Thinking | 22 January 2009

Margin loans to be regulated under Chapter 7 of the Corporations Act

Following last years’ Council of Australian Governments’ agreement to transfer of margin lending regulation from the States to the Commonwealth, Senator Nick Sherry announced this week that margin lending will be included in Chapter 7 of the Corporations Act as a financial product by 1 July 2009.

This will mean that all margin lending providers will have to:

  • hold an Australian Financial Services Licence (AFSL)
  • comply with general conduct standards, including the requirement to deal with investors efficiently, honestly and fairly
  • undertake appropriate disclosure to retail investors, including the provision of a Product Disclosure Statement (PDS), a Statement of Advice (SOA) and ongoing reporting
  • have adequate arrangements for the management of conflicts
  • ensure representatives are adequately trained and are competent to provide those services and
  • be subject to enforcement measures regarding market manipulation, false or misleading statements, inducing investors to deal using misleading information, and engagement in dishonest, misleading or deceptive conduct.

Senator Sherry also announced that the Financial Services Working Group will begin consultations with industry on the new national margin lending regulatory regime, which will include new short form, plain English product disclosure documents.

All margin lending providers will also be subject to responsible lending conduct provisions as part of broader consumer credit reforms covering all credit providers.

Hall & Wilcox’s Financial Services team is well equipped to advise margin lenders on the new requirements for margin lenders, having obtained a substantial number of Australian Financial Services Licences for our clients and advised our clients on all aspect of Chapter 7 of the Corporations Act (including licensing and the preparation of Product Disclosure Statements).

Contact

Harry New

Harry leads our financial services team and focuses extensively on financial services law and corporate advisory.

John Bassilios

John has broad experience in financial services, funds management, blockchain, corporate and corporate law.

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