Senator Nick Sherry, Minister for Superannuation and Corporate Law, has released the Corporations Legislation Amendment (Financial Services Modernisation) Bill 2009 . The Bill, if passed, provides for the national regulation of trustee companies, margin loans and debentures.
Trustee companies
Trustee companies are currently regulated at the State and Territory level. There are currently ten private licensed trustee companies operating in Australia. The new regime will provide authority under Commonwealth law for trustee companies to perform their traditional functions, deem such services to be “financial services” and require them to hold an Australian Financial Services Licence when selling such services.
ASIC will be the sole national regulator for trustee companies.
Debentures
The Bill will harmonise the legal regime to require all retail debentures and promissory notes to be subject to the full range of consumer disclosure and protection measures currently only applicable to debentures. This will include the requirement to have a trust deed and trustee arrangements, and to issue a full prospectus.
Additionally, debenture trustees will need to be registered. The public register of debenture trustees will be established and maintained by ASIC.
Margin Lending
Margin lending will be added to the Corporations Act 2001 as a financial product. Lenders will be required to hold an Australian Financial Services Licence, will be regulated by ASIC, will be required to be members of low-cost external dispute bodies, will be required to clearly disclose fees and commissions before lending and will have to lend under a margin lending-specific set of responsible lending obligations.
The Government’s Financial Services Working Group will shortly release a simplified margin lending Product Disclosure Statement. The new disclosure regime will commence in conjunction with the new laws.
The Bill will clarify that lenders are responsible for notifying borrowers of a margin call, unless arrangements are in place for the financial planner to do so.
Timetable
The public exposure period ends on 29 May, 2009 and, subject to the agreement of the States and Territories, the Bill will be introduced into Parliament in June.
