I don't really need to say anything See the ANZ and Opes Prime near the bottom to see how it could go. CommBank tries to calm Storm fury Colin Kruger SMH March 11, 2009 COMMONWEALTH BANK is negotiating confidential settlements with clients it shares with Storm Financial that could potentially cost the bank tens of millions of dollars as it attempts to head off legal action over its alleged role in the collapse of the failed wealth adviser, and the financial ruin of its clients. CommBank said yesterday it has a team negotiating "rearrangements" with the Storm clients. Some of the deals are expected to avoid a public relations nightmare for the bank which might otherwise be forcing destitute pensioners out of their homes. The Herald has also received documents dealing with the settlement of margin loans by Storm clients for what appears to be a reduced sum. All of the deals will require that clients sign away any right to legal action against CommBank over the debacle. "In this climate, it is appropriate that the bank is seeking appropriate legal arrangements with its customers to ensure that any rearrangements of facilities are final and conclusive, to allow all parties to move on," the bank said in a prepared statement. Storm clients who took the failed company's advice - borrowing against their homes, taking out margin loans, and investing the lot in index funds - were caught out when the sharemarket collapsed last year. Thousands face losses that are expected to top $1 billion. CommBank was the largest provider of mortgages, margin loans, and fund management services to Storm clients. A class action being prepared by Slater & Gordon is expected to allege that Storm effectively acted as an agent for CommBank, and other Storm partners like Bank of Queensland, which would make them liable for its flawed advice. CommBank is understood to be offering a complete freeze on mortgages where the clients are pensioners and unable to make payments. These clients are in effect being offered "life tenancy" in their homes which will only be sold after their death. In some cases, CommBank will not charge interest and the loan will not be indexed to inflation. The bank said it is making settlements on a case-by-case basis, and subject to confidentiality, because each customer has unique financial circumstances. Slater & Gordon's Damien Scattini said the deals potentially open CommBank to accusations of undue influence and unconscionable conduct given the distressed state of customers and the short time frame given for people to settle. Opes pact 'borderline contempt', says judge Marc Moncrief SMH March 11, 2009 ELEMENTS of the ANZ Bank's $253 million settlement with creditors of the defunct share lender Opes Prime are "borderline contempt" of court, a Federal Court judge declared yesterday, as he adjourned a dispute to allow the bank and creditors to negotiate key parts of proposed deal. Only days after the Australian Securities and Investments Commission announced a deal that would be Australia's biggest-ever compensation payout, Justice Ray Finkelstein adjourned a matter between ANZ and an Opes Prime creditor, Beconwood Securities. The adjournment is intended to give the bank time to reach an agreed scheme of arrangement with the liquidators, Ferrier Hodgson, which will then be put to a vote of creditors. The case will not be mentioned in court again until June 30. It is believed Judge Finkelstein objected to a clause in the terms of settlement that would apply if a trial occurred while the scheme of arrangement was still being prepared. It is understood parties would be able to rely on the clause to revisit the settlement agreement in such a case. Judge Finkelstein said the clause amounted to a threat against those who would want a court to hear their complaints. "That is a borderline contempt, isn't it? Threatening people not to go to court by taking away something from them, who aren't parties to the agreement, I don't know about that," he said. If he were to hear a matter captured by the clause, he "would not be influenced by [the] clause Ã¢Â€Â¦ in any way at all". ASIC's deal with ANZ fails to provide a disincentive for wrongdoers Elizabeth Knight SMH March 11, 2009 On Friday the Australian Securities and Investments Commission released details of the investigation into the ANZ and the role of its securities lending business and its relationship with the collapsed broker Opes Prime. It has been a pretty sordid saga but one which it seems will come to a close thanks to a deal being cut. The settlement, if accepted, will see ANZ pay the majority of $253 million to the clients of Opes Prime who will receive about 40 cents in the dollar. ASIC says it could have sought a claim for compensation due to alleged contravention of the managed investment provisions of the Corporations Act by Opes Prime and alleged involvement in the contravention by ANZ and Merrill Lynch. It chose a mediated settlement. In doing so, ANZ will not need to go before a court to explain whether it had knowledge of Opes Prime's possible contravention of the law relating to operations of unregistered schemes and whether the schemes could have operated without ANZ's participation. In the course of its investigations, ASIC looked at whether a number of transactions last year between Opes Prime and ANZ involved a breach by Opes Prime directors and whether the bank was in breach of the law, given its knowledge at the time. The regulator probed whether the deals benefited ANZ to the tune of $240 million to the detriment of other creditors and whether ANZ knew about Opes Prime's difficulties when it undertook the transactions. Given the deal between ASIC and ANZ is as good as done, these questions will never be answered in a court. But this takes nothing away from their seriousness. What ASIC uncovered about ANZ's modus operandi is a list of major shortcomings that it could have lifted from the conclusions that were made five years earlier about NAB. It found ANZ had poor reconciliation processes, a breakdown in proper compliance processes, inadequate resourcing and risk management and a poor compliance culture. There were "inadequate processes for identifying, monitoring and resolving potential conflicts of interest between ANZ employees and clients in the course of securities lending and inadequate processes to ensure that trades settled on time and failed trades were investigated to get to their cause and prevent their recurrence Ã¢Â€Â¦ the most obvious was in relation to the Opes Prime sell-down".