Commonwealth Consolidated Acts

[Index] [Table] [Search] [Search this Act] [Notes] [Noteup] [Previous] [Next] [Download] [Help]

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.



AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback