Commonwealth Consolidated Regulations Commonwealth Consolidated Regulations
1 Length and font size for Product Disclosure Statement for margin loan
(1) The length of a Product Disclosure Statement for a margin loan (not including any title page, table of contents or matter in writing that is applied, adopted or incorporated by the Statement) must not exceed:
(a) if it is printed on A4 pages--4 pages; or
(b) if it is printed on A5 pages--8 pages; or
(c) if it is printed on DL pages--12 pages; or
(d) otherwise--if it is formatted to be printed on A4 pages, 4 A4 pages.
(2) The minimum font size for text in the Statement is:
(a) for the name, address, ABN (if applicable), ACN (if applicable) and AFSL (if applicable) of the person giving the Statement--8 points; and
(b) for all other text--9 points.
Note 1: The Product Disclosure Statement must be worded and presented in a clear, concise and effective manner--see subsection 1013C(3) of the Act.
Note 2: A person required to a give a Product Disclosure Statement to a vision-impaired person must comply with its obligations under the Disability Discrimination Act 1992 .
2 Minimum content of Product Disclosure Statement for margin loan
(1) The Product Disclosure Statement must include the following sections, which must be numbered and titled as follows:
1. About [name of provider of the margin loan] and [name of margin loan product]
2. Benefits of [name of margin loan product]
3. How [name of margin loan product] works
4. What is a margin call?
5. The risk of losing money
6. The costs
7. How to apply.
(2) The Product Disclosure Statement must include:
(a) a table of contents that sets out the titles mentioned in subclause (1); and
(b) the telephone number of the provider of the margin loan to enable a borrower for the margin loan to request a copy of the following under regulation 7.9.11G:
(i) a copy of the Statement; and
(ii) a copy of a matter in writing that is applied, adopted or incorporated by the Statement.
(3) The Product Disclosure Statement must:
(a) advise a person reading the Statement that:
(i) it is a summary of significant information and contains a number of references to important information (each of which forms part of the Statement); and
(ii) the person should consider that information before making a decision about the product; and
(iii) the information provided in the Statement is general information only and does not take account of the person's personal financial situation or needs; and
(iv) the person should obtain financial advice tailored to the person's personal circumstances; and
(b) display the advice:
(i) at or near the beginning of the document; and
(ii) in a prominent position and style.
(4) The Product Disclosure Statement:
(a) may include additional sections after sections 1 to 7; and
(b) may include other information;
to an extent that does not have the effect of contravening subclause 1(1).
(5) The Product Disclosure Statement does not need to indicate that a particular requirement is not applicable to the margin loan.
Note: The Act, as modified in accordance with Subdivision 4.2A of Division 4 of Part 7.9, requires information to be included in the Product Disclosure Statement only to the extent to which the requirement is applicable to the margin loan.
Section 1 of the Product Disclosure Statement must include:
(a) a short description of the margin loan provider and its business; and
(b) a short summary of what margin lending is; and
(c) a statement setting out the possible consequences of borrowing money to invest, including the effect of magnifying both gains and losses; and
(d) a statement that the borrower for a margin loan should regularly monitor the borrower's portfolio so that:
(i) the borrower can be aware of changes (if any) to the terms of the margin loan; and
(ii) the borrower can take timely action to prevent potential losses in relation to the borrower's portfolio; and
(e) a statement that the borrower for a margin loan may need, at short notice, to pay an additional amount into the margin loan or sell some of the investments for which the margin loan is made; and
(f) a statement that the provider of a margin loan has the right in certain circumstances to sell all, or part, of the borrower's portfolio and may not be required under the terms of the margin loan to provide notice to the borrower of its intention to sell; and
(g) a statement that if the value of the portfolio for a margin loan does not cover the cost of repayments for the margin loan:
(i) the borrower for the margin loan may need to access other funds to repay the margin loan; or
(ii) the provider of the margin loan may sell assets provided as security for the margin loan, for example, the borrower's residential property; and
(h) a statement that the law requires the provider of a margin loan to:
(i) assess whether the margin loan is unsuitable for the potential borrower for the margin loan; and
(ii) if the potential borrower for the margin loan requests a copy of the assessment--to provide a copy of the assessment to the potential borrower for the margin loan.
Note: The provider of a margin loan is not required to give the borrower or potential borrower for the margin loan a copy of the assessment if the margin loan is not issued.
4 Contents of section 2 (Benefits of [name of margin loan product])
(1) Section 2 of the Product Disclosure Statement for a margin loan must include a description of the key benefits available to the borrower or potential borrower for the margin loan.
(2) Section 2 of the Statement may include a description about other benefits available to a borrower or potential borrower for the margin loan other than the benefits mentioned in subclause (1).
(3) Section 2 of the Statement may provide for the description mentioned in subclause (2) by applying, adopting or incorporating a matter in writing.
