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Margin Lending - Who is the Owner?
Margin lending has received a lot of press recently as a result of the collapses of 2 brokerage houses, Opes Prime and Lift Capital and the problems experienced by Tricom. Most of the concerns have related to legal ownership of the share holdings and your rights in the case of a possible brankruptcy by either the Intermediary or Product Provider.
In order to clarify the position we requested National Margin Lending and Macquarie Investment Lending to draft a note explaining the legal position.
There are 3 parties in these Margin Lending Transactions:
- The Client,
- Macquarie Wrap (The Product Provider and Investment Account), and,
- Loan Provider (National Margin Lending or Macquarie Investment Lending).
It should be noted that neither Horizon Wealth Management nor its licensee FYG Planners Pty Ltd (the Intermediaries) are principals in these transactions. No investment monies are paid into our bank accounts from our clients and nor do we receive any monies on your behalf from either the Product Provider or the Loan Provider.
As per the attached note, the Client is the beneficial owner of the holdings (managed funds, shares, cash). Whilst the loan is in place, the Loan Provider has a Charge over the Investment Account for as long as the Loan is outstanding.
The other matter that has received a reasonable degree of publicity surrounds stock lending. We can confirm that none of the shares (if you have any in your Investment Account linked to your margin loan) that you own may be lent out by the Loan Provider.
National Margin Lending and Macquarie Investment Lending borrowers who pledge direct shares as security to their Investment Loans, retain full legal and beneficial ownership of those shares, and their securities are not lent out for other purposes.
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