Western Australian Consolidated Regulations Western Australian Consolidated Regulations[r. 2]
Finance Brokers Control Act 1975
Code of Conduct for Finance Brokers
Index
DIVISION 1 — INTRODUCTORY PROVISIONS
1. Preliminary
2. Interpretation
DIVISION 2 — GENERAL OBLIGATIONS FOR ALL FINANCE BROKERS
3. Application of Division 2
4. General fiduciary obligations
5. Compliance with common law obligations, loyalty
and disclosure of interests
6. Cold calling/canvassing
DIVISION 3 — RESTRICTED FINANCE BROKING BUSINESS (APPLIES TO A, B & C
CLASSES)
7. Application of Division 3
8. Duties to borrowers
9. Limited ability to waive compliance
DIVISION 4 — UNRESTRICTED FINANCE BROKING BUSINESS (APPLIES TO A
CLASS ONLY)
10. Application of Division 4
11. Duties to parties
12. Duties to lenders
13. Execution of documents
14. Limited ability to waive compliance
Division 1 — Introductory provisions
1.1 The purpose of
this Code is to give effect to the Finance Brokers Control Act 1975
section 81.
1.2 Finance brokers
failing to comply with the terms of this Code could be subject to disciplinary
action or orders of the State Administrative Tribunal in accordance with
sections 34(1), 73(1) and 83(2)(c) of the Act.
2.1 Terms defined in
the Act or regulations have the same meaning when used in this Code.
2.2 In this Code
—
A class licensee means a person who holds an
unrestricted licence as described in regulation 16 of the regulations;
aggregator means any person that has an
arrangement with a lender to facilitate —
(a) the
submission of loan applications to that lender by finance brokers who may not
have such an arrangement with the lender; or
(b) the
payment of commissions by that lender to finance brokers who may not have such
an arrangement with the lender;
as if complete valuation means a valuation of a
proposed development that assumes the proposed development to be in a
completed state as at the date of valuation and reflects current market
conditions at that date;
as is valuation means a valuation that provides
the current value of the property as it currently exists rather than an
“as if complete valuation” of any proposed development;
associate includes an employee, C class licensee,
partner, co‑director or officer of the finance broker, any member of the
finance broker’s family, or any company or firm associated with the
finance broker or any member of the finance broker’s family;
B class licensee means a person who holds a
restricted licence, classified as a “B” class licence under
regulation 16 of the regulations;
borrower means the person to whom a loan is made
and includes a person seeking a loan whether or not a loan is made;
C class licensee means a person who holds a
restricted licence, classified as a “C” class licence under
regulation 16 of the regulations;
equipment finance means a loan where the
predominant purpose of the loan is to fund the purchase of chattels;
external party means a person (including an
aggregator) that the finance broker will deal with in relation to a loan or a
person directly or indirectly referring the borrower to the finance broker;
financial services licensee means a financial
services licensee as defined in the Commonwealth Corporations Act 2001 ;
Form 1 means the form set out in Appendix 1, or a
substantially similar form that contains the information required by
clause 11.2;
guarantor means any person who provides a
guarantee, indemnity or any other form of collateral security for the
obligations of a borrower in a loan transaction and includes a person offering
to be a guarantor for a loan whether or not that person becomes the guarantor;
lender means the person who makes a loan and
includes a person offering a proposed loan whether or not that person becomes
the lender;
Maximum Remuneration Schedule means the schedule
of maximum amounts of remuneration for finance brokers fixed under
section 44(1) of the Act as at the time of the relevant transaction;
on completion valuation means a valuation that
reflects the anticipated value of the proposed development at the time the
development is actually completed;
party means any borrower, lender, guarantor or any
other party to a loan transaction to which the Act applies;
person has its ordinary meaning and also means a
body corporate;
principal means a person for whom, or on behalf of
whom, a finance broker acts and —
(a) is
the borrower if a finance broker deals directly with the borrower in
negotiating or arranging a loan (unless the dealings with that borrower are
incidental or ancillary to negotiating or arranging the loan); and
(b) may
be a lender or, subject to clause 5.2, both a borrower and a lender;
proposed development means any planned development
or redevelopment of a property, including building improvements or additions,
which are proposed, approved or under construction on the site with the
exception of properties for which the value of the work on the land when
completed will be $200 000 or less;
refinance includes replacing or rearranging an
existing loan, or any part of that loan;
regulations means the
Finance Brokers Control (General) Regulations 2005 ;
remuneration includes any fees, commission,
reward, benefit or other valuable consideration whatsoever;
UCCC means the Consumer Credit (Western Australia)
Code.
