Commonwealth Consolidated Regulations

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CORPORATIONS REGULATIONS 2001 - REG 7.8.09

Reasonable inquiries etc about retail client: inquiries

             (1)  For paragraph 985G(1)(c) of the Act, the following inquiries about a client are prescribed in relation to a margin lending facility, or a margin lending facility whose limit is proposed to be increased, within the meaning of subsection 761EA(1) of the Act:

                     (a)  reasonable inquiries as to whether the client has taken out a loan to fund the secured property or transferred securities contributed by the client for establishing the margin lending facility;

Note:          This is sometimes referred to as 'double gearing'.

                     (b)  if a loan to fund the secured property or transferred securities contributed by the client for establishing the margin lending facility has been taken out--reasonable inquiries as to whether the security for the loan includes the primary residential property of the client;

                     (c)  if there is a guarantor for the margin lending facility--reasonable inquiries as to whether the guarantor has been appropriately informed of, and warned about, the risks and possible consequences of providing the guarantee;

                     (d)  reasonable inquiries as to the amount of any other debt incurred by the client;

                     (e)  any other matter that ASIC has specified in a legislative instrument for subregulation (2).

             (2)  ASIC may specify in a legislative instrument any matter ASIC considers to be relevant for the purpose of establishing whether the margin lending facility, or the margin lending facility with the increased limit, is unsuitable for the client.



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