Margin Lending

The regulation of margin lending is contained in the Corporations Legislation Amendment (Financial Services Modernisation) Act which was given Royal Assent on 6 November 2009, and the legislation became effective as of 1 January 2010. Providers of financial services in relation to margin lending facilities will need to apply for a new licence, or a variation to their current licence.

Key dates:

The key dates to keep in mind are listed below:

1 January 2010:
 Commencement of the Corporations Legislation Amendment (Financial Services Modernisation) Act, with a 12 month
   transition period
 Licensees to make application to ASIC for a new licence or variation of their licence if they intend to offer or advise on
   margin lending products after 30 June 2010

 

30 June 2010:
 New AFS licence application and licence variation application period closes.
 As of 1 July 2010, only advisors of licensees that have made variation applications to ASIC may continue to provide margin 
   lending products or advice.

 

1 January 2011:
 Transition period complete
 New legislative requirements in effect as to how margin lending products and advice are to be provided

 

1 July 2011:
 Entities and individuals that provide margin lending advice must comply with the new RG146 training requirements.

 

New Financial Requirements

AFS Licensees who deal in or advise on a margin lending facility are required to have adequate financial resources, supervisory arrangements & risk management systems in place.

 

In addition to the base level financial requirements, AFS licensees who provide a margin lending service will be required to comply with the following financial requirements:

 

 AFS licensees who issue a margin lending facility must hold at least $5 million in net tangible assets (NTA) at all times that
   the licensee holds secured property under a margin lending facility or must use a custodian with at least $5 million NTA;
 AFSL licensees who hold secure property on trust for the client or have the power to dispose of the client’s property under a 
   margin lending facility, will be required to comply with the surplus liquid fund (SLF) requirement under section E of RG166;
 AFS Licensees who have a liability to transfer marketable securities to the client under a non-standard margin lending facility 
   will be required to comply with the SLF requirements in section F of RG166;
 AFS Licensees will not have to comply with the SLF requirements in section F of RG166 if the licensee provides credit 
   under a margin lending facility and that credit remains undrawn.

 

Training Requirements

The training requirements for all persons providing advice on margin lending facilities are as Tier 1 under RG 146 (Margin Lending Facilities). AFS Licensees, including Responsible Managers and representatives, will be required to demonstrate knowledge in this specialist area. The specialist knowledge comprises of types of products, product characteristics, taxation, compliance & disclosure, theories of investment, portfolio management and management of investment and risk. Training courses must be registered on the ASIC Training Register. Advisors will need to complete the training requirements by the 6 November 2010 where the licensee has been granted a variation before that date.

Acompli, in conjunction with our training partner Kaplan, offers clients exclusive half-day training workshops to meet the training and competency level requirements of RG 146 – Margin Lending Facilities recently released.