Draft Corporations Amendment Regulations 2009: margin loans, trustee corporations and debentures

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP,has released for public comment draft Regulations and explanatory material for the Corporations Amendment Regulations 2009 in relation to margin loans, trustee corporations and debentures.

The draft Regulations give effect to the following matters dealt with in the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009:

  • the national regulation of margin loans;
  • the national regulation of trustee companies; and
  • enhancements to the regulation of debentures.

The margin loans regulations include the following:

  • the unsuitability assessment provided as part of the responsible lending requirements does not constitute the provision of financial advice;
  • a detailed methodology is provided for calculating the monetary threshold contained in the Act for distinguishing between retail and wholesale clients in relation to margin loans;
  • a number of specific matters are prescribed that lenders must take into account when conducting the unsuitability assessment as part of the responsible lending requirements. These are matters that are considered to contain particular risks to potential borrowers. It is further prescribed that the same matters must be addressed in a Statement of Advice that recommends a margin loan;
  • a number of situations are specified for which a margin loan must be assessed to be unsuitable for the client; and
  • the contents required of periodic statements for margin lending facilities.

The regulations also include new provisions where specific arrangements are prescribed for situations where a credit limit breach occurs due to unilateral action by the borrower that is beyond the control of the provider. The arrangements allow a grace period for conducting the unsuitability assessment within a defined period after the breach occurs.

The trustee company regulations contain a list of trustee companies which will be required to hold an Australian financial services licence (AFSL) covering the provision of traditional trustee company services

The debenture regulations require ASIC to establish and maintain a register of trustees for debenture holders and will require debenture issuers to lodge certain information with ASIC for the purposes of the register.

Submissions are due by 18 September 2009

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