In the context of the current market volatility, ASIC is reminding advisers and margin lenders of their obligations under the recent margin lending reforms, specifically in relation to advisers’ obligations to notify clients of margin calls and new responsible lending provisions. ASIC has been contacting dealer groups to request that they forward this reminder onto advisers.
Client notifications
Advisers may have clients who hold margin lending facilities. If this is the case, these advisers may have obligations under the Corporations Act to notify their clients of margin calls.
As you are likely aware, lenders are obliged to take reasonable steps to notify a client with a margin loan as soon as practicable where that loan is subject to a margin call. If the adviser has agreed with their client and the margin lender that margin loan notices will be given to the client by the adviser, the adviser must take reasonable steps to notify their client of margin calls as soon as practicable. To enable this, the lender must take reasonable steps to notify the adviser of the margin call.
Responsible lending
We are aware that during market downturns there can be pressure on lenders to extend margin lending limits and/or loan-to-value (LVRs) ratios to minimise margin calls on clients. We remind lenders (and their agents) that the responsible lending requirements continue to apply, including to any limit increases. Therefore, lenders need to take care to ensure that any changes to lending limits and LVRs are consistent with responsible lending practices.
Generally
While this may not be directly applicable to advisers, your members may receive increased inquiries about clients’ margin loans and we remind advisers both of these responsible lending provisions and the requirements to ensure any advice is appropriate. It is also important during this time to ensure that licensees’ internal dispute resolution arrangements are appropriately resourced and consumers are informed about their right to access external dispute resolution (as necessary).
For more information:
- ASIC’s website material on margin lending obligations at the following link: http://www.asic.gov.au/asic/ASIC.NSF/byHeadline/Margin%20lending
- Part 7.8, Division 4A, of the Corporations Act.