Division 2 — General obligations for all finance brokers
3.1 Division 2
applies to all loans negotiated or arranged by a finance broker.
4 . General fiduciary obligations
4.1 A finance broker
must know and comply with the duties imposed by the Act, this Code, the
regulations and the Maximum Remuneration Schedule.
4.2 A finance broker
must establish and maintain reasonable compliance measures intended to ensure
compliance with clause 4.1.
4.3 In particular, a
finance broker must —
(a)
observe the general rule to avoid a conflict of duties or interests, otherwise
than with the fully informed consent of the finance broker’s principal;
and
(b) not
take improper advantage of the trust of any party in order to obtain a benefit
for the finance broker or a third party; and
(c)
fulfil all commitments honestly, fairly and competently.
5 . Compliance with common law obligations,
loyalty and disclosure of interests
5.1 Subject to this
Code (including clause 5.2), a finance broker must always act in the best
interests of the finance broker’s principal and give that principal
undivided loyalty unaffected by any interest of the finance broker (including,
without limitation, any interest referred to in clause 5.3) or of any
other person.
5.2 A finance broker
can only act for more than one principal in the same matter if —
(a) each
principal has given prior written informed consent; and
(b) each
principal understands and agrees that the finance broker may have duties to
disclose information to other parties under this Code.
5.3 A finance broker
must seek to avoid any conflicts between the finance broker’s duties to
the finance broker’s principal and the finance broker’s duties to
any other person or the finance broker’s personal interest. If a
conflict of interest or duties occurs the finance broker must disclose that
conflict in writing to the finance broker’s principal and obtain the
principal’s fully informed consent to the broker continuing to act.
5.4 To the extent that
disclosure is not made under clause 8, at all times, whilst negotiating
or arranging a loan, a finance broker must disclose in writing to the finance
broker’s principal any interest the finance broker may have, or intends
to have, directly or indirectly in —
(a) the
loan transaction; or
(b) any
property or services being purchased using any part of the loan; or
(c) any
property being offered as security for the loan; or
(d) any
other commercially relevant transaction which may affect the advice given in
respect of that loan,
and of which the
principal is not, or reasonably could not be, aware.
5.5 Clause 5.4
includes, without limitation, any agency or other commercial relationship
which the finance broker may have with any lender, borrower, aggregator,
valuer, real estate agent, mortgage insurer, lawyer, accountant, financial
planner, financial advisor, insurer or insurance broker, or other finance
broker directly or indirectly related in any way to the relevant loan.
5.6 A finance
broker’s disclosure obligations under clause 5.4, extend to
disclosure of the relevant interests of an associate of the finance broker, of
which the broker is or reasonably ought to be aware.
5.7 If an interest
referred to in clause 5.4 or 5.6 exists, a finance broker must not act in
the loan transaction unless —
(a) each
principal in relation to the loan is fully informed of all matters required to
be disclosed under clauses 5.4 and 5.6; and
(b) each
principal consents to the finance broker acting or continuing to act on their
behalf in that transaction; and
(c) the
finance broker has recommended in writing to each principal that it is in
their best interests to obtain independent advice in relation to the merits of
the transaction.
5.8 A finance broker
must not, directly or indirectly, disclose or reveal the contents of any
instructions, information, documents or papers given to the finance broker by
the finance broker’s principal, to any person otherwise than to the
extent authorised by the finance broker’s principal in writing, or as
the finance broker may be required to disclose by law or under this Code
(including, without limitation, clause 5.12(c)).
