A major provision of the current regulation of margin lending is that it must be done “responsibly”. One dictionary definition of “responsible” is “answerable or accountable, as for something within one’s power, control, or management”. So, in everyday terms, responsible lending refers to lending where the person providing or advising on the lending is accountable for that lending.
This topic examines the concept of responsible lending and the associated ideas of “unsuitability” and “reasonable inquiries” in margin lending laws, evaluating cases of “unsuitability” that are prescribed in these laws.
We demonstrate how a margin lender might evaluate “responsible lending” in practice using the generic 5 Cs approach to making any credit decisions; and analyse what clients margin lending might be suitable for. Finally, we discuss margin call obligations and reporting obligations.
In this course you will learn to:
- Explain the concepts of responsible lending, unsuitability and “reasonable inquiries” which are included in the new margin lending laws
- Outline situations which the law prescribed must be treated as “unsuitable”
- Describe how a margin lender, in practice, might implement the responsible lending obligation
- Appraise the types of investors who might be able to be considered a suitable for margin lending
- Describe margin call obligations and reporting obligations of margin lenders.
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Each CPD course has specific learning outcomes, reflections and extra resources and activities, and is assessed via a short online multiple choice quiz. You have 8 weeks to complete the course.