The term, “A fair go!” is an informal expression somewhat unique to Australia and New Zealand. “It is used to implore or demand that someone act with more fairness or reason, or desist in something considered outrageous.”
In the last nine years I have written millions of words to this Government and the former one, ASIC, certain Banks and the Judiciary asking that they give the victims of Storm Financial “a fair go” but it’s all been to no avail. That is why when the Court threw out the following class action in 2016 I just couldn’t be bothered anymore. After all, Helen and I had come though! We had survived. It was someone else’s turn now to rail against the injustices of the system.
Unfortunately, that sort of attitude is inbred in us. If it doesn’t affect us, why should we give a toss? Fortunately, I have now come to my senses after a brief sojourn. We all need to care because if we don’t, nothing will change. We Australians will keep getting shafted.
So let’s begin!
4/4/2016- “Storm investors’ class action against ASIC fails: Lock v Australian Securities and Investments Commission  FCA 31
(Article was written by Moira Saville, Chris Murphy and Liam Burgess.)
Early 2016 saw the failure of the first class action brought against an Australian regulator (in this case ASIC). The 2009 collapse of Townsville based Storm Financial Limited spawned several class actions against banks, most of which have been settled. In Lock v Australian Securities and Investments Commission  FCA 31 a group of Storm investors sued ASIC alleging breach of a duty of care and misfeasance in public office. The investors alleged that ASIC knew, or ought to have known, that Storm was failing to comply with its obligations under the Corporations Act and that ASIC should have warned investors of the risks, or taken regulatory action against Storm, in order to protect investors from the losses they suffered arising from their Storm investments.
The Court found that the plaintiffs’ pleading was deficient and failed to disclose any reasonable cause of action and therefore struck out the pleading in its entirety. In striking out the pleading, the Court refused leave for the plaintiffs to amend their pleading. The proceedings were subsequently dismissed by consent (with the plaintiffs ordered to pay ASIC’s costs of the proceedings). The case confirmed that ASIC does not owe a duty of care to investors whose interests it exists to protect. The result is also notable because very few class actions have been struck out in their entirety.
In delivering its judgment, the Court considered in detail the principles that will apply in determining whether a statutory authority (like ASIC) will owe a party a duty of care. The general rule is that a statutory authority that is under no positive legislative obligation to exercise a power will not have a duty of care to third parties, unless by its conduct the authority places itself in a position that attracts a duty of care, and consequently calls for the exercise of that power.
The Court found that the plaintiffs in the proceedings had failed to disclose a reasonable cause of action against ASIC in respect of the alleged duty. The alleged duty was to avoid causing economic harm to the plaintiffs as investors, by ASIC exercising its powers with reasonable care to disclose risks to investors and/or by requiring Storm to minimise and avoid the risks. The Court held that it would be neither reasonable nor justifiable for investors to have relied upon ASIC’s regulation of Storm as a basis for acting on Storm’s advice, and that in any event the pleadings wholly failed to explain how the alleged negligence caused the plaintiffs’ losses (or what those losses were). Similarly, the plaintiffs failed to adequately plead the elements necessary to make out the tort of misfeasance in public office.
Comments made by the Court regarding the personal responsibility of investors are interesting in the context of investor class actions. The Court noted that all class members were aware that they were entering a “risk-laden field of endeavour”, and that they were acting in their own-self interest in taking advice from Storm with the hope of a return on their investment. Such an activity is not one that is inherently safe.
The case is also a timely reminder that while regulatory bodies play a significant role in maintaining an efficient market and handling of enforcement in appropriate circumstances, investors will face a difficult battle should they attempt to sue such a regulator when things do go wrong.”
Prior to this class action being launched, we, Helen and I, were asked to join it. I declined on our behalf, not because I thought that ASIC wasn’t liable, but rather because I knew that the forces reigned against us were too powerful, and we had little chance of winning. We had right on our side but little else!
