Moral Business

1. The “Agency Problem” is the conflict between economic and moral imperative. In Agency problem 1, promoters, investment and financial advisors play an important role on bridging informational asymmetries between company and investors. But some promoters opportunistically exploited the asymmetries for personal interest. In Agency Problem 2, there are problems with the information flows and areas of individual authority and responsibility within the organization. Additionally, this refers to a conflict between the shareholders and the management team of a company. The shareholders owners have to control internally and externally in order to make sure the executive managers are pursuing best interests of the principals rather than own interests.

2.

* Other banks offered special treatment to Storm customer and created close relationships with Storm’s management. For instance, Macquarie bank accepted to charge lower interest rates, allowed high loan valuations and provided extra time to meet margin calls towards Storm clients.

* Barry and Deanna Doyle double geared into the stock market by borrowing against their home and use their cash to raise more money for investment. These two investors pitched up at Storm’s Townsville headquarters with a house worth $450,000 and $640,000 in superannuation’s. After two and a half year, their super had gone, the share portfolio had been sold and they had increased the debt on their home to $456,000, with insufficient income to make the repayments.

* The unconscious action of BOQ and Macquarie allowing the Doyle’s to enter a high-risk transaction was alleged by ASIC. In contrast, ASIC hoped to use section 73 of the TPA to make the two banks jointly liable for Storm’s many false and misleading representations.

* BOQ denied that it had “never provided margin loans, never promoted Storm Financial products and never managed geared equities and never taken any commission from storm”

* There are 360 customers...