Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

PART 7.8 - OTHER PROVISIONS RELATING TO CONDUCT ETC. CONNECTED WITH FINANCIAL PRODUCTS AND FINANCIAL SERVICES, OTHER THAN FINANCIAL PRODUCT DISCLOSURE  

Division 4A - Special provisions relating to margin lending facilities  

Subdivision A - Responsible lending conduct for margin lending facilities  

SECTION 985K   UNSUITABLE MARGIN LENDING FACILITIES  

985K(1)   Requirement not to issue unsuitable margin lending facilities etc.  

The provider must not:


(a) issue the margin lending facility to the retail client; or


(b) increase the limit of the margin lending facility that was issued to the retail client;

if the facility is unsuitable for the retail client under subsection (2).

Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1) ).

Note 2: This subsection is a civil penalty provision (see section 1317E ).

985K(2)   When a margin lending facility will be unsuitable.  

The margin lending facility is unsuitable for the retail client if, at the time it is issued or the limit is increased:


(a) it is likely that, if the facility were to go into margin call, the retail client:


(i) would be unable to comply with the retail client ' s financial obligations under the terms of the facility; or

(ii) could only comply with substantial hardship; or


(b) if the regulations prescribe circumstances in which a margin lending facility is unsuitable - those circumstances apply to the margin lending facility.

985K(3)   Information to be used for the purposes of subsection (2).  

For the purposes of determining under subsection (2) whether the margin lending facility will be unsuitable, only information that satisfies both of the following paragraphs is to be taken into account:


(a) the information is about the retail client ' s financial situation, or any other matter prescribed by regulations under paragraph 985G(1)(c) or (d) ;


(b) at the time the margin lending facility is issued or the limit is increased:


(i) the provider had reason to believe that the information was true; or

(ii) the provider would have had reason to believe that the information was true if it had made the inquiries or verification under section 985G .

985K(4)   Regulations in relation to unsuitability of margin lending facility.  

The regulations may prescribe particular situations in which a margin lending facility is taken not to be unsuitable for a retail client, despite subsection (2).

985K(5)   Increase in limit of standard margin lending facility.  

For the purposes of paragraph (1)(b), the limit of a standard margin lending facility is taken not to be increased if:


(a) apart from this subsection, there would be an increase in the limit; and


(b) the increase in the limit would result from an increase in the value, determined under the terms of the facility, of the secured property under the facility (as referred to in paragraph 761EA(2)(c)); and


(c) the increase in the value of the secured property does not result from the client contributing additional property to the secured property.

985K(6)   Regulations in relation to increase in limit.  

For the purposes of paragraph (1)(b), the regulations may prescribe particular situations in which the limit of a margin lending facility is taken:


(a) to be increased, despite subsection (5); or


(b) not to be increased.


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