Former Storm Financial (Storm) founder Emmanuel Cassimatis's close relationship with the firm's margin lenders may have led to a relaxed approach to prudential standards and poor handing of clients' paperwork, a former Storm executive has claimed.
Ex-Storm business development manager Ron Jelich revealed the claim, among others, in his submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial products and services in Australia.
"Emmanuel Cassimatis and its lenders, particularly the CBA (Commonwealth Bank of Australia, specifically Colonial Geared Investments) enjoyed a seamless, very close relationship," Jelich said in his submission.
"The intimate relationship was very rewarding for both parties and in my belief led to a relaxation of prudential standards and 'creative' handling of clients' paperwork in relation to asset valuations and loan applications."
Jelich also claimed Storm and Colonial Geared Investments shared more favourable contract terms than those offered to other advisory firms, including beneficial sponsorship arrangements and generous loan arrangements to select Storm employees.
Commenting on Jelich's claims, a CBA spokesperson said: "Storm and the bank agreed on some general guiding parameters regarding margin loans of Storm clients, however the bank expressly reserved its rights under its margin loan terms and conditions."
"Far from being preferential terms, these parameters were in fact requested by Storm to bring Colonial Geared Investments into line with its competitors," the spokesperson said.
The submission also claimed that in March 2008 a system was developed by CBA and linked to Storm's computer systems to allow the bank to conduct remote valuations of all assets of joint clients of the two parties. CBA denies such a suggestion.
"The only system-to-system access was Storm's access to the Colonial Geared Investments website, which is standard procedure for licensed financial planning companies dealing with Colonial Geared Investments," the spokesperson said.
