ASIC is investigating us, bank admits

THE Bank of Queensland was forced into a climb-down yesterday when it admitted the corporate regulator was investigating its role in the failure of Storm Financial just a day after the bank denied to investors that such an inquiry was under way.

The Herald understands the reversal was a result of pressure applied by the Australian Securities and Investments Commission when it discovered the bank had made a statement to the ASX that it was not under investigation.

Intense negotiations took place between bank officials and ASIC yesterday over the wording of a follow-up clarification that represented an about-face to what the bank said on Thursday.

In that statement the bank, whose chief executive is David Liddy, said it was not under formal investigation by ASIC. The regulator has been looking into the affairs of Storm and the activities of the banks that lent to the company and its customers following the collapse of the financial planner into administration in January.

However, the bank said yesterday that late on Thursday it became aware of a "specific investigation" by ASIC.

The short two-sentence statement offered no further explanation as to how the bank had been so confident to deny such an investigation only to change its mind in the course of one trading day. A bank spokeswoman refused yesterday to add anything further to its statement.

Yesterday's developments emerged as it became clear that ASIC itself had only last week publicly outlined the scope of its investigation.

In parliamentary committee hearings, the ASIC chairman, Tony D'Aloisio, said repeatedly that investigations into Storm and its financiers were continuing.

He said 10 days ago: "These investigations extend to possible action to recover compensation under Section 50 of the ASIC Act against all involved, including financiers."

The stance adopted by the Bank of Queensland is in sharp contrast to that taken by the Commonwealth Bank, which has accepted that it made mistakes in dealing with Storm and that it would right any financial problems suffered by its customers as a result of its errors.

However, the Bank of Queensland yesterday stood by the other parts of Thursday's statement that its position was rather different to Commonwealth's in that it only extended home equity loans worth $105 million to 319 customers.

They then used the money to invest in their Storm-related sharemarket portfolios, which subsequently greatly fell in value, leaving them in debt to the bank.

The bank also denies any improper or dishonest practices in its dealings with Storm's clients or any misleading or deceptive conduct.

However, the bank is about to face a legal challenge by lawyers acting for customers who say the bank let them down in their dealings with Storm.

Damian Scattini, a principal with Slater & Gordon, said the bank's correction to its earlier statement raised questions about how effectively it had investigated the claims of its customers.

"It's just one of the statements in their release that ought to be corrected," Mr Scattini said.