Following the passage of the Financial Modernisation Act of 2009 Margin Lending is now a financial product requiring issuers and advisers to hold an Australian Financial Services Licence (AFSL).
These reforms have been enacted in an effort to improve investor protection. The new regulations will require that the Margin Lending industry comply with the same requirements Insurance, Bonds, Securities and other financial industries must abide by.
In fact, the new requirements come with an extra set of regulations that imposes new responsible lending requirements for issuers of Margin Lending Facilities. These new requirements make it a responsibility of the issuers and advisers to provide notification of margin calls to their clients.
Whether you are a Margin Lending professional or a client it is a good idea to familiarize yourself with the new requirements and guidelines. ASIC Commissioner, Dr Peter Boxall that entities which that provide a financial service in relation to Margin Lending Facilities or that plan to do so, should start looking into the new requirements so as to make the transition as smooth as possible.
The Financial Modernization Act comes with a 12 month transition period from the commencement of the new Act for the requirements to take effect. In the first six months of the transition period professionals are required to apply for an Australian Financial Services Licence which has been modified to include Margin Lending.
In fact a number of existing Australian Securities and Investments Commission regulatory guides have been modified to take into account the new status of financial product that Margin Lending now has.
All this gets rather technical but if you are in anyway related to the Margin Lending industry you will do well to visit the ASIC website and check all the specific changes. Here is a compilation of the most important modifications:
There is now an updated policy and regulations guide that all interested parties should request from ASIC. These include updates to Regulatory Guide 2 (AFS licensing Kit: Part 2) and Regulatory Guide 3 (AFS Licensing Kit: Part 3). As well as changes to Regulatory Guide 146, 166 and the Australian Financial Services.
These changes in the financial regulations of Margin Lending must be seen in the light of the recent credit crisis many countries are still immersed in. Many blame slack and inadequate credit regulations and the government is taking these measures in an effort to “tighten things up” and get rid of loop holes in the system.
This should protect investors from advisers and issuers of Margin Lending Facilities that don’t look out for their client’s best interests. New regulations, for instance, require that issuers and advisers notify their clients in the case of a margin call.
Margin Lending is not an investment for everyone and must entered with caution and well informed of the risks involved. If you are interested in Margin Lending you will do well to contact a reputable Financial Adviser that is already licensed by The Australian Securities and Investment Commission.
