The Australian Securities and Investments Commission (ASIC) is facing a class action for its alleged delay in taking action against Storm Financial and for allegedly acting to protect the interests of major banks, particularly the Commonwealth Bank, rather than customers.
The claim is brought by Levitt Robinson Solicitors on behalf of investors in Storm Financial products.
The solicitor alleges that ASIC had all the knowledge that it needed to start an enforceable undertaking (EU) against Storm Financial planners by late 2007 or, at the latest, by early 2008. However, it did not demand the EU until December 2008.
ASIC "could have saved Storm clients the hundreds of millions of dollars in losses which they suffered because they weren't warned early enough," Levitt said.
He also alleges that "when ASIC finally did decide to act, it did so to protect the interests of major banks, particularly the Commonwealth Bank, rather than consumers, and principally to deflect from CBA the major blame for the collapse of its own customers' Storm investment portfolios."
The amended statement of claim alleges that ASIC is "guilty of misfeasance in public office and negligence for its decisions taken in 2009."
Levitt told Financial Standard that it is possible to sue the regulator, but that no one has succeeded before. He expected the regulator's defense to argue that ASIC acted in good faith, an argument that the plaintiffs will need to overcome.
The solicitor is confident that it has enough information to prove that ASIC took no action to protect consumers.
"Since 2010 we've been involved in proceedings against banks who were involved in Storm: Bank of Queensland, CBA, Macquarie Bank and Westpac," Levitt said, and added that this has allowed the solicitor to gather a large amount of information on ASIC's involvement in Storm.
"Others haven't had that much information. We do, and we know where the mines are," Levitt said.
Justice Lindsay Foster has also allowed plaintiffs to make a freedom of information request to ASIC to seek the regulator's internal documents and records.
ASIC was not available for comment at the time of publishing.Author: Laura Millan
Source: Financial Standard
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