By forces, I refer to the Government, the Banks, the Judiciary and ASIC who all have a vested interest in seeing this action fail. Why? Because THE SYSTEM in place at the moment allows the Big End of Town to make money at our expense and no one wants to upset the gravy train.
To my mind, this decision by the Court to let ASIC off the hook is just one more example of how we all are at the mercy of the system. One that was designed to make the rich richer and the poor destitute.
When I worked in the Philippines, the corruption that existed there was in your face and personal. Because you knew about it, you took it into account when transacting any business dealings. In a peculiar way, there was a type of honesty to it because no one tried to hide it.
Here in Australia it is different altogether. Corruption in high places is rife but it bubbles below the surface so you cannot see it. It permeates through our financial systems like some pernicious disease and infiltrates into every avenue of our daily lives. Signs of this are evident every day but we ignore the evidence because we believe we live in a civilized society where such could never exist. Stop kidding yourself!
Whilst ASIC’s culpability in this matter won’t be tried in a Court of Law now, that doesn’t mean we can’t try ASIC in the Court of Public Opinion. Here goes!
1. Storm investors sued ASIC alleging breach of a duty of care and misfeasance in public office.
I will deal with the ‘Duty of Care aspect shortly. Let’s talk about “malfeasance in Public Office” and what that means exactly.
There is a tort in Australian Law called ‘misfeasance of public office’.
“Tort law is a way in which the law can interfere with relationships between private individuals to correct a form of conduct or wrong. A large number of torts exist, and they generally derive their legal status from the common law.”
According to Justice Dean in the High court of Australia this tort requires:
“(i) an invalid or unauthorised Act; (ii) done maliciously; (iii) by a public officer; (iv) in the purported discharge of his or her public duties; (v) which causes loss or damage to the plaintiff (Northern Territory v Mengel (1995) Aust Torts Reports.”
“According to Mengel, ‘misfeasance in public office’ exists to cover intended harms, and hence focuses generally on intention and actual knowledge. Public officials and their employers may be liable where they act (or fail to act) beyond power,
• and are actuated by 'malice' in the sense of intention to injure;
• know that their act is beyond power and ought to know injury will follow; or
• act blindly with reckless disregard of the legality and consequences of their act.
The CCH Torts Commentary states:
“A mere bad motive or intention will not, by itself, render conduct tortious… proof of the tort of misfeasance in a public office requires that, viewed objectively, the defendant’s conduct must have constituted an abuse of the office. A public officer acting in excess of his jurisdiction will abuse his office, as will an officer who wrongfully exercises his powers or exercises them for an improper purpose.
Just how poor ASIC’s performance was in relation to Storm Financial can be found in my book, “I ACCUSE” - PART I’, ‘ASIC’S PRE-STORM FAILURES IN LAW’ Chapter 1 ‘ASIC FAILED TO CONDUCT EFFECTIVE COMPLIANCE AUDITS’
If Storm Financial were running a clean ship prior to its collapse, why did ASIC then prosecute the directors of that company for misconduct?
On Friday 26 August 2016 ASIC published the following ‘Media Release’16-277MR.
“Directors of Storm Financial found to have breached their duties under the Corporations Act
The Federal Court has today 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 on 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.
In a 217 page judgment, Justice Edelman found that:
“Storm provided advice to certain investors, that was inappropriate to their personal circumstances and failed to give such consideration to the subject matter of the advice and did not properly investigate the subject matter of the advice given.
‘A reasonable director with the responsibilities of Mr and Mrs Cassimatis would have known that the Storm model was being applied to clients such as those who fell within this class and that its application was likely to lead to inappropriate advice. The consequences of that inappropriate advice would be catastrophic for Storm (the entity to whom the directors owed their duties). It would have been simple to take precautionary measures to attempt to avoid the application of the Storm model to this class of persons.’" (Paragraph 833)
Commissioner Greg Tanzer said,
"This is an important decision which emphasises the importance of directors' duties to ensure that they do not cause the companies that they control, to breach the law. The decision also highlights the significant obligation on financial services licensees to provide financial advice that is appropriate to the persons to whom it is given."