5 Contents of section 3 (How [name of margin loan product] works)
(1) Section 3 of the Product Disclosure Statement for a margin loan must include:
(a) an explanation of how margin lending works including information about the following:
(i) the maximum loan amount for the margin loan;
(ii) the loan-to-value ratios for the margin loan; and
(b) at least 1 example that illustrates the matters mentioned in subparagraphs (a)(i) and (ii); and
(c) a description of the financial products that the borrower or potential borrower for the margin loan can purchase with the margin loan (including the Approved Securities List for the provider or potential provider of the margin loan); and
(d) an explanation of who owns the investments purchased with the margin loan; and
(e) a statement that:
(i) details of the rights and obligations of the borrower for a margin loan are set out in the terms of the agreement for the margin loan; and
(ii) recommends that a potential borrower for a margin loan read the loan agreement; and
(iii) explains how a potential borrower can obtain a copy of the loan agreement; and
(f) an explanation of any other features of the margin loan that:
(i) are not covered by the matters mentioned in paragraphs (a), (c) and (d); and
(ii) are sufficiently important to be material to a reasonable person's decision to take out the margin loan; and
(g) a reference to:
(i) the calculator provided on a website operated by or on behalf of the Commonwealth and an explanation of the assistance the calculator can provide; or
(ii) if the provider or potential provider of the margin loan provides a calculator to borrowers or potential borrowers for the margin loan--that calculator and an explanation of the assistance the calculator can provide.
(2) Section 3 of the Statement may provide for the following matters by applying, adopting or incorporating the matter in writing:
(a) the Approved Securities List;
(b) the explanation mentioned in paragraph (1)(f).
6 Contents of section 4 (What is a margin call?)
Section 4 of the Product Disclosure Statement for a margin loan must include:
(a) if the terms of the margin loan include a margin call:
(i) an explanation of what a margin call is; and
(ii) an explanation of when there will be a margin call in response to changes in the market; and
(iii) an explanation of when there will be a margin call at the discretion of the provider of the margin loan; and
(iv) at least 1 example of how a margin call works, including:
(A) the impact of breaching the loan-to-value ratio ( LVR ) for the margin loan; and
(B) how to adjust the LVR back to the required level for the margin loan; and
(C) how the buffer (if any) for the margin loan operates; and
(v) a description of how a margin call can be dealt with by the borrower for the margin loan; and
(vi) a statement that if there is a margin call, the provider of the margin loan will notify the borrower for the margin loan, or the borrower's financial advisor, that the margin call has occurred; and
(vii) a statement that the borrower for the margin loan must be contactable at all times in case of a margin call; and
(b) if the terms of the margin loan do not include a margin call, a statement to that effect.
7 Contents of section 5 (The risk of losing money)
(1) Section 5 of the Product Disclosure Statement for a margin loan must include a description of the risks associated with margin lending to a borrower for the margin loan, including a description of any of the following risks, if relevant:
(a) the risk that the value of the borrower's investment may fall and the possible consequences to the borrower if this occurs, in particular the risk of a margin call occurring;
(b) the risk that the provider of the margin loan may change the loan-to-value ratio of an investment at any time and the consequences to the borrower of the change, in particular, the risk of a margin call occurring;
(c) the risk that the provider of the margin loan may remove an investment from the Approved Securities List and the consequences for the borrower if this occurs, in particular, the risk of a margin call occurring;
(d) the risk that the interest rate for the margin loan may rise and the consequences for the borrower if this occurs, in particular, the possibility that interest payments owed by the borrower may exceed the returns available from the borrower's portfolio;
(e) the risk of the loss of property of the borrower if the property has been mortgaged as security for, or in connection with, the margin loan;
(f) the risk of a default event under the loan agreement occurring and the potential consequences for the borrower if a default event does occur;
(g) the risk that the taxation laws may change and that this may have a negative effect on the tax position for the borrower for the margin loan;
(h) any other significant risks that a reasonable person would consider to be relevantly associated with the margin loan.
(2) Section 5 of the Statement must include a hyperlink to the page on a website operated by or on behalf of the Commonwealth that provides information about margin loans.
(3) Section 5 of the Statement may include information about risks associated with margin lending other than the risks mentioned in subclause (1).
(4) Section 5 of the Statement may provide for the information mentioned in subclause (3) by applying, adopting or incorporating a matter in writing.
8 Contents of section 6 (The costs)
(1) Section 6 of the Product Disclosure Statement for a margin loan must include the following:
(a) a description of the interest rate for the margin loan, including how the interest rate is calculated;
(b) a statement about whether a default interest rate will be charged for the margin loan;
(c) details of any fee or cost to be charged by the provider of the margin loan, unless the fee is a minor fee;
(d) a statement about whether a fee or cost to be charged by the provider for the loan can be unilaterally changed by the provider under the loan agreement;
(e) a list of matters for which the provider of the margin loan will charge a minor fee for the margin loan;
(f) a statement about whether a commission or fee is payable to a financial advisor or other third party for the margin loan and, if a commission or fee is payable:
(i) the circumstances in which the commission or fee will be payable; and
(ii) how the borrower for the margin loan can obtain more detailed information about the commission or fee.
(2) Section 6 of the Statement must include:
(a) a statement of the interest rate for the margin loan; and
(b) details of any minor fee the provider of the margin loan will charge for the margin loan.
(3) Section 6 of the Statement may provide for the statement mentioned in paragraph (2)(a) or the details mentioned in paragraph (2)(b) by applying, adopting or incorporating a matter in writing
9 Contents of section 7 (How to apply)
(1) Section 7 of the Product Disclosure Statement for a margin loan must include:
(a) information about how to apply for the margin loan; and
(b) a short summary about the dispute resolution system the provider of the margin loan has for dealing with disputes or complaints about the loan, including:
(i) how a borrower for the loan may make a complaint about the loan; and
(ii) contact details for making a complaint about the loan.
(2) The margin loan provider:
(a) may provide more detailed information about cooling-off periods, complaints and dispute resolution; and
(b) may provide that information by applying, adopting or incorporating a matter in writing.