ASIC’s Counsel, Jeremy Giles, told Justice Lindsay Foster in the Federal Court at Sydney, Wednesday, that it will be defending a Class Action against ASIC, brought by Levitt Robinson Solicitors, by denying that ASIC owes any duty of care to consumers of financial services.
The claim, brought on behalf of thousands of investors in Storm Financial products who were sold out of the market in the darkest days of the GFC, was commenced in December 2014 in the names of lead plaintiffs, Jeffrey Lock, William Westhead and Virgil Smith. The claim was filed just shy of the sixth anniversary of the mostly “mum and dad” investors’ learning of their financial devastation. That occurred after major banks had followed Storm’s policy of lending against most, if not all, of their customers’ assets to fuel investment in financial products, which entirely depended on the performance of the Australian Stock Exchange.
“As the market fell, so did most Storm investors’ levels of bank-fuelled debt, egged on by Storm financial planners, often to the point of ruination”, said the Group Members’ lawyer, Levitt Robinson Principal Stewart Levitt.
The members of the class include everyone who had received financial planning and advice services from Storm Financial Limited (now in liquidation) and had borrowed money to acquire those financial products, relying on advice from Storm, and at any time between 1 November 2007 and 31 January 2009, had held investments in unit funds bearing Storm’s brand or otherwise endorsed by Storm to its clients.
According to Stewart Levitt, “Class Members include anyone who meets these criteria, regardless of whether they have already received a settlement from their bank pursuant to another Class Action run by Levitt Robinson Solicitors or from a Claims Resolution Scheme, run by a bank who had worked with Storm.”
“In the Class Action, we allege that when ASIC demanded an Enforceable Undertaking from Storm planners from the top down, in December 2008, and issued media releases decrying Storm and the Storm Financial Model, it took the very action which it should have taken by the end of 2007 or at the latest, by early 2008.
“It had all the knowledge that it needed by those earlier dates and could have saved Storm clients the hundreds of millions in dollars in losses which they suffered because they weren’t warned early enough,” said Mr Levitt.
The claim also alleges that when ASIC finally did decide to act, it did so to protect the interests of major banks, particularly the Commonwealth Bank, rather than consumers, and principally to deflect from CBA, the major blame for the collapse of its own customers’ Storm investment portfolios.
In the Plaintiffs’ Statement of Claim this is described as ASIC’s “Bank Preference Policy”.
On 12 June 2010, ASIC’s then Chairman, Tony D’Aloisio, was quoted by Paul Cleary in The Australian declaring that the losses suffered by Storm Financial investors were “small” when compared with the nation’s $2.4 trillion in household financial assets.
According to Cleary, D’Aloisio said, “I’m the first to concede when you get a Storm it is a big issue, (claims of) regulators asleep at the wheel and so on, that it is a small part of this total market, a $2 trillion-plus market we look after. That is not to say that I don’t have sympathy for the investors. No one likes to lose money.”
Levitt Robinson’s Amended Statement of Claim alleges that ASIC is guilty of misfeasance in public office and negligence for its decisions taken in 2008.
Justice Foster adjourned the proceedings until 7 May 2015, to permit the Plaintiffs to make an F.O.I. request foreshadowed by the Plaintiff’s Counsel, Tony Martin SC, seeking the production of ASIC’s internal documents and records. This will afford the Plaintiffs the opportunity to make amendments to their claim based on information which ASIC has a statutory obligation to divulge in answer to such request. ASIC had opposed this course.
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For further information, feel free to contact Stewart A Levitt on 0407 323 737 or slevitt@levittrobinson.com