Following an ASIC review, margin lenders have moved to better address the different levels of risk for investors seeking margin loans, especially in relation to double geared margin loans.
Double geared margin loans are where a consumer borrows money (using another asset as security, such as their home) to purchase shares, and then obtains a margin loan on these shares to purchase additional shares.
ASIC found that in certain circumstances, four of the five margin lenders who approved double geared margin loans did not take additional steps when approving such loans, despite the additional risks associated with double geared margin loans.
Following ASIC's review, one margin lender decided to cease offering double geared loans.
ASIC's review also identified two lenders that provided double geared margin loans in circumstances where the borrower would not be able to fully service the margin loan relying only on their available income.