Response to Sydney Morning Herald article on 22 December 2010
22 December 2010
The Sydney Morning Herald article today titled "Macquarie in Storm loan cover up" misrepresented the nature of Macquarie’s margin lending arrangements with Storm Financial clients.
The following information was provided to the journalist in response to his questions regarding Macquarie's margin lending practices with Storm Financial clients and Macquarie’s submission to the Parliamentary Joint Committee on Corporations and Financial Services:
- Macquarie offered a margin lending facility which was an interest only line of credit secured by approved financial assets pledged as collateral to the loan.
- All clients had an obligation to monitor the loan facility and to maintain it within the facility parameters.
- Macquarie Investment Lending did not, and was not authorised to, provide financial advice to clients.
- Macquarie’s practice was to provide clients with an explanation of the risks involved and to require clients, prior to taking out a margin loan facility, to sign a declaration that they had considered the risks and costs involved and were prepared to accept the risks involved.
- Clients were provided with 24 hour access to a secure website which was updated daily, where borrowers could monitor their position and we strongly recommended that borrowers, in conjunction with their financial advisers, continually monitored their position.
- There was a mechanism whereby if the loan-to-value ratio exceeded 90% then we could reduce the satisfaction period to 24 hours from that point. (refer page CFS19 of the transcript of the PJC hearing).
- A margin call is not a stop-loss mechanism. We could never guarantee that we will sell out a portion of a portfolio at a particular LVR.
- Macquarie undertook to provide the committee with further information on margin calls and we did so. The Committee subsequently published the information on their website.
- In response to your particular point that Macquarie did not accelerate margin call restitution periods from 10 days to 24 hours after their portfolios crossed 90% LVR, this was not an obligation of Macquarie under the terms of the lending documents but was action that Macquarie could take at its discretion. None of Macquarie’s actions prevented any client from actively managing their investments and loan facilities at any time. This is consistent with Macquarie’s submission to the PJC.