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 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.

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.


ASIC commenced this civil penalty proceeding against the Cassimatises in late 2010 (refer: 13-158MR).  The trial took place between 30 May and 30 June 2016.

In May 2013 ASIC secured $1.1 million in compensation on behalf of two former Storm investors, Barry and Deanna Doyle (refer: 13-122MR).

[This MR was redacted on 09/09/2022 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]

In May 2013, ASIC intervened in the application for Court approval of the settlement of the related class action brought against Macquarie Bank in respect of Storm as it had concerns about the fairness of the settlement arrangements.  On 12 August 2013, the Full Federal Court agreed that the distribution of the settlement sum was not fair and reasonable to all group members (refer  Under a revised settlement, Macquarie Bank agreed to pay $82.5 million by way of compensation and costs (refer 14-244MR).

In September 2014, ASIC entered into a settlement agreement with the Bank of Queensland Limited to pay approximately $17 million as compensation for losses suffered on investments made through Storm (refer 14-244MR). 

Editor's note 1:

On 7 September 2016, Justice Edelman ordered that the proceeding be set down for a hearing on remedies and costs on 1 February 2017.

Editor's note 2:

On 1 February 2017, Justice Dowsett heard submissions on penalty and costs. The parties are to make further written submissions and the decision has been reserved.

Editor's note 3:

On 19 April 2018, the respondents filed a notice of appeal in relation to the liability and penalty judgments.

Editor's note 4:

The appeal by Mr and Mrs Cassimatis is listed for a case management
hearing before Justice Greenwood in Brisbane on 4 September 2018.

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