The Minister for Financial Services, Superannuation, and Corporate Law, Chris Bowen MP, today welcomed the prescribing regulations as part of the Commonwealth's new margin lending regime.
"The margin lending regulations complement the previous primary legislation put in place by the Government ensuring the appropriate regulation of margin loans and protections for consumers," Mr Bowen said.
"One of the main aims of this regulatory regime is to protect borrowers from the abuses that have occurred in the past in relation to margin loans, such as in the case of Storm Financial."
In 2009 margin loans were inserted into Chapter 7 of the Corporations Act ensuring that the investor protection regime contained in the Corporations Act applies to margin loans.
The regime consists mainly of a range of licensing, conduct and disclosure requirements that apply to providers of financial products and services. Under the previous State and Territory-based consumer credit regime, margin loan borrowers did not benefit from any protection measures specifically tailored to their requirements.
"On of the key provisions of the new regime prescribes a number of detailed matters that must be specifically taken into account when lenders assess whether the loan is not unsuitable for the client under the Government's new responsible lending requirements," Mr Bowen said.
"These include important factors such as whether borrowers have provided their home as security for the loan, as this may put their homes at risk if they cannot service the loan."
The new regulations also say that a person providing both financial services and credit products can combine certain prescribed disclosure documents known as Financial Services Guides and Credit Guides. This is a measure that will save costs and effort for licensees, while making disclosure documents simpler and clearer for consumers.
Finally, the regulations also ensure that a margin lending facility is a financial product for the purposes of the Australian Securities and Investments Commission Act (ASIC Act). This ensures that the general consumer protection measures which apply to other financial products under the ASIC Act extend to margin loans, including prohibitions from engaging in unconscionable conduct or conduct that is misleading or deceptive, and from making false or misleading representations.
The regulations were developed with extensive input from both industry stakeholders and the wider public.
The regulations will come into effect at the same time as the general margin loan provisions in the Corporations Act on 1 January 2011.
7 May 2010