Draft margin lending regulations and ‘example documents’, including a draft Product Disclosure Statement, are likely to be released within the next couple of weeks, according to a Treasury executive.
Speaking at the Investment and Financial Services Association (IFSA) conference on the Gold Coast, Geoff Miller, general manager, corporations and financial services division, Treasury, said like other financial services working group products, the ‘example documents’ were not templates, but they would “lead us through the process of creating the regulation that needs to go into place”.
“And we use the example documents as proof of concept that we can actually do, and you can do, what we’re asking you to,” Miller added.
“This document will inform potential borrowers in fairly clear and concise language of the key factors they need to consider before taking out a margin loan,” he said of the documents, which are currently going through various levels of consumer testing.
“This will be the first time margin loans will be specifically targeted for legislation,” Miller said.
The draft of the new margin lending scheme, part of the Government’s anticipated broader consumer credit regime and geared to protect consumers from harmful lending practices, will fall under chapter seven of the Corporations Act, but is yet to be passed.
Miller also said the consumer credit regime will include “several specific measures that will apply exclusively to margin loans”.
“In drafting the legislation, care has been taken to draft a definition of margin loan that captures both standard margin loans and non-standard structures, such as those used in the past by failed entities such as Opes Prime.”
Miller said by placing margin lending under the governance of chapter seven, consumers would benefit from the protection scheme contained in the chapter, including licensing, access to dispute resolution and disclosure requirements that apply to all financial products.
“Margin loans are interesting creatures. They sort of sit somewhere between a financial product and a loan,” he noted.
