Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .

PART 7.1 - PRELIMINARY  

Division 2 - Meaning of some terms relating to financial services and markets  

SECTION 761EA   MEANING OF MARGIN LENDING FACILITY , MARGIN CALL AND ASSOCIATED EXPRESSIONS  

761EA(1)    
A margin lending facility is:

(a) a standard margin lending facility; or

(b) a non-standard margin lending facility; or

(c) a facility of a kind that has been declared by ASIC to be a margin lending facility under subsection (8);

unless the facility is of a kind that has been declared by ASIC not to be a margin lending facility under subsection (9).

Standard margin lending facilities

761EA(2)    
A standard margin lending facility is a facility under the terms of which:

(a) credit is, or may be, provided by a person (the provider ) to a natural person (the client ); and

(b) the credit provided is, or must be, applied wholly or partly:

(i) to acquire one or more financial products, or a beneficial interest in one or more financial products; or

(ii) to repay, wholly or partly, another credit facility (within the meaning of subparagraph 765A(1)(h)(i) ), the credit provided under which was applied, wholly or partly, to acquire one or more financial products, or a beneficial interest in one or more financial products; and

(c) the credit provided is, or must be, secured by property (the secured property ); and

(d) the secured property consists, or must consist, wholly or partly of one or more marketable securities, or a beneficial interest in one or more marketable securities; and

(e) if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

(i) the client becomes required to take action; or

(ii) the provider becomes entitled to take action; or

(iii) another person becomes required or entitled to take action;

in accordance with the terms of the facility to reduce the current LVR of the facility.

761EA(3)    
The current LVR of a standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

(a) is determined under the terms of the facility; and

(b) under the terms of the facility, represents a particular relationship between:

(i) the amount of the debt owing by the client, or credit provided by the provider, or both, under the facility at that time; and

(ii) the value of the secured property determined at that time under the terms of the facility.

761EA(4)   [ " margin call " in relation to standard margin lending facility]  

A standard margin lending facility is in margin call when paragraph (2)(e) applies in relation to the facility.

Non-standard margin lending facilities

761EA(5)    
A non-standard margin lending facility is a facility under the terms of which:

(a) a natural person (the client ) transfers one or more marketable securities, or a beneficial interest in one or more marketable securities (the transferred securities ) to another person (the provider ); and

(b) the provider transfers property to the client (the transferred property ) as consideration or security for the transferred securities; and

(c) the transferred property is, or must be, applied wholly or partly to acquire one or more financial products, or a beneficial interest in one or more financial products; and

(d) the client has a right, in the circumstances determined under the terms of the facility, to be given marketable securities equivalent to the transferred securities; and

(e) if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

(i) the client becomes required to take action; or

(ii) the provider becomes entitled to take action; or

(iii) another person becomes required or entitled to take action;

in accordance with the terms of the facility to reduce the current LVR of the facility.

761EA(6)    
The current LVR of a non-standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

(a) is determined under the terms of the facility; and

(b) under the terms of the facility, represents a particular relationship between:

(i) an amount determined at that time under the terms of the facility by reference to the value of the transferred property and any amount owing by the client to the provider; and

(ii) the value of the transferred securities determined at that time under the terms of the facility.

761EA(7)    
A non-standard margin lending facility is in margin call when paragraph (5)(e) applies in relation to the facility.

ASIC declarations in relation to margin lending facilities

761EA(8)    
ASIC may declare that a particular kind of facility is a margin lending facility . The declaration must give the meanings of margin call and limit in relation to that kind of facility.

761EA(9)    
ASIC may declare that a particular kind of facility is not a margin lending facility .

761EA(10)    
A declaration made under subsection (8) or (9):

(a) must be in writing; and

(b) is a legislative instrument.

Meaning of limit of a margin lending facility

761EA(11)    
The limit of a margin lending facility:

(a) in relation to a standard margin lending facility - means the maximum amount of credit that may be provided by the provider to the client under the facility; and

(b) in relation to a non-standard margin lending facility - means the maximum amount of property that may be transferred by the provider to the client under the facility; and

(c) in relation to a facility of a kind that ASIC has declared to be a margin lending facility under subsection (8) - has the meaning given in the declaration.