5.9 A finance
broker’s duty of confidentiality towards the finance broker’s
principal continues after the relationship of principal and broker has ceased.
5.10 A finance broker
must —
(a)
treat all parties honestly and fairly; and
(b) not
engage in harsh or unconscionable conduct towards any party; and
(c)
exercise reasonable skill, care and diligence when conducting and carrying on
the business of a finance broker and fulfil the broker’s obligations to
the finance broker’s principal and other parties in a timely manner; and
(d)
ensure that the broker, and the finance broker’s employees and C class
licensees under that finance broker’s supervision, are competent in
those areas and aspects of the industry in which they participate.
5.11 A finance broker
must take reasonable steps to keep up‑to‑date with the relevant
current laws and practices in those aspects of the finance broking industry in
which the finance broker participates.
5.12 A finance broker
must not —
(a)
mislead or deceive any party; or
(b) make
a false representation to any party or cause any other finance broker to make
a false representation to any party; or
(c) omit
to provide to any party any significant information of which the broker is
aware, that could influence a reasonable person’s decision
to —
(i)
enter into the loan transaction; or
(ii)
consent to the broker acting for more than one principal.
5.13 If a finance
broker is also a licensed real estate or business agent, real estate sales
representative or business sales representative, and if a loan transaction is
negotiated or arranged on behalf of a borrower, then the loan shall not be
made conditional upon the finance broker —
(a)
obtaining from the borrower an authority to sell; or
(b)
being given by the borrower a management agreement in relation to,
any property being
offered as security for the loan or any other property owned by the borrower.
5.14 If 2 or more
finance brokers act in conjunction in negotiating or arranging a loan, the
total remuneration payable in respect of negotiating or arranging the loan
must not exceed the maximum remuneration for the transaction determined under
the Maximum Remuneration Schedule.
5.15 Where a finance
broker has employees or is supervising C class licensees, it is the finance
broker’s responsibility to take reasonable steps to ensure that those
employees or C class licensees —
(a) have
up‑to‑date qualifications or experience relevant to their duties
in the finance broker’s business; and
(b) keep
up‑to‑date with relevant current laws and practices in those
aspects of the finance broking industry in which they participate; and
(c)
comply with the following —
(i)
any conditions on their licences;
(ii)
the provisions of the Act and regulations;
(iii)
the Maximum Remuneration Schedule;
(iv)
the requirements set out in this Code.
5.16 A finance broker
must keep and maintain copies of all records of business and the forms and
documents required by this Code in relation to a loan transaction for a period
of at least 7 years after the date on which the authority to act is
signed.
5.17 Clause 5.16
continues to apply to a person even when that person has ceased to carry on
business as a finance broker.
5.18 Subject to
clauses 9 and 14, a condition or provision of an agreement or statement
by a party is void to the extent it purports to waive compliance with any
clause of this Code.
6.1 A finance broker
must at all times comply with the Fair Trading Act 2010 and the UCCC,
including whilst —
(a)
canvassing (whether in person, over the telephone or via any other unsolicited
communication) any person at their place of residence to apply for or obtain
any loan; or
(b)
engaging any other person to carry out the activities in paragraph (a).
[Clause 6 amended in Gazette 30 Jun 2011
p. 2645.]
Division 3 — Restricted finance broking business (applies to
A, B and C classes)
7.1 Subject to
clause 8.1, Division 3 applies to loans negotiated or arranged by an
“A” class, “B” class or “C” class finance
broker where the lender is —
(a) a
financial services licensee authorised to operate a managed investment scheme
registered under the Commonwealth Corporations Act 2001 Chapter 5C; or
(b)
regulated by the Australian Prudential Regulation Authority (APRA) of the
Commonwealth; or
(c) a
licensed credit provider under the Credit (Administration) Act 1984 ; or
(d) a
person exempt from the licensing requirements of the Credit (Administration)
Act 1984 section 6, pursuant to section 7(1) of that Act; or
(e) both
a “financial corporation” and a “registered entity”
within the meanings given to those terms in the Commonwealth
Financial Sector (Collection of Data) Act 2001 ; or
(f) a
person noted in a condition on a finance broker’s licence as an approved
lender.