The matter will be listed for a further hearing at a later date to determine what civil penalties and disqualification orders should be imposed on the Cassimatises as a result of the breach of their director duties.”
This raises a number of important questions:
• What was ASIC doing as far as Storm was concerned between 1994 and 2009 (14 years or so give or take)? Did its personnel have their eyes closed or didn’t they care?
• Why did it take 8 years before the Court brought down its Decision that the Cassimatises had breached their duties as directors?
• Why didn’t ASIC’s compliance audits pick up that Storm was offering a "one-size-fits-all" statement of advice to its clients
• Why didn’t ASIC’s compliance audits pick up that Storm was breaching various sections of the Corporations Act?
• Why didn’t ASIC’s compliance audits pick up that Storm’s professional indemnity insurance cover was inadequate?
It seems to me to be the height of hypocrisy by ASIC to lay these charges when ASIC originally signed off on Storm’s practises. Surely ASIC is just as guilty for allowing these practises to continue?
2. The Court found that the plaintiffs in the proceedings had failed to disclose a reasonable cause of action against ASIC in respect of the alleged duty. The alleged duty was to avoid causing economic harm to the plaintiffs as investors, by ASIC exercising its powers with reasonable care to disclose risks to investors and/or by requiring Storm to minimise and avoid the risks.
Would any person with an ounce of common sense believe that ASIC “exercised it powers “with reasonable care” in this particular instance? The facts tell us otherwise.
In the ‘Australian Securities and Investments Commission Act 2001’ (Act No. 51 of 2001 as amended), Sub-section (g) it states that ASIC should, “take whatever action it can take, and is necessary, in order to enforce and give effect to the laws of the Commonwealth that confer functions and powers on it.”
Where compliance is concerned, could ASIC’s failure to identify Storm’s failings be construed as malfeasance in Public Office’? It’s hard to say because we are referring to ASIC’s performance or lack of such. Negligence at best, I would think which still doesn’t put ASIC in the clear!
“On the other hand, the law of negligence serves to offer recovery for unintended harms. The acts of governments and public officials are subject to the law of negligence under the same general principles that apply to private persons. Chief among these principles are the notions of proximity and foreseeability.”
At this stage we are still talking about ASIC’s performance or lack thereof in relation to compliance audits. However, there is another aspect to all this that has never been considered. ASIC has a duty of care to ensure that the Corporations Act is administered correctly. In relation to ‘Storm’s professional indemnity insurance cover ASIC did not ensure that ‘Storm’ complied with the regulations. In fact, it continues to give tacit approval to financial advisers seeking an inferior form of professional indemnity insurance cover that does not conform with the ACT.
The ACT is quite clear! The professional indemnity insurance cover taken out by a financial adviser must be adequate to compensate the investor against fraudulent action by the financial adviser involved. Storm’s professional indemnity insurance cover was inadequate.
On 20th February 2012 I wrote the following letter to The Hon Mr. BILL SHORTEN who was the Assistant Treasurer at the time. In it I outlined ASIC’s failings in this regard. The key issues are shown here in ‘RED’.
Re: Professional Indemnity Insurance – “Lessons to be learnt!”
Past events where Storm Financial and the Banks are concerned have demonstrated to me that this Government and ASIC will behave wisely only when they have exhausted all other alternatives.
I together with thousands of others lost our lifesavings when Storm Financial collapsed in early 2009. I have spent the time since then delving into what brought about the failure of this major financial advisory firm and the reasons why so many lost everything. Based on the evidence at hand, the blame does not lie fully with Storm Financial and the Banks closely allied with that firm. Rather, it must be shared in equal part by our Government and ASIC - the consumer credit regulator.
At the time that we and countless others, acting on Storm’s advice, invested in the market place, we were under the impression that we were protected by statutory regulations and compliance systems that would effectively protect us from malpractice. Sadly, we were mistaken.
