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CORPORATIONS ACT 2001 - SECT 985H

When margin lending facility must be assessed as unsuitable

Requirement to assess the margin lending facility as unsuitable

             (1)  The provider must assess that the margin lending facility will be unsuitable for the retail client if the margin lending facility will be unsuitable for the retail client under subsection (2).

Note 1:       This subsection is a civil penalty provision (see section 1317E).

Note 2:       Even if the margin lending facility will not be unsuitable for the retail client under subsection (2), the provider may still assess that the margin lending facility will be unsuitable for the retail client for other reasons.

             (2)  The margin lending facility will be unsuitable for the retail client if, at the time of the assessment, it is likely that:

                     (a)  if the facility is issued or the limit increased in the period covered by the assessment, and 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 will apply to the margin lending facility if the facility is issued or the limit increased in the period covered by the assessment.

Information to be used to make the assessment

             (3)  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 of the assessment:

                              (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.



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