Storm investor group comes to an end
MORE than 10 years after the collapse of Storm Financial, the action group formed to try and recover the huge losses of its customers is winding up its activities.
It comes after a final settlement was reached with the Westpac bank last year by a small group of remaining former clients in the failed investment scheme.
While corporate regulator the Australian Securities Investment Commission calculated investors lost more than $800 million of their own money, around 3000 investors lost indexed share portfolios which had been worth, including borrowings to the banks, some $3 billion.
Storm Investors Consumer Action Group spokesman Mark Weir said its members, which numbered about 2000 people, had moved on as best they could.
"Many Storm investors are still marginalised. There wouldn't be too many people who were in retirement who haven't ended up on social welfare," Mr Weir said.
He said Townsville had been the epicentre of the financial carnage but that investors living in centres as far south as Victoria had suffered no less.
With legal actions against banks which had supported Storm's investment scheme now concluded, Mr Weir said it was logical the group be wound up.
The group's committee planned to call a general meeting to wind up the organisation next month in Redcliffe where it was inaugurated in January 2009.
Anyone interested to attend has been asked to email Mr Weir (firstname.lastname@example.org).
The proportion of borrowings or leveraging of investors - many more than 60 per cent debt to equity - has been blamed for the losses.
When the sharemarket tanked more than 50 per cent from late 2008, investors funds went into negative equity and the Commonwealth Bank closed down the funds, leaving investors with the losses.
Mr Weir said the leveraging of the funds was a factor "to some extent" in the disaster but that investors also were not given the right to pay margin loan calls to keep their portfolios.
The market recovered about 30 per cent within 12 months of the collapse but the leading Australian index is still only just above the peak reached in December 2007.
Storm investors, generally, only recovered about 10 per cent of the cash they invested and have been forced to sell their homes, mortgaged to support borrowings, or signed agreements to continue to live in their homes but hand them to the banks when they die.
While rules for margin lending have been tightened and banks have tightened credit, Mr Weir believed it could happen again.
Given the extent of the sharemarket collapse, nobody, including the banks, knew how to handle the event, Mr Weir said.
"It certainly could happen again," he said.