7.2 Clause 7.1
applies to the holder of an “A” class licence, while that finance
broker is negotiating or arranging a loan in circumstances that fit one of the
criteria in clause 7.1, otherwise Division 4 applies to that
“A” class licence holder.
8.1 Clause 8 does
not apply —
(a) to
finance brokers who act as intermediaries for other finance brokers and
—
(i)
who do not deal directly with the borrower for whom the
loan is to be negotiated or arranged; or
(ii)
who deal directly with the borrower but only in relation
to matters that are incidental or ancillary to negotiating or arranging the
loan for the borrower;
or
(b)
where the borrower is —
(i)
a statutory corporation (other than a local government)
acting on behalf of the State; or
(ii)
an “agency” within the meaning given to that
term in the Commonwealth Public Service Act 1999 or in the Public Sector
Management Act 1994 ; or
(iii)
a “listed entity”, or a “related body
corporate” of a listed entity, within the meanings given to those terms
in the Commonwealth Corporations Act 2001 ;
or
(c) to
the extent it is waived in accordance with clause 9.
8.2 The following
provisions of clause 8 do not apply to payments to other finance brokers,
apart from associates, who do not deal directly with the borrower, or deal
directly with the borrower but only in relation to matters incidental or
ancillary to negotiating or arranging the loan, and who do not offer a choice
of brand of loan —
(a)
clause 8.6(h);
(b)
clause 8.6(i);
(c)
clause 8.8(n);
(d)
clause 8.8(o).
8.3 In general terms,
the duties owed to a borrower by a finance broker under this Division are as
follows —
(a) to
negotiate or arrange appropriate finance;
(b) to
provide preliminary information to the borrower including —
(i)
the broker’s introductory details; and
(ii)
the remuneration, fees, commissions, etc., that the
broker is entitled to charge the borrower; and
(iii)
how complaints are dealt with;
(c) to
provide information to the borrower as to the full details of any loan
arranged;
(d) to
provide information to the borrower regarding any further remuneration, fees,
commissions, etc., that will be received by the broker;
(e) to
warn of and where appropriate explain any variance in a loan and confirm the
borrower’s intentions in relation to the terms of a loan.
8.4 A finance broker
must not negotiate or arrange a loan which the finance broker does not
genuinely and reasonably believe is appropriate for the borrower, and the
finance broker must document in writing, and be able to demonstrate that, the
finance broker has —
(a) made
reasonable inquiries in relation to the needs, objectives and financial
circumstances of the borrower, including existing loans; and
(b)
cautioned the borrower that the proposed loan arrangements were based on the
lenders canvassed and the information provided by the borrower and that, if
the information is incomplete or inaccurate, the borrower should, before
entering into the proposed loan arrangements, consider its appropriateness
having regard to the borrower’s relevant personal circumstances and, if
necessary, seek independent financial advice.
8.5 A finance
broker —
(a) must
not refinance a loan if the refinancing is solely for the purposes of
generating commission or fees for the finance broker, or the finance
broker’s associates; and
(b) must
be able to demonstrate, in relation to the refinancing, that the finance
broker has complied with clause 8.4; and
(c)
where the refinancing will increase the overall financial commitments of the
borrower, must ensure that the borrower is aware of this and recommend in
writing that the borrower seek independent financial advice.
