Legal steps against Storm and banks

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Australia's corporate watchdog says it plans to begin legal action against several banks to seek compensation for investors after the collapse of Storm Financial.

The Townsville-based financial services firm collapsed in 2008 at the height of the global financial crisis, owing millions of dollars to investors.

In 2008, Storm Financial was a company with about 14,000 clients under investment advice, well over a billion dollars of funds under management and a net profit of about A$28 million.

By January 2009, administrators had been appointed to the company, clients were threatening lawsuits for substantial losses, over A$500 million in equity for clients had been wiped out and the business was insolvent.

Among the banks ASIC is pursuing are Commonwealth Bank of Australia (CBA), Bank of Queensland (BoQ) and Macquarie Bank (MBL).

The Australian Securities and Investments Commission (ASIC) said the compensation action would not be filed immediately, so parties had up to three more weeks for commercial talks.

Chairman Tony D'Aloisio said ASIC had been unable to agree on an acceptable commercial compensation with key parties which ASIC had been prepared to recommend to investors.

"In the circumstances, it was not possible for ASIC to continue to defer the decision to commence legal proceedings," D'Aloisio said in a statement on Friday.

"However, ASIC remains of the view that a commercial resolution is the preferable course.

"The compensation actions we have decided to bring are complex, but we consider that it is in the public interest for ASIC to assist retail investors by bringing these actions."

ASIC said it was also starting civil proceedings against Emmanuel and Julie Cassimatis as directors of Storm Financial.

"In addition to seeking compensation for investors, ASIC is pursuing regulatory outcomes in relation to those who implemented the Storm model," D'Aloisio said.

The regulator alleges the Cassimatises breached their duty as directors by causing and permitting Storm to be exposed to legal liability from its financial services model.

ASIC also said the conduct of the Storm model amounted to the operation of a managed investment scheme that was required to be registered under the Corporations Act, but was not registered.

"It will be alleged that CBA, BoQ and MBL participated in the operation of that scheme," it said.

- AAP