Former Storm Financial clients facing a budget Christmas have called for a quick resolution to court action launched against three banks as their fight for compensation enters its third year.
The Australian Securities and Investments Commission yesterday initiated proceedings against the Commonwealth Bank, Bank of Queensland and Macquarie Bank after they failed to meet last Friday's deadline to reach compensation deals with about 14,000 investors caught up in last year's $3 billion corporate collapse.
The banks are accused of helping Storm operate as an unregistered managed investment scheme by approving inappropriate margin loans for the financial planner's clients.
Most of the former Storm investors, including many retirees, borrowed against their homes to buy into index funds, which collapsed during the global financial crisis, leaving many of them unable to pay their mortgages.
Storm Investors Consumer Action Group co-chairman Noel O'Brien said it was frustrating that it had taken two years for ASIC to initiate legal proceedings.
The corporate watchdog had been waiting for the banks to make their own resolutions with customers.
"We probably expected [yesterday's] outcome but we are very, very disappointed that it now has to go down the legal path," Mr O'Brien said.
"It will slow things down and we are looking for some sort of resolution.
"The majority of the Storm investors are retirees and time is of an essence. A lot of them just want the problem to go away, now this court action will just drag it on. I would have thought the [banks] that were involved could have been a bit more responsible and come to the table and helped us get on with our lives. "
CBA admitted limited liability earlier this year and negotiated a compensation deal for 2000 people, although about 300 dissatisfied investors have started a class action.
Mr O'Brien said if the CBA deal had been acceptable court action would not have been required.
"The CBA resolution scheme fell far short of the mark and that's indicated by ASIC's involvement," he said.
"We were expecting that they'd go to court because they're being very hard-nosed about the whole thing."
Lawyers running the CBA class action are expected to today launch similar proceedings against Macquarie Bank on behalf of about 150 clients.
Lorna Abdy, from Charters Towers, said yesterday she became involved in the CBA class action because ASIC was sitting on its hands.
"They should have done [legal action] a long time ago," she said.
"They've put everyone through all that heartache."
Mrs Abdy's 29-year-old son Raymond, who has an acquired brain injury from an accident, lost $120,000 in the Storm fiasco, and she and her husband had also remortgaged their home to invest through the company in a bid to set up Raymond for life.
They are now living practically hand-to-mouth.
"We're not having any flash Christmas dinner ... we're not buying many presents, just one present each," she said. "We live a very quiet life.
"We didn't want to be millionaires or anything, we were just helping our son, who'd had an accident, get into a position to look after himself when we're gone."
Mrs Abdy said the legal proceedings would be too late for many Storm investors.
"I know a lot of people who've passed away and committed suicide," she said.
"There's only the strong ones that are getting through to this stage. That's the saddest part about it - making sure there's a quick resolution."
The banks have rejected ASIC's allegations and declared they would defend the legal action.
They argue they did not provide personal financial advice to Storm clients, provide home mortgages through Storm, or pay or receive any commissions from the financial planner.
In a statement yesterday, CBA said ASIC's arguments did not fairly reflect the role played by other parties, including the corporate watchdog.
"The bank maintains its view that the losses incurred by many Storm clients were caused by Storm's financial advice," the statement says.
"It is apparent that because Storm, its principals and the Storm financial advisers are unable to provide compensation the focus has moved to the banks.
"ASIC's legal proceedings can only create further uncertainty and delay for former Storm Financial clients. This is in stark contrast to the tangible results already provided for Bank customers through the Resolution Scheme."
Macquarie described ASIC's action as "unsustainable and speculative" and said "the bank maintains that its conduct, and that of its staff, has been ethical, lawful and professional".
BOQ managing director David Liddy said the bank had not acted illegally or dishonestly and it would "vigorously" defend the court action.
He said BOQ had employed independent valuers to assess home equity loans of its 370 Storm-referred customers and that all customers had been able to fully service their loans until Storm collapsed.
"We had a zero default rate and no complaints from customers who had invested in Storm Financial prior to its collapse," he said.
ASIC is also pursuing Storm's founders, Townsville couple Emmanuel and Julie Cassimatis.
Their lawyer, Steve Russell, said yesterday the couple would not comment.