The communication between Storm Financial and its lending partner Colonial Geared Investments (CGI) in the lead up to Storm clients being placed in margin calls involved the sending of spreadsheets with incorrect data, the founder of Storm Financial has said.
Emmanuel Cassimatis claims statements by CGI head of distribution John Clothier to the Worrells Solvency and Forensic Accounts public examination that Storm and CGI were in "constant communication" over the situation of client portfolios was inaccurate.
"CGI did not make margin calls to our clients. Their idea of constant communication was to send spreadsheets that did not have all of the data required nor was the information that was in the spreadsheet correct," Cassimatis said.
"Storm clients and Storm expected, as has been the standard procedure for the relationship with CGI, that a written margin call was sent directly to clients.
"Storm never, at any stage, agreed to be responsible for the margin calls on behalf of Colonial."
Cassimatis said suggestions Clothier sent an email to Storm on 25 November warning the firm that close to 700 of its clients were in margin calls was a "red herring".
"By 25 November, CBA (Commonwealth Bank of Australia) had already done all the damage by selling all the clients out without permission from the clients, and without making margin calls to the clients," he said.
"What is the point of pointing this out once the damage is done?"
Cassimatis, however, did confirm that he instructed CGI to sell more than $30 million worth of his clients' securities.
"Yes, but this is a result of clients switching from managed funds to cash. This was not in response to any margin calls," he said.
"Clients did not, I repeat, did not receive margin calls from CBA which is what they had got in the past and were expecting again this time - that's where the whole problem came from."
Cassimatis is expected to appear before Worrells' public examination into the collapse of Storm in the coming weeks.
