Legislation regulating margin lending received Royal Assent on 6 November 2009.
The changes to margin lending, contained in the Corporations Legislation Amendment (Financial Services Modernisation) Act, are part of the Government's plan to regulate consumer credit nationally.
The Act requires (among other things):
issuers and advisers of margin lending facilities to be licensed by ASIC under an Australian financial services (AFS) licence;
advisers to only provide advice that is appropriate to the client's individual circumstances;
margin lenders to meet new responsible lending requirements;
consumers to have access to external dispute resolution services; and
clarity around responsibility for notifying clients in the case of a margin call.
Timeline
The Act has been proclaimed to commence on 1 January 2010. Issuers of, and advisers on, margin lending facilities are able to apply for an AFS licence, or a variation to an existing AFS licence, between 1 February 2010 and 30 June 2010 . The balance of the new requirements will take effect from 1 January 2011.
Issuers and advisers of margin lending facilities are able to apply for an AFS licence, or a variation to an existing licence from 1 February 2010 until 30 June 2010. Existing margin lenders and advisers on margin loans must apply to ASIC for an AFSL authorisation within this timeframe if they intend to continue to provide a margin lending financial service after the application period closes on 30 June 2010. Industry participants who fail to do so will have to cease providing such services.
It is important people consider their situation and make any necessary changes to ensure they can continue carrying on business after 30 June 2010.
The same licensing, conduct and disclosure requirements that currently apply to financial services will apply to providers and financial advisers in relation to margin lending facilities.
ASIC guidance on margin lending
ASIC has released updated policy and regulatory guidance to assist issuers and advisers of margin lending facilities comply with their new requirements.
Regulatory Guide 2 AFS Licensing Kit: Part 2 — Preparing your AFS licence application (RG 2)
Regulatory Guide 3 AFS Licensing Kit: Part 3 — Preparing your additional proofs (RG 3)
Regulatory Guide 146 Licensing: Training for financial product advisers (RG 146)
Consultation Paper 112Dispute resolution requirements for consumer credit and margin lending (Issued 27 July 2009; consultation closed 11 September 2009); View submissions
Consultation Paper 129 Non-standard margin lending facilities: Improving disclosure for retail clients. Released 21 December 2009.
Transition timeline for margin lending reforms
Corporations Legislation Amendment (Financial Services Modernisation) Act
National Consumer Credit Regulation