The simple truth is that this and past Governments have failed in their duty of care to the Australian people because despite numerous instances of past malfeasance in the financial sector occurring at regular intervals, Governments have let this situation continue to fester unabated. Now, with the collapse of Storm and other financial institutions, the Government has at last seen fit to introduce reforms that are designed to restore investor confidence and reassure one and all that another “Storm” cannot occur again!
Believe me, another “Storm” is just over the horizon if this Government and ASIC continue with their “laisse-faire” economic doctrine of non-interference in commerce beyond the minimum necessary for a free-enterprise system to operate according to its own economic laws. Nowhere is this more evident than with regard to “professional indemnity insurance”.
I have written to ASIC on a number of occasions regarding the deficiencies that still exist with regard to professional indemnity insurance despite the new regulations. I have also mentioned our own experiences when attempting to claim against Storm’s insurers.
Attached, you will find copies of ASIC’s letters I have received in response to mine. These letters, dated 17th March 2011 and 13th February 2012, explain the requirements under the regulations as far as taking out PI insurance cover by financial advisers is concerned.
Unfortunately, in its correspondence ASIC not only fails to answer my queries satisfactorily, but also clearly displays an approach that is ineffectual when it comes to, what I consider to be, one of the most important issues in the financial sector today; namely, adequate professional indemnity insurance.
This type of insurance cover for financial advisers that should effectively protect investors, has been inadequate in the past and will continue to be insufficient if nothing is done to rectify the situation. Quite frankly, the recent changes in the regulations in this regard simply do not go far enough!
With respect, this “head in the sand” approach to professional indemnity insurance by this Government as well as ASIC just begs for “more of the same” because it fails to address the real issue – namely professional indemnity insurance cover that fully protects investors’ when fraud occurs. You can only have an effective PI insurance cover if it contains a “run-off” clause.
Before remarking on the comments made by ASIC in these letters, I will explain the problem at hand.
Following the collapse of Storm Financial, we, the Storm investors, had to wait more than a year before we could ascertain the name of Storm’s insurers (who were AIG) because ‘Worrells’ (the appointed liquidator) would not release such to us. Then, I found that when I lodged a claim with AIG for our losses due to “misleading and deceptive conduct” by Storm, our claim was repudiated because Storm did not have a “run-off” insurance cover thus restricting the lodging of claims to the period covered by the insurance policy.
The first thing to consider, and it should be an object lesson for all, is that when a scenario such as Storm Financial occurs, it is impossible for claimants to lodge claims until wrong doings are identified which makes a nonsense of PI insurance such as that held by Storm.
Not making it compulsory still for financial advisers to hold “run-off” insurance leaves a glaring hole through which more investors will continue to fall like those before them. Further, it brings into question the value of PI insurance in its current form as an effective security device for anyone that is seeking to invest using financial advisers when so doing. This loophole has not been addressed under the new regulations, which means that lessons still have not been learnt.
I will now quote from both of ASIC’s letters and comment accordingly:
ASIC’s letter to us dated 17/3/2011
“Regulatory Guide 210 (RG 210 Compensation and insurance arrangements for credit licensees) and Regulatory Guide 126 (RG 126 Compensation and insurance arrangements for Australian Financial Services licensees) address how ASIC proposes to administer the law in relation to adequate insurance cover for both types of licensees. In setting our policy on PI insurance, we need to take into account the coverage available in the insurance market.”
Why does ASIC need to take into account the coverage available in the market place? By so doing ASIC and this Government are allowing outside forces to dictate policy rather than the other way around. To my mind, there are two clear choices: (a) make it mandatory for all professional indemnity insurance covers taken out by financial advisers to have a “run-off” clause with an extended claim period of 12 months or (b) to provide Federal or State Government insurance as an alternative.
If insurance companies are not prepared to issue sufficient or effective PI insurance to fully cover those in the financial advisory industry, and by so doing also provide safe guards for those investors using such, then it’s up to this Government to offer investors an alternative as I have suggested above. By so doing you will:
• restore investor confidence;
• provide the means whereby claims can be settled quickly;
• create additional revenue for the Government coffers.