8.6 Before being
appointed to act as a finance broker to a borrower, a finance broker must
disclose in writing to the borrower, the following information —
(a) the
finance broker’s full name and address;
(b) the
finance broker’s licence number;
(c) the
nature and range of services that the finance broker provides;
(d) a
statement listing the lenders from whom, subject to the borrower meeting the
lender’s lending criteria, the finance broker can obtain a loan for the
borrower;
(e) the
proposed timeframe required to establish the borrower’s eligibility for
a loan;
(f) that
the remuneration of finance brokers is limited to a maximum as prescribed by
the Maximum Remuneration Schedule;
(g) any
fees or other amounts that may be charged to the borrower by the finance
broker or any associate of the finance broker and the manner in which the
finance broker (or any associate) requires the borrower to pay the fees ( for
example, paid upfront or drawn down from the proceeds of the loan );
(h)
where the finance broker’s services comprise of arranging loans
regulated by the UCCC other than equipment finance (but subject to
clause 8.2) —
(i)
the range of commissions, including, at least, the
highest and the lowest commissions (upfront and trail) payable by the
broker’s panel of lenders to any person in relation to negotiating or
arranging a loan, if the finance broker were to arrange a loan for the
borrower, expressed as —
(I) percentages, where commissions are
payable as percentages across that panel; or
(II) fixed amounts,
where commissions are payable as fixed amounts across that panel; or
(III) either
percentages or fixed amounts, provided always that the highest and lowest
commissions are expressed in the same manner for any loan amount and term
nominated by a prospective borrower, where commissions are payable as both
percentages and fixed amounts across that panel;
and
(ii)
whether any external party or associate is likely to
share in the commission, or otherwise be remunerated in relation to loan
transactions negotiated or arranged by the finance broker ( for example,
referral fees ) for the borrower; and
(iii)
a prominent warning that the borrower should ask, if the
borrower so requires —
(I) where in such range the proposed lender
(once selected) sits; and
(II) the role and
identity of any such external party or associate and the amount payable to
such party;
(i)
where the finance broker’s services consist of
arranging equipment finance or loans not regulated by the UCCC (but subject to
clause 8.2), either the disclosure set out in paragraph (h) or a
general statement —
(i)
explaining the method and source of the finance
broker’s remuneration (monetary or non‑monetary) including an
explanation of who pays that remuneration and how it is payable ( for example,
as commission or as a margin on the interest charged ); and
(ii)
indicating whether any external party or associate is
likely to share in the remuneration, or otherwise be remunerated, in relation
to loan transactions negotiated or arranged by the finance broker ( for
example, referral fees ) for the borrower; and
(iii)
offering to provide the borrower, if the borrower so
requires, with —
(I) the actual amount of the broker’s
remuneration, once ascertainable; and
(II) details of the
role and identity of any such external party or associate and the amount
payable to such party, once ascertainable;
(j) to
the extent that the disclosure required by paragraphs (g), (h) or (i),
does not provide full disclosure of the source of and method of calculation
of, the finance broker’s remuneration, a statement of —
(i)
the source of the finance broker’s remuneration;
and
(ii)
the method by which the remuneration is calculated; and
(iii)
when, and how, the remuneration is received;
(k) that
any complaint in respect of a loan transaction may be lodged by the borrower
with the Commissioner for Consumer Protection.
8.7 Before being
appointed to act as a finance broker, a finance broker must ensure that the
borrower has signed the written disclosure given under clause 8.6
following which the finance broker must retain the document and give a signed
copy of that disclosure to the borrower.
