International Law

ASIC guide on margin lending disclosure

By David Jacobson

ASIC has released RG 219 Non-standard margin lending facilities: Disclosure to investors which aims to improve protections for retail clients through better disclosure of non-standard margin lending facilities.

Non-standard margin lending facilities are margin lending arrangements that use a type of ?securities lending? agreement instead of a loan agreement.

The key difference between standard and non-standard margin lending facilities is that in a non-standard margin lending facility, ownership of the securities under the margin loan passes to the lender and may pass to the lender?s financiers.

In RG 219 ASIC sets out that it expects a provider to include in a Product Disclosure Statement (PDS) for a non-standard margin lending facility. These requirements include:

• how the product differs from a standard margin lending facility
• an explanation of the transfer of securities from the client to the provider of the facility and the risks associated with that transfer
• a clear warning to the client of their responsibility to monitor the margin under the facility, and
• an explanation of the tax consequences of the transaction, together with a warning that the client should seek tax advice before entering into the transaction.

Full post as published by Australian Regulatory Compliance Review on November 10, 2010 (boomark / email).