• avoid financial debacles such as ‘Storm’ where the investors lost everything;
• reduce the need for litigation with its subsequent costs;
• give investors certainty when using financial advisers;
• weed out those who do not have sound infrastructures.
Some will argue that this will just be a further impost on an industry already weighed down with enough restrictions and regulations. I disagree because I believe the benefits of so doing, which I have stated above, far outweigh any downside.
Whatever, only by taking the necessary steps to change the current situation with regard to professional indemnity insurance will this Government restore investor confidence and encourage future growth in the investment market. What’s more, it will reassure investors that this Government finally means business!
So much for the future! I will now deal with the past!
****There is no question that the PI insurance taken out by Storm Financial did not comply with Section 912B of the Corporations Act because it did not have the capacity to compensate Storm’s clients.****
I put it to you that ASIC failed its duties and responsibilities to Storm’s investors with regard to PI insurance under the Act.
In ASIC’s letter to us dated 13/2/2012, it states:
”Section 912B(1) states that a financial services licensee that provides a financial service to retail clients must have arrangements for compensating those persons for loss or damage suffered because of breaches of their obligations under the Act by the licensee or its representatives. The arrangements must meet the requirements under subsection 2.
Subsection 2 states that the arrangements must:
(a) if the regulations specify requirements that are applicable to all arrangements, or to arrangements of that kind - satisfy those requirements; OR
(b) be approved by ASIC.
So, in essence section 912B allows a licensee a choice about which arrangements to implement.”
Yes! I agree that Section 912B allows a licensee a choice about which arrangements to implement but it doesn’t mitigate ASIC’s obligation; namely “that a financial services licensee that provides a financial service to retail clients must have arrangements for compensating those persons for loss or damage…”
The wording in this Section is quite specific and unequivocal. How, therefore, may I ask, can this obligation be met if the insurance cover is both inadequate and ineffective as was the case with Storm Financial’s indemnity insurance? How can ASIC now turn around and offer the following as an excuse:
‘So, in essence section 912B allows a licensee a choice about which arrangements to implement.’
What does that have to do with anything? How for that matter does ‘…must have arrangements for compensating those persons for loss or damage…’ stack up against the fact that Storm had a PI insurance THAT DID NOT COMPENSATE Storm’s investors for loss or damage in any way?
Is the Corporation Act an instrument that ASIC can interpret as it sees fit or does it have some substance in Law? Is ASIC responsible for ensuring that financial services licensees have a professional indemnity insurance cover in place that can compensate persons for loss or damage or not?
On ASIC’s website it states:
“We deliver a wide range of compliance programs aimed at ensuring companies, schemes and various individuals and entities meet their obligations under the Corporations Act 2001 (Cth) (Corporations Act).”
If Storm Financial did not have the means to compensate persons for loss or damage as stated in Section 912B, whose fault was that? Wasn’t it ASIC’s duty under the ACT to ensure that such means were in place? I think so! After all, what are compliance audits for if not to ensure that Storm was meeting its obligations under the Corporations Act? Storm’s directors thought that they were meeting their obligations in relation to professional indemnity insurance because ASIC didn’t tell them otherwise. ASIC assumed that Storm was meeting its commitments because no one thought to ask whether the professional indemnity insurance policy Storm had taken would serve to compensate Storm’s clients for loss or damage if the need arose.
Emmanuel and Julie Cassimatis, the founders of Storm Financial, have stated that ASIC officials ''visited Storm's premises and conducted reviews and audits on numerous occasions from 1993 to 2008 without raising concerns”. This indicates that compliance audits were taking place at regular intervals. What excuses do ASIC therefore have for not ensuring that investors’ interests were being protected?
ASIC’s letter to us dated 13/2/2012
“The arrangements that have been set in place by regulations are that licensees that provide financial services to retail clients must hold professional indemnity (PI) insurance cover that is adequate. Adequacy is measured with regard to factors such as the size of the licensee's business (reg 7.6.02AAA).”