8.8 Before the
borrower accepts any offer to enter into a loan, a finance broker must ensure
that the borrower has had written disclosure of the following information
where it is applicable to the loan transaction contemplated —
(a) the
full name and address of all borrowers and guarantors;
(b) the
amount of the loan;
(c) the
term of the loan;
(d) the
purpose of the loan;
(e) any
amount of the loan that is to be used to repay existing loans and the
transaction costs that apply to that repayment;
(f) the
security the lender requires to be given for the loan;
(g) the
date by which finance is to be obtained;
(h) in
relation to —
(i)
loans regulated by the UCCC, the interest rate and
whether that rate may increase; or
(ii)
non‑UCCC loans, the interest rate and whether that
rate may increase or, alternatively, the amount, number and frequency of
payments;
(i)
any default interest rate or other penalty in respect of
late payment or non‑payment;
(j) the
terms of drawdown, redraw and repayment of the principal and interest;
(k) any
rights of early repayment, including any exit or deferred establishment fees;
(l) any
insurance requirements imposed by the lender;
(m) if
not previously disclosed, any fees or other amounts that will be charged to
the borrower by the finance broker or any associate of the finance broker and
the manner in which the finance broker (or any associate) requires the
borrower to pay the fees ( for example, paid upfront or drawn down from the
proceeds of the loan );
(n) in
relation to loans regulated by the UCCC other than equipment finance (but
subject to clause 8.2) —
(i)
a statement of commission (including upfront and trailing
commission) which will be paid by the lender or any other person if the lender
provides the loan to the borrower (which can be expressed in percentage
amounts) and whether (to the knowledge of the finance broker) any other
remuneration (including monetary and non‑monetary benefits) may be
earned or received by the finance broker, or whether any associate of the
finance broker or any external party is to receive remuneration (as a result
of participating with the finance broker in negotiating or arranging the
loan), if the lender were to provide the loan to the borrower; and
(ii)
where it is reasonable to anticipate that the finance
broker will not receive or retain all of the fees payable by the borrower or
all of the commission or other remuneration disclosed under
paragraph (i), an explanation of the amount the finance broker personally
will be entitled to retain and of any amounts that, to the knowledge of the
finance broker, any associate of the finance broker or external party will
receive in relation to the loan transaction negotiated or arranged by the
finance broker ( for example, referral fees ) for the borrower, and the
identity of that person; and
(iii)
where the amount of any remuneration is not able to be
ascertained, a clear description of the means by which it will be calculated;
(iv)
if not previously disclosed, the identity of any person
who will otherwise be remunerated for referral and the amount payable to such
person;
(o) in
relation to equipment finance or loans not regulated by the UCCC (but subject
to clause 8.2) and where the details differ from those disclosures made
under clause 8.6(i), either the disclosure set out in paragraph (m)
or the following explanations and reminders —
(i)
a general statement explaining the method and source of
the finance broker’s remuneration (monetary or non‑monetary)
including an explanation of who pays that remuneration and how it is payable (
for example, as commission or as a margin on the interest charged );
(ii)
an explanation of any external party or associate who
will share in the same or who (to the knowledge of the finance broker) will
otherwise be remunerated in relation to the loan transaction negotiated or
arranged by the finance broker ( for example, referral fees ) for the
borrower;
(iii)
a reminder to the borrower of the offer made pursuant to
clause 8.6(i)(iii).
8.9 To comply with the
requirement for written disclosure under clause 8.8 in particular cases,
the finance broker —
(a) may
be able to refer the borrower to documents already in the borrower’s
possession ( for example, a lender’s offer to enter into a loan may
provide most of the information required to be disclosed under clause 8.8
); or
(b) may
be able to rely on the written information given under clause 8.6, if no
subsequent changes have taken place and no additional information needs to be
added; or
(c) may
use another method of disclosure (in a form likely to be understood by the
borrower) provided the borrower has some written record of the required
information.
8.10 Where a written
disclosure is made by the finance broker under clause 8.8, the finance
broker must ensure that the borrower has signed the written disclosure,
following which the finance broker must retain the document and give a signed
copy of that disclosure to the borrower.
8.11 Before the
borrower accepts any offer to enter into a loan, the finance broker must
—
(a) if
and when the finance broker is or becomes aware that the terms of the loan
vary from the borrower’s application, explain to the borrower those
differences and why they have occurred and offer to confirm the explanation in
writing; and
(b) in
any event, caution the borrower to check that the terms of the loan do not
vary from the borrower’s application and, if they do vary, inform the
finance broker forthwith.
9 . Limited ability to waive compliance
9.1 Compliance with
part or all of clause 8.8 may be waived if —
(a)
there is a written waiver of compliance that relates solely to
clause 8.8; and
(b) the
loan transaction is not regulated by the UCCC; and
(c) the
borrower —
(i)
is independently professionally advised, and indicates
that he or she understands the effect of the waiver; or
(ii)
is a person who regularly engages in and is conversant
with loans of money (secured or unsecured) and by the person’s
experience over a reasonable period of time, may be expected to fully
appreciate and understand the risks involved and their consequences.
