Maybe you guys missed this, but it certainly points to Colonial selling shares due to Storm Financials collapse, cheers
Michael West December 11, 2008 - 4:35PM Storm Financial Group is collapsing. Colonial First State, which runs index funds for Storm clients has terminated its four share market funds and Storm management is locked in crisis meetings today.
Storm, a rapid-growth financial services group based in Townsville which advised its clients to borrow heavily against their share portfolios to turbo-charge returns in the bull market, is holding mass client briefings around the country.
Just a year ago, at the peak of the cycle, Storm's founders Emmanuel and Julie Cassimatis were trying to list their financial services empire on the stock market in a $500 million float.
Before its index managers Challenger and Colonial froze the funds and began selling stock over the past two months the group boasted 35,000 clients and $4.7 billion of funds under management.
Last month Storm advised its clients to sell stock but maintain their margin loans. The failure of the group will be especially devastating for Townsville, Storm's home base, where its clients are concentrated.
Further, as the group aggressively recommended its clients "optimise (their) personal balance sheet'' - often gearing their homes to invest in the market - some clients have been wiped out and others may lose their homes.
One told BusinessDay this week that she had lost her home and another press report in a local newspaper told the story of a retired couple who were in financial strife having been advised to gear into the Colonial funds while their house was already geared by Colonial's parent Commonwealth Bank - two layers of leverage.
Storm was unavailable for comment. Last week there were three briefings of 400 clients each.
"Many were told they had been sold down into cash - most clients still don't understand what it all means and they believe they will get back into the market,'' said a source. "This is basically impossible as soon as funds are transferred from cash offsets for the margin loans back into indexed funds they will in breach of their equity requirements for the margin loans.
"Some clients are contacting solicitors and the regulators. Some haven't even got a statement of position despite the sell-down and the regulatory requirement to provide one within five days of the advice execution.''
Many of Storm's clients are retired and have lost their savings this year as the stock market plunged.
Colonial is believed to have already sold down $600 million in stock and Challenger at least $1 billion.
MCW Price at posting:
20.0¢ Sentiment: None Disclosure: Not Held
