Directors of Storm Financial found to have breached their duties under the Corporations Act


The Federal Court has found that the directors of Storm Financial, Emmanuel and Julie Cassimatis, breached their duties as directors. The Court also found that Storm Financial provided inappropriate advice to certain investors.

Since around 1994, Storm Financial operated a system created by the Cassimatises, in which what ASIC considered to be “one-size-fits-all” investment advice was recommended to clients. The advice recommended that clients invest substantial amounts in index funds, using “double gearing” (Storm Model). This approach involved taking out both a home loan as well as a margin loan in order to purchase units in index funds, create a “cash dam” and pay Storm’s fees. Once initial investments took place, “Stormified” clients would be encouraged to take “step” investments over time.

By the time of Storm’s collapse in early 2009, approximately 3,000 of its 14,000 client based had been “Stormified”. In late 2008 and early 2009, many of Storm’s clients were in negative equity positions, sustaining significant losses.

The case that ASIC advanced against the Cassimatises centered around a sample of investors who were advised to invest in accordance with the Storm Model. ASIC alleged that the advice provided to those investors by Storm was inappropriate to their personal circumstances, considering that each of the investors were alleged to be 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.

Among other things, it was also alleged that Storm failed to properly investigate the subject matter of the advice given to those investors. As such, ASIC also alleged that Storm failed to do all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly.

ASIC further alleged that because the Cassimatises were responsible for the day-to-day significant decisions in relation to the provision of financial services to Storm’s clients and exercised a high degree of control over its systems and processes, they had caused Storm to contravene its obligations under the Corporations Act and did not exercise their powers as directors of Storm with the degree of care and diligence that a reasonable person would have exercised in that situation.

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Directors of Storm Financial found to have breached their duties under the Corporations Act

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