ASIC Market Supervision Update issue 12

Other issues

Margin lending obligations

As you would know, new obligations came into existence on 1 January 2011 in relation to margin call notification requirements that fall on licensees (lenders) and agents.

Given the current period of market volatility, ASIC would like to stress the importance of compliance with section 985M of the Corporations Act 2001 (the Corporations Act), and by way of reminder, provides the following.

Section 985M(1) of the Corporations Act requires that when a facility goes into margin call, the licensee must take reasonable steps to notify retail clients (the Notice) under that facility of the margin call in accordance with this section. In addition, s985M(2) requires that where there is an agreement between the provider, the retail client and another financial services licensee (the Agent), that the Agent will receive communications from the provider in relation to the margin lending facility on behalf of the retail client, then:

  • the provider must take reasonable steps to notify the Agent (instead of the retail client) of the margin call; and
  • the Agent must take reasonable steps to notify the retail client of the margin call in accordance with the section.

In the absence of a time period being specified by ASIC, s985M(3)(b) requires that the Notice under the section must be made as soon as practicable. Further, it must be made in a manner consistent with the requirements of s985M(4).

Furthermore, and given the current market conditions and the possibility that lenders may be considering the merit of extending existing facility limits, ASIC also takes this opportunity to remind licensees of their responsible lending obligations in relation to margin loans. Sections 985EA through to 985K of the Corporations Act set out responsible lending requirements for licensees, including when a margin lending facility would be unsuitable for a retail client (s985H(2)).

ASIC is committed to keeping participants informed of their obligations, and working together to maintain fair and efficient financial markets as well as confident and informed investors and financial consumers.

Contact ASIC

Market participants should contact ASIC for market integrity issues and ASX for operational issues. Contact ASIC’s Market and Participant Supervision group on 1300 029 454 and you will have these voice menu options:

  • Option 1 for real time market matters
  • Option 2 for other market related matters
  • Option 3 for Participant enquiries or matters
  • Option 4 for Market wide announcements.

Or you can reach the Market and Participant Team by email market.participants@asic.gov.au, or through your relationship manager.

For more information

Please see www.asic.gov.au/market-supervision.

 

Last updated: 30/03/2021 09:35