Corporations Legislation Amendment (Financial Services Modernisation) Act 2009 (108 of 2009)

Schedule 1   Margin lending facilities

Corporations Act 2001

9   After section 761E

Insert:

761EA Meaning of margin lending facility , margin call and associated expressions

(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

(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.

(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.

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

Non-standard margin lending facilities

(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.

(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.

(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

(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.

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

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

(a) must be in writing; and

(b) is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

Meaning of limit of a margin lending facility

(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.