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CORPORATIONS ACT 2001 - SECT 761EA

Meaning of margin lending facility , margin call and associated expressions

  (1)   A margin lending facility is:

  (a)   a standard margin lending facility; or

  (b)   a non - standard margin lending facility; or

  (c)   a facility of a kind that has been declared by ASIC to be a margin lending facility under subsection   (8);

unless the facility is of a kind that has been declared by ASIC not to be a margin lending facility under subsection   (9).

Standard margin lending facilities

  (2)   A standard margin lending facility is a facility under the terms of which:

  (a)   credit is, or may be, provided by a person (the provider ) to a natural person (the client ); and

  (b)   the credit provided is, or must be, applied wholly or partly:

  (i)   to acquire one or more financial products, or a beneficial interest in one or more financial products; or

  (ii)   to repay, wholly or partly, another credit facility (within the meaning of subparagraph   765A(1)(h)(i)), the credit provided under which was applied, wholly or partly, to acquire one or more financial products, or a beneficial interest in one or more financial products; and

  (c)   the credit provided is, or must be, secured by property (the secured property ); and

  (d)   the secured property consists, or must consist, wholly or partly of one or more marketable securities, or a beneficial interest in one or more marketable securities; and

  (e)   if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

  (i)   the client becomes required to take action; or

  (ii)   the provider becomes entitled to take action; or

  (iii)   another person becomes required or entitled to take action;

    in accordance with the terms of the facility to reduce the current LVR of the facility.

  (3)   The current LVR of a standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

  (a)   is determined under the terms of the facility; and

  (b)   under the terms of the facility, represents a particular relationship between:

  (i)   the amount of the debt owing by the client, or credit provided by the provider, or both, under the facility at that time; and

  (ii)   the value of the secured property determined at that time under the terms of the facility.

  (4)   A standard margin lending facility is in margin call when paragraph   (2)(e) applies in relation to the facility.

Non - standard margin lending facilities

  (5)   A non - standard margin lending facility is a facility under the terms of which:

  (a)   a natural person (the client ) transfers one or more marketable securities, or a beneficial interest in one or more marketable securities (the transferred securities ) to another person (the provider ); and

  (b)   the provider transfers property to the client (the transferred property ) as consideration or security for the transferred securities; and

  (c)   the transferred property is, or must be, applied wholly or partly to acquire one or more financial products, or a beneficial interest in one or more financial products; and

  (d)   the client has a right, in the circumstances determined under the terms of the facility, to be given marketable securities equivalent to the transferred securities; and

  (e)   if the current LVR of the facility exceeds a ratio, percentage, proportion or level (however described) determined under the terms of the facility, then:

  (i)   the client becomes required to take action; or

  (ii)   the provider becomes entitled to take action; or

  (iii)   another person becomes required or entitled to take action;

    in accordance with the terms of the facility to reduce the current LVR of the facility.

  (6)   The current LVR of a non - standard margin lending facility at a particular time is the ratio, percentage, proportion or level (however described) that:

  (a)   is determined under the terms of the facility; and

  (b)   under the terms of the facility, represents a particular relationship between:

  (i)   an amount determined at that time under the terms of the facility by reference to the value of the transferred property and any amount owing by the client to the provider; and

  (ii)   the value of the transferred securities determined at that time under the terms of the facility.

  (7)   A non - standard margin lending facility is in margin call when paragraph   (5)(e) applies in relation to the facility.

ASIC declarations in relation to margin lending facilities

  (8)   ASIC may declare that a particular kind of facility is a margin lending facility . The declaration must give the meanings of margin call and limit in relation to that kind of facility.

  (9)   ASIC may declare that a particular kind of facility is not a margin lending facility .

  (10)   A declaration made under subsection   (8) or (9):

  (a)   must be in writing; and

  (b)   is a legislative instrument.

Meaning of limit of a margin lending facility

  (11)   The limit of a margin lending facility:

  (a)   in relation to a standard margin lending facility--means the maximum amount of credit that may be provided by the provider to the client under the facility; and

  (b)   in relation to a non - standard margin lending facility--means the maximum amount of property that may be transferred by the provider to the client under the facility; and

  (c)   in relation to a facility of a kind that ASIC has declared to be a margin lending facility under subsection   (8)--has the meaning given in the declaration.


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