Stewart Levitt, principal of Levitt Robinson Solicitors, said ASIC’s failure to warn investors about obtaining independent legal advice in 2007, despite the regulator being aware of Storm’s flawed model, shows a compromised ability to deal with the situation.

“It’s important that clients recognise that if they put all their eggs in the ASIC basket, ASIC might just drop the basket at any stage …. ASIC have demonstrated that they can’t be relied upon in relation to this entire enterprise,” Levitt told Lawyers Weekly.

Mediation is scheduled for the end of February for all parties involved in the Storm Financial debacle and despite Levitt Robison and ASIC being on the “the same side” in terms of a resolution for investors, Levitt said he will not forget the regulator’s failures.

“Just because you have an alliance with somebody doesn’t mean that everything that happens should be swept under carpet,” he said.

 In early November 2007, after ASIC approved the Storm Financial Prospectus, the regulator’s compliance team performed a full audit of Storm’s method of doing business.

Levitt claims to have emails, obtained outside the discovery process, sent between Storm and ASIC which indicate that Storm’s North Sydney office was fully audited.

“They show that ASIC was fully aware of how Storm operated and did nothing about it,” said Levitt, adding that most of the damage was done between November 2007 and August 2008.

“ASIC blame all the banks now, but the fact is they fully audited the whole Storm model in 2007 and gave them a silver star. Why did they stand by when people signed their life away?”

After the collapse of Storm, CBA and Slater & Gordon jointly promoted the CBA Storm Resolution Scheme, which Levitt described as “a hardship scheme which did not recognise that the bank had done anything wrong legally”.

“CBA was paying Slater & Gordon, who were co-authors of the offers, and S&G were telling clients it was a good deal. Where is the independence in that?

“ASIC now, by necessary interference, has recognised that that wasn’t appropriate, yet they stood by and let it all happen and consequently the bank didn’t adequately compensate people.”

The corporate watchdog has defended accusations that it should have done more to prevent the collapse after Storm Financial went into administration in January 2009.

More than 400 Storm clients were affected after the Federal Court ordered the company's winding up in March 2009 due to debts of about $80 million.