Macquarie Bank’s margin lending division was only a provider of loans and not a financial adviser to clients of failed advisory group Storm Financial (Storm), the banking group has said.
In its submission to the Parliamentary Joint Committee on Corporations and Financial Services inquiry into financial products and services in Australia, Macquarie said its margin loan division, Macquarie Investment Lending (MIL), did not provide advice to Storm clients.
“MIL was one of a number of margin loan providers from which Storm advisers were able to choose based on which features met the needs of their clients,” the submission said.
“MIL’s only lending interaction with Storm and its clients was as a margin lender. MIL was not authorised to provide financial advice to clients.”
Despite not being authorised to provide advice to Storm clients, more than 94 per cent of MIL’s margin loan book resulted from a recommendation from a client’s financial adviser.
“The financial adviser could choose to recommend the use of the MIL margin lending facility to the client if the MIL margin lending facility was one of the margin lending options included on their dealer group’s recommended product list,” the submission said.
“Before the adviser could recommend the MIL margin lending facility, in most cases the product had to be approved by the adviser’s dealer group.”
As well as revealing details of its dealing with Storm clients, Macquarie also supports the proposal to include margin lending within the same framework as other financial services in the Corporations Act.
“We also support an investigation into whether certain prudential or credit-related rules should be recommended or imposed for margin lending activities to reduce the risk of investor losses if we were to face such volatile markets again,” the bank said.
Storm clients accounted for less than $300,000 in bad debts or non-performing MIL margin loans, it said.
In January, Macquarie sold off the majority of the MIL margin loan portfolio to Leveraged Equities, a subsidiary of Bendigo and Adelaide Bank.