How can ASIC possibly argue that Storm’s PI insurance cover was adequate? Storm had an insurance cover for some $25 to $45 million dollars (the true figure has yet to be ascertained) and yet Storm Financial was handling portfolios worth hundreds of millions of dollars?
ASIC states above: “Adequacy is measured with regard to factors such as the size of the licensee's business (reg 7.6.02AAA).” When was the last time ASIC measured Storm’s business or for that matter, did it ever measure such? Quite frankly, to me, and I am sure, many like me, this is a completely unacceptable answer from a body that has been created to safeguard consumers’ interests.
I put it to you that ASIC DOES HAVE a responsibility under Section 912B(1) to ensure that financial services licensees that provide a financial service to retail clients do have arrangements in place for compensating those persons for loss or damage suffered because of breaches of their obligations under the Act by the licensee or its representatives. The wording is precise in this regard. I also put it to you that subsection 2 does not in any way diminish ASIC’s responsibility under Section 912B because it deals with the “arrangements” rather than the “obligation”. The choice regarding any arrangements should have no effect on the obligation which is that “licensees that provide financial services to retail clients must hold professional indemnity (PI) insurance cover that is adequate.”
For this Section to be interpreted in any other way would make investors’ positions with regard to their rights to compensation untenable and the wording of the Act misleading. We, Helen and I, have a clear case for”misrepresentation” against Storm because our signatures on the SOA agreement were obtained by deceit. Yet, we cannot sue Storm because it is now defunct and we cannot claim against Storm’s PI insurance because the policy does not allow us to do so.
Whilst we now have claims against the Banks that we contracted with whilst with Storm, this is our only recourse other than lodging a claim against ASIC for failing in its duty of care towards us. Bearing in mind the circumstances, can you explain why ASIC should not be considered liable indirectly for our losses?
By copy of this letter I am asking ASIC to re-consider its position bearing in mind what I have stated.
I will end on this note. We that lost money by investing on the advice of Storm Financial are sick and tired of the excuses that have been trundled out since then by the Banks involved, ASIC and this Government. The financial sector has been operating for hundreds of years in this country, indeed thousands of years in some countries overseas, and yet those in high places still can’t get it right. We have had to sit around for three years waiting for compensation whilst many of the wrongdoers blithely carry on operating their trade. What’s more we, and other victims who were with the Macquarie Bank are now having to pay private solicitors to get the job done because ASIC is only representing the CBA’s Storm customers.
It seems to me at times that it not so much that the problems in the financial sector cannot be rectified, but rather that it suits those that hold the balance of power to keep the ‘status quo’ intact because it protects those in the Big End of town that have vested interests in leaving things as they are!
For goodness sake, fix it even if it’s only with regard to “professional indemnity insurance” before thousands of others go down the same path as us. While you are at it, get ASIC organised and proactive because the way things are going at the moment, nothing is going to change.” – [Extract from ‘I ACCUSE’ - CHAPTER 2, “ASIC FAILED TO ENSURE STORM’S P.I. INSURANCE WAS ADEQUATE’]
There’s far more in this CHAPTER of my book but I think you get the drift!
3. The general rule is that a statutory authority that is under no positive legislative obligation to exercise a power will not have a duty of care to third parties, unless by its conduct the authority places itself in a position that attracts a duty of care, and consequently calls for the exercise of that power.
There are recognised categories of relationship which give rise to a duty of care. One of these covers, “a public authority to a member of the public”.
ASIC has an implied duty of care to ensure that it abides by the laws of the Commonwealth and in this instance, it did not do so. Why? Because it did not ensure that the professional indemnity insurance cover Storm took out could adequately compensate investors if Storm behaviour was fraudulent or if Storm breached the Corporations Act when giving advice. In Storm’s case both elements existed which culminated in Storm’s clients losses. ASIC placed the investors at risk by cutting corners and this ultimately led to the tremendous losses that occurred.
