Storm without power: Low civil penalties for directors of Storm Financial

by Associate Professor Anil Hargovan School of Taxation and Business Law, University of New South Wales
  • Absence of dishonesty in misconduct should be treated as absence of an aggravating factor rather than as a mitigating factor.
  • Insurance against loss does not excuse or mitigate seriousness of directors’ breach of duties.
  • A banning order has a motive of personal deterrence and a punitive aspect.

Businessman watching incoming storm

In Australian Securities and Investments Commission v Cassimatis (No 8)1, Justice Edelman of the Federal Court found that the directors of Storm Financial (Emmanuel and Julie Cassimatis) had contravened their duty of care and diligence under s 180(1) of the Corporations Act 2001 (Corporations Act) by allowing Storm Financial to provide the ‘Storm model’ of financial advice to investors who were particularly vulnerable financially.

In doing so, the directors caused or allowed Storm to contravene ss 945A and 912 of the Act and exposed Storm to the risk of losing its Australian Financial Services Licence (AFSL). Any reasonable director would have taken this risk extremely seriously, which Mr and Mrs Cassimatis failed to do.

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