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Financial Services Modernisation Regulations - Seeking Public Comment

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, today released for public comment draft Regulations and explanatory material for the Corporations Amendment Regulations 2009 in relation to margin loans, trustee corporations and debentures.

The draft Regulations give effect to the following matters dealt with in the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 (Modernisation Bill):

  • the national regulation of margin loans;
  • the national regulation of trustee companies; and
  • enhancements to the regulation of debentures.

Further details are in the Attachment.

The package of regulations and related explanatory material can be found and downloaded at www.treasury.gov.au

Submissions are due by 18 September 2009 and can be provided by email to one of the following email addresses: This e-mail address is being protected from spambots. You need JavaScript enabled to view it for margin lending, This e-mail address is being protected from spambots. You need JavaScript enabled to view it for trustee company comments and This e-mail address is being protected from spambots. You need JavaScript enabled to view it for debenture issues.


Summary of Draft Regulations

Corporations Amendment Regulations 2009 (Margin Loans)

The purpose of these regulations is to make arrangements for margin lending facilities complementing the amendments to the Corporations Act 2001.

The main provisions refined by these regulations include the following:

  • the unsuitability assessment provided as part of the responsible lending requirements does not constitute the provision of financial advice;
  • a detailed methodology is provided for calculating the monetary threshold contained in the Act for distinguishing between retail and wholesale clients in relation to margin loans;
  • a number of specific matters are prescribed that lenders must take into account when conducting the unsuitability assessment as part of the responsible lending requirements. These are matters that are considered to contain particular risks to potential borrowers. It is further prescribed that the same matters must be addressed in a Statement of Advice that recommends a margin loan;
  • a number of situations are specified for which a margin loan must be assessed to be unsuitable for the client; and
  • the contents required of periodic statements for margin lending facilities.

The regulations also include new provisions where specific arrangements are prescribed for situations where a credit limit breach occurs due to unilateral action by the borrower that is beyond the control of the provider. The arrangements allow a grace period for conducting the unsuitability assessment within a defined period after the breach occurs.

Corporations Amendment Regulations 2009 (Trustee Companies)

The purpose of these regulations is to help give effect to the framework for the regulation of trustee companies. The main provisions of the regulations are:

  • a list of trustee companies which will be required to hold an Australian financial services licence (AFSL) covering the provision of traditional trustee company services;
  • a proviso that a State or Territory Public Trustee must only be listed if the State or Territory asks the Minister to list the trustee, and the Minister agrees;
  • a list of persons to whom a traditional trustee company service is taken to be provided;
  • provisions which give beneficiaries access to dispute resolution and compensation arrangements;
  • a provision which preserves the role of specified State laws, and consequently State Courts and tribunals, in relation to guardianship matters (in their guardianship role, trustee companies will, however, be subject to Commonwealth regulation in relation to their AFSL conditions, their charging of fees and certain other matters);
  • a requirement for a licensed trustee company to provide an annual information return (with specified content) when requested by specified persons, including settlors and beneficiaries;
  • a power of a licensed trustee company to seek a Court order transferring an estate to another licensed trustee company within the same consolidated entity; and
  • an exception from the normal requirement to disclose fees, commissions and other charges as a dollar amount.

Corporations Amendment Regulations 2009 (Debentures)

The Modernisation Bill will require ASIC to establish and maintain a register of trustees for debenture holders and will require debenture issuers to lodge certain information with ASIC for the purposes of the register.

These regulations set out the detail that ASIC is required to enter into the register, including details on the trustee and borrower and the date of execution of the trust deed.


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