At common law a ‘duty of care’ will generally arise when the defendant should have foreseen that their conduct could result in injury to the plaintiff (see Donoghue v Stevenson  AC 562). The question then becomes, Could ASIC with a little foresight, have foreseen what could occur with the type of professional insurance cover Storm took out. The answer to that is an unequivocal ‘Yes’.
“Matters relating to advice or disclosure of insurance products sold are regulated by the Australian Securities and Investments Commission (ASIC). The Australian Competition and Consumer Commission (ACCC) also has a regulatory role with respect to competition law.
Who better then than ASIC to know whether a professional indemnity insurance cover is adequate in relation to compensation or not?
So why are financial advisors allowed by ASIC to opt for a professional indemnity insurance cover that is basically inadequate? You guessed it! It’s cheaper and it is also more readily available. ASIC allow this because, “What was the excuse it used?” “In setting our policy on PI insurance, we need to take into account the coverage available in the insurance market.”
”Let me repeat this because it’s worth repeating!
”Section 912B(1) states that a financial services licensee that provides a financial service to retail clients MUST HAVE arrangements for compensating those persons for loss or damage suffered because of breaches of their obligations under the Act by the licensee or its representatives.
ASIC has been flying under the radar for so long in this regard and no one seems to have picked up on it! In plain and simple terms, ASIC is not complying with Section 912B (1) of the ACT.
3. The Court held that it would be neither reasonable nor justifiable for investors to have relied upon ASIC’s regulation of Storm as a basis for acting on Storm’s advice, and that in any event the pleadings wholly failed to explain how the alleged negligence caused the plaintiffs’ losses (or what those losses were).
If the judges in the Court had read my book ‘I ACCUSE” beforehand, they would have known how the alleged negligence caused the plaintiffs’ losses (or what those losses were)! Surely the pleadings would have been clear on this point?
4. The Court noted that all class members were aware that they were entering a “risk-laden field of endeavour”, and that they were acting in their own-self interest in taking advice from Storm with the hope of a return on their investment. Such an activity is not one that is inherently safe.
“Oh what a tangled web we weave. When first we practice to deceive.” - Sir Walter Scott.
Certainly, the class members knew that they were entering a “risk-laden field of endeavour” when they invested in the Australian share market but what has that got to do with the issues at hand? Anyone entering the share markets knows full well that such markets have a certain volatility. Therefore, this is a risk that they readily accept.
However, there is NO justification for the Court to state “that they were acting in their own-self interest in taking advice from Storm with the hope of a return on their investment”. The advice was contaminated for goodness sake and such advice was in breach of the provisions laid down in the Corporations Act. In other words, it was fraudulent advice designed to deceive. Any risk has to be known in order that it can be evaluated. The first (market place volatility) was a known risk. The second (fraudulent advice) didn’t come into the equation because Storm’s clients relied on the statutory regulations in place and ASIC’s ability to police such.
Why the hell should investors have to worry about ASIC stuffing everything up! It should be a ‘gimme’ that people are protected. Indeed, it is their right! The fact of the matter is that Storm’s clients relied entirely on ASIC to protect them from any wrongdoings by that company and ASIC failed them miserably in this regard. The Storm investors’ belief that the regulations in place would protect them was entirely understandable. They had no reason to believe otherwise. They also had every right to believe that Storm’s professional indemnity insurance cover was up to scratch! The fact that it wasn’t was entirely ASIC’s fault.
Their reliance on ASIC and the financial regulations then in place was entirely justified. As members of a free society they deserved nothing less. Is it right that they now have to suffer the consequences because the laws that are meant to protect them are weak and favour the wrongdoers rather than the victims? In this instance, should they have been penalized because the sheriff was out to lunch?
