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Wednesday 24 December 2008

AD08-89 Storm financial

On 12 December 2008, ASIC commenced an investigation into Storm Financial Limited (Storm) in connection with margin loans and related advice given to its clients.

Storm is based in Townsville, Queensland, and provides financial services to clients across Australia. ASIC has determined that approximately 3,000 Storm clients entered into a margin loan for investment in market-linked investments. ASIC’s inquiries indicate that Storm’s other 11,000 financial planning clients do not have margin loans and this part of Storm’s business is not currently part of ASIC’s investigations.

At the commencement of ASIC’s investigation, there were over 450 clients who owed their margin lender more than the value of their portfolios, equating to approximately $30 million owing.

ASIC understands that there are now approximately 300 clients with a total of $20 million owing.

Late last week, Storm issued legal proceedings against Commonwealth Bank of Australia Ltd (CBA) in connection with margin loans from the CBA group that were heard in Brisbane yesterday. ASIC is monitoring these proceedings as part of its investigation.

ASIC’s team has been working closely with Storm, associated margin lenders and the Financial Planning Association. ASIC has also interviewed a number of Storm clients.

ASIC will seek to provide an additional update in the New Year, but at this stage is unable to make any further comments.

Further information

Investors can seek further information from the following organisations:

Financial Planning Association

The Financial Planning Association is helping Storm clients with margin loans and can be contacted on their toll free number 1800 337 301.

Colonial Geared Investments

Colonial margin loan holders can contact the Financial Planning Association toll free number for referral to another planner (not related to Colonial) and Colonial will pay for one hour of that advice.

ASIC

For further information or to lodge a complaint, go to http://www.asic.gov.au/complain or contact ASIC’s Infoline on 1300 300 630.

ASIC’s dedicated consumer website FIDO website has contact details for financial counsellors.

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Last updated: 24/12/2008 12:00