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CORPORATIONS ACT 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS    View history reference

PART 7.1 - PRELIMINARY    View history reference

Division 2 - Definitions    View history reference

SECTION 761EA  MEANING OF MARGIN LENDING FACILITY, MARGIN CALL AND ASSOCIATED EXPRESSIONS  

 View history reference

761EA(1)  ["margin lending facility"]  


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).

761EA(2)  Standard margin lending facilities.  


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.

761EA(3)  ["current LVR" of standard margin lending facility]  


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.

761EA(4)  ["margin call" in relation to standard margin lending facility]  


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

761EA(5)  Non-standard margin lending facilities.  


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.

761EA(6)  ["current LVR" of non-standard margin lending facility]  


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.

761EA(7)  ["margin call" in relation to non-standard margin lending facility]  


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

761EA(8)  ASIC declarations in relation to margin lending facilities.  


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.

761EA(9)  [ASIC declarations that facilities not margin lending facilities]  


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

761EA(10)  [Form and nature of declarations]  


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


(a) must be in writing; and


(b) is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

761EA(11)  Meaning of limit of a margin lending facility.  


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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