9.2 Compliance with
part or all of either clause 8.6 or 8.8, or both, may be waived if
—
(a)
there is a written waiver of compliance that relates solely to clause 8.6
or 8.8, or both; and
(b) the
borrower is a sophisticated borrower who may be expected to fully understand
the importance of the clause of the Code in respect of which the compliance
requirement has been waived.
9.3 To be a
sophisticated borrower a person must —
(a) have
net assets of at least $2.5 million; or
(b) has
a net income for each of the last 2 financial years of at least $250 000
a year.
9.4 The onus of
establishing the requirements of clause 9.1, 9.2 or 9.3 rests with the
finance broker.
Division 4 — Unrestricted finance broking business (applies
to A class only)
10 . Application of Division 4
10.1 Division 4
applies to loans negotiated or arranged by finance brokers who hold an
“A” class licence, when the lender does not fall within a category
set out in clause 7.1.
10.2 A finance broker
who holds an “A” class licence is subject to Division 3 when
the lender does fall within a category set out in clause 7.1.
11.1 In general terms,
the duties owed to the parties to a loan by a finance broker under this
Division are as follows —
(a) to
provide details of the parties to the loan to each other party;
(b) to
provide details of the financial position of the borrower and guarantor;
(c) to
provide details of the loan arranged or negotiated;
(d) to
provide details of the property being used as security;
(e) to
set out any additional action that the finance broker will take in the case of
default.
11.2 Before a loan is
made, a finance broker must give to all parties to the loan a notice in
writing, in the form of Form 1, containing the following information —
(a) the
finance broker’s full name, licence number and address;
(b) the
full name and address of all lenders;
(c) the
full name and address of all borrowers;
(d) the
full name and address of all guarantors;
(e) the
full name of each party for whom the finance broker acts;
(f) the
amount and terms of the finance broker’s remuneration;
(g) the
borrower’s net assets and details of the borrower’s ability to
service interest payments ( refer clause 12.10(a) );
(h) the
guarantor’s net assets and details of the guarantor’s ability to
service interest payments ( refer clause 12.10(a) );
(i)
the purpose of the loan;
(j) the
amount of the loan;
(k) the
amount of loan to be used to repay existing loans;
(l) the
term of the loan;
(m) the
date of advance;
(n) the
interest rate;
(o) the
commencement date of interest;
(p) when
interest is payable;
(q) any
penalty rate;
(r) the
terms of repayment or repayment dates;
(s) any
rights of redraw and discharge;
(t) any
insurance requirements;
(u)
whether management agreement is required or not required;
(v)
the security required;
(w)
where real property is to be used as security —
(i)
a description of the mortgaged property; and
(ii)
the purchase price of that property (where relevant); and
(iii)
the priority of any mortgage and details of all prior
encumbrances; and
(iv)
the ratio of loan to valuation of any mortgaged property,
calculated on an “as is valuation” basis;
(x)
the person responsible for preparation and custody of
security documents;
(y) any
action the finance broker will take to notify lenders of a loan default;
(z) any
action the finance broker will take to enforce the loan should a default
occur;
(aa) the
fee to be charged by the finance broker or debt collecting agency in pursuing
the borrower for payment;
(ab) all
the information required by clauses 12.3 and 12.4, and clauses 12.7
to 12.10, attached as an annexure to Form 1.
11.3 The finance
broker must ensure that all parties to the loan sign the completed Form 1,
following which the finance broker must retain the original notice and give a
signed copy of that notice to all parties.
11.4 A finance broker
must provide in a timely manner and without undue delay all information
requested by a party relating to a loan to which they are a party.
11.5 Subject to
clause 11.6, a finance broker must, upon request by a party, provide free
of charge and in a timely manner and without undue delay, a statement of
account for a loan that is managed by the finance broker.
11.6 The requirement
in clause 11.5 to provide a statement free of charge is limited to once
every 6 months by each party, otherwise the finance broker is entitled to
charge for the service rendered.
12.1 A finance broker
must —
(a)
ascertain and communicate to a lender all material facts relating to any
property or the value of any property being offered as security for a loan
(including all registered or known encumbrances); and
(b) take
reasonable steps to ensure the accuracy of all information which is provided
to a lender relating to any property being offered as security for a loan.
