"Standard" vs "Non-Standard" margin lending facilities - how do they differ?

[Toeknee]

Since the GFC we have had the Ripoll report then FOFA. We've had many recommendations of that report implemented.

The new "Responsibile Lending" provisions and licencing in RG203 and RG209 outline that all credit providers giving loans or loan advice to people need to be licenced and that they must consider their ability to repay/service the facility in the event of a margin call.

All this was brought about mainly because of Storm Financial and the CBA not contacting customers in time when their margin calls hit.

Now that has set the scene, can someone please outline the differences between a "Standard" and "Non-Standard" margin lending facility?

How would you establish a suitable margin loan for someone?

[Country Lad]

Now that has set the scene, can someone please outline the differences between a "Standard" and "Non-Standard" margin lending facility?

The 'non standard margin lending facility' is targeted at type of margin loan facility used by lenders such as Opes Prime and Tricom, that caused the problems in late 2008. These are not based on a loan agreement, but instead use a type of securities lending agreement to achieve a similar economic outcome as a standard margin loan. The key difference is that in a non-standard margin loan the title to the security provided for the loan passes out of the client's hands.

The Act classifies margin lending facilities into standard and non-standard facilities.

Standard facility

A standard facility is one where:

• credit is provided to a natural person, and the credit is applied wholly or partly to acquire a financial product; and

• the credit provided is, or must be, secured by property which consists, wholly or partly of one or more marketable securities; and

• the client becomes required to, or the provider or another person becomes entitled to, take action in accordance with the terms of the facility where the current Loan to Valuation Ratio (LVR) of the facility exceeds a ratio, percentage, proportion or level determined under the terms of the facility.

Non-standard facility

A non-standard facility is a facility under the terms of which:

• a natural person transfers one or more marketable securities to the provider of the facility;

• the provider transfers property to the client which is, or must be applied wholly or partly to acquire one or more financial products; and the client has a right, in the circumstances determined under the terms of the facility, to be given marketable securities equivalent to the transferred property given to the provider; and

• the client becomes required to, or the provider or another person becomes entitled to take action in accordance with the terms of the facility where the current LVR of the facility exceeds a ratio, percentage, proportion or level determined under the terms of the facility.

http://www.professionalplanner.com.a...ending-regime/

[Toeknee]

Thank you, link was exactly what I was looking for.

So basically a non-standard margin loan is one where title passes to the loan provider. I can't think of any situation where this would be a preferred option.

Can anyone shed some light on when you would enter a non standard margin loan?