The Australian Federal Court finds directors of Storm Financial in breach of duties

The Australian full Federal Court confirmed today that it found Emmanuel and Julie Cassimatis, directors of Storm Financial in breach of duties. The proceedings were first initiated in 2016, which the Cassimatises appealed. The Australian Securities & Investment Commission (ASIC) sought to dismissed and the Federal Court granted a dismissal.

Storm Financial operated a system established by the Cassimatises since 1994 where they required clients to invest substantial amounts in index funds, using “double gearing” (Storm Model). Investors needed to take out home loan and margin loan to purchase units. After the initial investment, they were then advised to take “step” investments over time.

ASIC office

The company collapsed in early 2009 and around 3,000 of its 14,000 clients were in negative equity positions, sustaining significant losses.

The majority of investors in Strom Financial were retired or approaching and planning their retirement. They had limited income, few assets and little chance of rebuilding their financial position after the failed investments. ASIC alleged that the advice the company provided was inappropriate to their personal circumstances.

ASIC alleged that the directors, the Cassimatises, were in control of the significant decisions in the company and the provision of financial services. As responsible parties, they gave their clients in appropriate advice and did not give their clients with care and diligence they were required to provide according to their Australian Financial Services (AFS) License.

Commissioner John Price commented:

John Price

This important decision reaffirms ASIC’s view of the importance of directors’ duties and the obligations on financial services licensees. We hope that, with this decision, the aftermath of the Storm Financial collapse is now at an end.

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