Commonwealth Bank settles Storm Financial dispute with ASIC with compensation of about 55%
The Commonwealth Bank Group has reached a resolution with the Australian Securities & Investments Commission (ASIC) in relation to the Storm Financial matter.
It will make available up to an additional $136 million in compensation to its customers who invested through Emmanuel and Julie Cassimatis's Storm Financial.
It takes the total in CBA payments to customers to about $270 million. CBA's Storm Financial investors will get compensation of about 55% of their losses.
“We are pleased to have reached an agreement with ASIC on this matter as it is in the best interests of our customers to avoid lengthy and uncertain litigation,” David Cohen, the bank's group general counsel, said.
The agreement with ASIC was reached without any admission of liability by the bank, which will continue to defend the class action proceedings, which are before the Federal Court in Brisbane.
ASIC chairman Greg Medcraft welcomed the agreement, saying CBA's $136 million of additional compensation was intended to ensure that each CBA investor who takes part in the settlement will get compensation of approximately 55% of that part of their total loss allocated to CBA under the ASIC compensation model.
"Storm investors can be confident we would not have agreed to a settlement unless we thought the compensation was appropriate," he said.
Speaking at a hastily organised press conference this evening, Medcraft said the deal with the Commonwealth Bank would allow about 2,400 individuals to take part in the settlement
“Investors will get compensation of about 55% of their loss.
“It's one of the largest settlements every achieved for investors
“Its timely and fair. Rather than have lengthy court case – many of investors are elderly – it does not put them through the strain of a long court battle," said Medcraft at the press conference to announce the settlement.
He said the Commonwealth Bank had done the right thing and hoped the other lenders caught up in the dispute would continue doing the right thing in the future.
Payments will be made "fairly soon", though no exact timing has yet been made known.
He said subject to the court dismissing ASIC's claim against CBA, the agreement would bring to a close the legal action against CBA in ASIC's unregistered managed investment scheme proceedings, which were brought in the Federal Court of Australia in Brisbane in December 2010.
ASIC will continue the unregistered managed investment scheme proceedings against Storm, Bank of Queensland and Macquarie, which are scheduled to start on September 17.
ASIC estimates the total loss suffered by all investors who borrowed monies from banks to invest through Storm to be approximately $830 million.
ASIC has been investigating a range of issues relating to the affairs of Storm Financial Limited (receivers and managers appointed) (in liquidation) since December 2008.
Storm investors can visit ASIC’s Storm investor website if they have questions about the settlement.