The truth is that the ‘Storm’ fiasco has bugger all to do with the risks inherent in the share markets ‘per se’ and the Court knows that. This is a real “no brainer!” by the Court and shows just how desperate it was to stifle this case. Lumping all these risks together as the Court has done in this instance just goes to show you how fouled up our judicial system is, and what shadowy forces are at play that discount any semblance of, “a fair go!” The facts are clear enough:
(a) By definition, Storm’s directors were fraudulent in their approach to their clients, “Fraud is an act or omission that is intentionally dishonest and done with the purpose of deceiving.
(b) ASIC didn’t do its compliance job adequately where Storm was concerned. Therefore, ASIC was really the catalyst for what followed.
(c) ASIC didn’t follow the rules laid down in statute law where professional indemnity insurance is concerned because it allowed market forces to set the agenda when it had no authority to do so. By so doing, ASIC put the Storm investors at risk.
(d) Every ‘Storm’ investor that was sold a ‘one-fit’ plan by Storm should have been compensated. Only three Banks were sued. Anyone that was not with these three banks was collateral damage. What sort of system is this? One that is FUBAR!
(e) ASIC was just as culpable as Storm if not more so because ASIC could have prevented the Storm disaster by acting effectively in the first place. Its failure to do so is a stain on the financial history of this country.
(f) The Government must also accept some responsibility because it seems incapable of fixing the glaring loopholes in our financial regulations either by its inherent stupidity or by design. It’s not as if these problems have arisen overnight. They are systemic and have been with us for a very long time. They continue to mount by the day!
As for the Court, all I have left to ask is, “Why did the clients of Storm have to pay for Storm’s deception and ASIC’s cockup? What sort of justice is that?”
How could the Court dismiss this case so dismissively without considering all the facts? I’ll tell you why! The aim was to get ASIC off the hook! It was all about protecting ASIC. Why do you think the Cassimatises were tried last when logic dictated that they should have been first cab off the rank? The Banks would have had to cave in if all the dirt the Cassimatises had on them were dished out before the Banks were brought to trial. The government, the banks and the judiciary couldn’t afford that to happen. The Big End of town needed protection at all costs.
Did you ever ask yourself why justice always wears a blindfold?
“The blindfold represents objectivity, in that justice is or should be meted out objectively, without fear or favour, regardless of identity, money, power, or weakness; blind justice and impartiality.
How foolish are we to believe that such high moral values exist today in our judicial system or our financial institutions.
So who can you trust out there?
- financial advisers have become like used car salesmen;
- the Banks can’t lie straight in bed at night;
- the Government is completely clueless;
- ASIC is an accident waiting to happen;
- the regulatory regulations are written in hieroglyphics;
- the system is buggered and
- fraudsters abound everywhere.
The answer is that you can’t trust anyone! They are all after one thing - your money and they will promise you anything in order to get their hands on it.
FRANK AINSLIE – 18th July 2017OUTSTANDING AUTHOR OF:‘I ACCUSE’ - https://sites.google.com/site/stormingonbanks/the-government/attorney-general‘THE BANK OF QUEENSLAND SCANDAL’ - https://sites.google.com/site/boqnorthward/‘PLAUSIBLE DENIABILITY’ - https://sites.google.com/site/stormingonbanks/home/our-company‘THE THIRD SECRET’ - https://sites.google.com/site/thethirdsecret/‘IS THE LAW AN ASS?’ - https://bankvictims.com.au/general-banking-news/item/11769-is-the-law-an-ass-or-the-people-that-administer-it'ROYAL COMMISSION INTO BANKING - A VOTE CHANGER' - https://bankvictims.com.au/index.php/general-banking-news/item/11796-royal-commission-into-banking-a-vote-changer'THE BANKING CODES PROVE THAT SELF-REGULATION DOESN'T WORK!' - https://bankvictims.com.au/index.php/general-banking-news/item/11770-the-banking-codes-prove-that-self-regulation-doesn-t-work'ASIC'S FLAWED POLICY CONTINUES TO PUT THOUSANDS OF INVESTORS AT RISK'? - https://bankvictims.com.au/index.php/regulators/item/11803-asic-s-flawed-policy-continues-to-put-thousands-of-investors-at-risk