ASIC has released Consultation Paper 129 Non-standard margin lending facilities – improving disclosure for retail clients (CP 129) which sets out the key features and risks which ASIC proposes should be disclosed in a Product Disclosure Statement (PDS).
A non-standard margin lending facility differs from a standard margin lending facility in that ownership of securities passes out of the investor’s hands. Ownership is transferred to the lender who then transfers consideration for the securities back to the investor, representing the ‘loan’ component of the facility. Products like this were offered by lenders such as Opes Prime Stockbroking Ltd and Tricom Equities Ltd up until 2008.
Under recent changes to the Corporations Act, margin lending will be regulated as a financial product and supervised by ASIC. ASIC’s proposed requirements for non-standard margin lending facilities supplement the Financial Services Working Group’s proposed requirements for shorter, simpler disclosure for standard margin loans.