Banks to defend Storm legal action by ASIC

Macquarie Bank Ltd and the Bank of Queensland say they will vigorously defend legal
action commenced against them by the corporate regulator over the collapse of Storm
Financial Ltd.
The Australian Securities and Investments Commission (ASIC) on Wednesday said it had
lodged court action against Commonwealth Bank, Bank of Queensland Ltd and Macquarie
Group Ltd to seek compensation for investors who suffered losses in the collapse of
Storm.
Macquarie Bank responded by saying it will defend the legal proceedings, which it
called "unsustainable and speculative".
"Macquarie maintains that its conduct and that of its staff has been ethical, lawful
and professional," the company said in a statement.
"There is a fundamental difference between the role of a margin lender and that of
Storm, a financial adviser licensed by ASIC."
BoQ said it intended to vigorously defend the action based on legal advice that the
bank did not act illegally or dishonestly.
The Federal Court proceedings allege unconscionable conduct under the Trade
Practices Act against the Bank of Queensland, the owner and franchisee of the BoQ's
North Ward branch (Senrac Pty Ltd) and Macquarie Bank Ltd.
ASIC says further proceedings were lodged against Storm, Commonwealth Bank of
Australia, BoQ and Macquarie Bank Ltd based on an alleged unregistered managed
investment scheme operated by Storm.
ASIC chairman Tony D'Aloisio said ASIC commenced the legal action as it was not able
to reach a commercial resolution with the banks.
"Unfortunately, discussions did not result in a satisfactory outcome and it has been
necessary for ASIC to bring these proceedings," Mr D'Aloisio said in a statement.
As foreshadowed, ASIC has also filed civil penalty proceedings in the Federal Court
against Emmanuel and Julie Cassimatis as directors of Storm in relation to alleged
contraventions of their duties as directors under the Corporations Act.
ASIC said its investigations into the collapse of Storm are continuing.
BoQ managing director David Liddy said the bank had a responsibility to all
stakeholders and it would be irresponsible not to fight the action.
"In saying that, we have every sympathy for customers who lost money through the
collapse of Storm Financial; we too put faith in the regulatory system and can
understand our customers' frustration at the collapse of a financial planner that
had the tick of approval from government regulators," Mr Liddy said in the
statement.
Law firm Slater and Gordon, which is undertaking a class action on behalf of Storm
investors, welcomed the start of legal action by the ASIC.
"We welcome the commencement of legal proceedings against Emmanuel and Julie
Cassimatis, who will finally be called to account for ruining the lives of so many
everyday Australians with their one-size-fits-all financial advice," Slater and
Gordon class action law expert Damian Scattini said.
Mr Scattini said Slater and Gordon would continue to pursue test cases commenced
against BoQ by clients of the firm.
"These claims are well advanced. We view ASIC's litigation against BoQ as the
opening a second front in the battle for compensation."
Storm Financial went into administration in January 2009 and was placed in
liquidation in March that year owing $3.6 billion to an estimated 14 000 investors,
many of whom were small investors.