International Law

Senator Nick Sherry, Minister for Superannuation and Corporate Law, has announced that the Government's Financial Services Working Group will this week begin consultations with industry on a new, national margin lending regulatory regime, which will include new short form, plain English product disclosure documents.

It is proposed that the new regime will commence on 1 July, 2009.

Margin lending providers will have to be licensed by ASIC and will have to ensure their representatives are appropriately trained to provide advice on the product.

Last year, the Council of Australian Governments (COAG) agreed to the transfer of margin lending regulation from the states to the Commonwealth. As a result, margin lending will be included in Chapter 7 of the Corporations Act as a financial product by 1 July.

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

• have 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 an investor, including 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 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.

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