The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
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Nick Sherry

Minister for Superannuation and Corporate Law

3 December 2007 - 8 June 2009

Media Release of 18/01/2009

NO.004

Financial Services Working Group
Begins Work on Margin Lending Documents

Senator Nick Sherry, Minister for Superannuation and Corporate Law, has announced that the Rudd Government's Financial Services Working Group will this week begin consultations with industry on a new, national margin lending regulatory regime, which will include new short form, plain English product disclosure documents.

"There will be single, standard, national regulation and supervision of margin lending by July 1, 2009 which means much greater protection for investors as well as cost savings for product providers."

"Margin lending providers will have to be licensed by ASIC and will have to ensure their representatives are appropriately trained to provide advice on the product."

"Investors will be informed about the risks of margin lending as well as the potential rewards of the product – all in plain English. This week we will start discussions with industry on delivering these greatly simplified documents."

"Disclosures in the new short-form Product Disclosure Statement will include all fees and charges, including commissions paid by margin loan providers to advisers who sell the product."

"It's important that investors not only receive clear advice about why a particular product or strategy is being recommended to them, but also what's in it for the person or firm recommending it."

"Conservatively geared margin lending may have a role in a balanced investment strategy for investors fully informed about how it works in both rising and falling markets," Minister Sherry said.

Last year, the Council of Australian Governments (COAG) agreed to the transfer of margin lending regulation from the states to the Commonwealth. As a result, margin lending will included in Chapter 7 of the Corporations Act as a financial product by July 1.

This will mean that all margin lending providers will have to:

  • have an Australian Financial Services Licence (AFSL).
  • comply with general conduct standards, including the requirement to deal with investors efficiently, honestly and fairly;
  • undertake appropriate disclosure to an investor, including provision of a Product Disclosure Statement (PDS), a Statement of Advice (SOA) and ongoing reporting;
  • have adequate arrangements for the management of conflicts;
  • ensure representatives are adequately trained and competent to provide those services; and
  • be subject to enforcement measures regarding market manipulation, false or misleading statements, inducing investors to deal using misleading information, and engagement in dishonest, misleading or deceptive conduct.

All margin lending providers will also be subject to responsible lending conduct provisions as part of broader consumer credit reforms covering all credit providers.

CANBERRA
18 January 2009