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Margin lending: a brief introduction update

Andrew Evans
09/04/2020
In these uncertain times with volatile markets we have refreshed our briefing paper on margin lending.  This briefing paper sets out a brief summary of a typical margin loan structure, the risks to borrowers and lenders involved in margin lending, steps that can be taken to minimise such risks and some applicable legal considerations for lenders offering margin loans as part of their services.
 


What is margin lending?

Margin lending describes the provision of financing backed by a portfolio of cash, shares, units in managed funds, commodities, derivatives and any other form of market traded asset which is extended to individual or corporate borrowers for the purposes of financing investments.

A key feature of margin lending is that the ability to borrow funds is determined by the assets in the portfolio, their loanable value and a credit limit based on the borrower's financial position.

Margin loans can be made by lenders to individual borrowers, limited partnerships, private and public companies, limited liability partnerships and other incorporated associations.
 

Margin lending: a brief introduction
 

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