More disclosure for non-standard margin lending facilities
The Australian Securities and Investments Commission (ASIC) has released regulatory guidance on disclosure for non-standard margin lending facilities, which became notorious after the collapse of Opes Prime Stockbroking and Tricom Equities.
According to ASIC’s new guidelines, providers are expected to explain to investors in a Product Disclosure Statement how the product differs from a standard margin lending facility.
Non-standard margin lending facilities are margin lending arrangements that use a type of ‘securities lending’ agreement, instead of a loan agreement.
ASIC deputy chairman Belinda Gibson said the key difference between the two was that in a non-standard margin lending facility, ownership of the securities under the margin loan passed to the lender and might pass to the lender’s financiers, which could create significant risks for investors.
“Given the complexity and risk inherent in non-standard margin lending facilities, investors need to be in a position to assess whether these types of products are likely to be appropriate for their investment objectives, needs and risk profile,” Gibson said.
According to the regulator, providers would also be expected to warn the client of their responsibility to monitor the margin under the facility, and explain the process of the transfer of securities from the client to the provider and the risks associated with that transfer.
“While this guidance can’t prevent investments failing, improved disclosure will help retail clients make better risk — reward decisions,” Gibson said.
Recommended for you
Multiple industry organisations have shared their thoughts on AFCA’s proposed rules amendment, supporting the idea of firms being named publicly when they fail to comply with determinations.
Channel Capital has appointed a head of investment oversight who joins from 14 years at asset consulting firm JANA Investment Advisers.
Licensee Centrepoint Alliance has completed the acquisition of Brighter Super’s annual review service advice book, via Financial Advice Matters.
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
