Instalment warrants separated from margin loans

The Australian Securities and Investments Commission (ASIC) has moved to address industry concerns that some instalment warrants traded on the Australian Securities Exchange (ASX) might be classified as margin loans and therefore tied up in the new margin lending provision of the Corporations Act, which kick off on 1 January.

The regulator has addressed the issue by issuing class order relief that effectively recognises that instalment warrants were not meant to be tied up in the new legislation.

Announcing its move, ASIC said it was of the view that Parliament’s main focus in enacting the new margin lending provisions was to regulate traditional margin loans, rather than instalment warrants that are bought on a secondary market where timing is critical and which involve non-recourse credit with limited investor liability.

“Additionally, ASIC considers that the ASIC Market Integrity and the ASX Operating Rules have a number of provisions that protect investors in ASX-traded instalment warrants,” the regulator said.

As a result of the class order, ASX-traded instalment warrants will continue to be regulated under the Corporations Act as either a security or an interest in a managed investment product.