuel and Julie Cassimatis, who were previously found by the Court to have breached their duties as directors. They were also disqualified from managing corporations for 7 years.
This draws to a close ASIC’s Storm-related litigation, which has included investors receiving compensation in relation to losses suffered on investments made through Storm.
Storm Financial operated a system of advice, created by the Cassimatises, in which ‘Stormified’ clients were advised to invest substantial amounts in index funds, using ‘double gearing’ (Storm Model). Clients would usually take out a home loan and a margin loan in order to purchase units in index funds, create a ‘cash dam’ and pay Storm’s fees. Clients were then encouraged to take ‘step’ investments over time. In late 2008 and early 2009, many of Storm’s clients were in negative equity positions, sustaining significant losses.
In the original judgment, Justice Edelman had found that a sample of investors who were advised to invest in accordance with the Storm Model, received advice that was inappropriate to their personal circumstances. Each of those investors were over 50 years old, were retired or approaching and planning for retirement, had little or limited income, few assets and had little or no prospect of rebuilding their financial position in the event of suffering significant loss.
Justice Edelman found that the Cassimatises had each engaged in a course of conduct which amounted to one breach of the requirement that they exercise their powers as directors with the degree of care and diligence that a reasonable person would have exercised in that situation. The maximum penalty for a breach of directors’ duties (s180) is $200,000.
The complete announcement can be seen here.