12.2 If real property
is to be offered as security for a loan, the finance broker must provide all
lenders with a true copy of the current Certificate of Title relating to that
real property.
12.3 If real property
is to be offered as security for a loan, the finance broker must inform
prospective lenders in writing that they are entitled to appoint a valuer of
their own choice, by including such a statement in the notices given under
clause 11.2.
12.4 When a finance
broker or any person other than the lender appoints a valuer to value any
property offered as security for a loan, the finance broker must —
(a)
obtain written confirmation to ensure that the valuer is qualified to
undertake the valuation; and
(b)
obtain written confirmation that the valuer has no direct or indirect
interest, financial or otherwise, in the property to be valued or the loan for
which the property is required as security or in any transaction to which the
loan is commercially relevant; and
(c)
provide an unedited copy of all valuations obtained from the valuer to all
lenders, as an attachment to the notice required under clause 11.2; and
(d)
ensure that the valuer acknowledges in the valuation document that the lender
may use and rely on the valuation and that the valuer accepts legal
responsibility, by acknowledging a duty of care to the lender for the
valuation; and
(e) if
the valuation is to be undertaken on a proposed property development, ensure
that the valuation obtained contains an “as is valuation” in
addition to any “as if complete valuation” or “on completion
valuation” that may also be provided, and that these appear
consecutively (with the “as is valuation” stated first) and are
also so included in the valuation summary in the report; and
(f)
ensure that all valuations are up‑to‑date and provide an
explanation of the basis upon which any value is calculated, including any
assumptions made; and
(g)
obtain and provide to all lenders (bound into the copy of the valuation
report) a written copy of the original and any subsequent instructions given
to the valuer by the person who appointed the valuer or by any other person;
and
(h)
provide to all lenders (attached to or included as a part of the valuation
report) a written statement identifying the person(s) that gave the
instructions mentioned in paragraph (g) and, if that person is the
borrower, the written statement must clearly identify that this person is the
borrower; and
(i)
ensure that the information provided in the valuation
document can be understood by the lenders with whom the finance broker is
negotiating.
12.5 A finance broker
is not permitted under any circumstances to use a valuation obtained by the
finance broker or any other person for the purposes of soliciting funds from
lenders, unless that valuation is in writing and meets all the requirements of
clause 12.4.
12.6 A finance broker
must not improperly procure, or attempt to procure, a statement signed by a
lender stating that the lender has appointed a valuer to conduct a valuation
of property to be secured.
12.7 A finance broker
must provide all lenders with a budget attached to the notice required under
clause 11.2 which must contain all such information, in relation to the
project to be funded, as lenders and their professional advisers would
reasonably require for the purpose of making an informed assessment of the
transaction, including where any proposed development is concerned —
(a) the
total amount of funding required to complete the development and whether all
those funds will be raised prior to the commencement of the project; and
(b) the
proposed application of funds at each stage of the project development,
including the time expected to be required to complete each stage; and
(c) who
will inspect the project development and authorise the advance of funds at
each stage; and
(d) the
amount of funds to be held in trust, and for whom, at each stage of the
project development.
12.8 The budget
referred to in clause 12.7 must, in relation to each stage of any project
development, separately identify (but is not limited to) the following items
or, if applicable, reasonable estimates of those items at each stage —
(a) the
cost of purchasing the land relating to the property development;
(b)
payments to builders;
(c)
payments to individual contractors and development consultants comprising more
than 2% of the total cost involved in that stage;
(d)
payments to valuers;
(e)
amounts used to repay existing loans;
(f)
amounts used to pay interest and interest in advance;
(g)
amount of commission paid to the finance broker;
(h)
taxes, duties and charges.
12.9 In determining
the nature of information to be included in any budget referred to in
clause 12.7, regard is to be had to —
(a) the
nature and purpose of the proposed loan; and
(b) the
kinds of persons likely to consider participating in such a loan; and
(c) the
matters which may reasonably be expected to be known to professional advisers
of any kind whom those persons may reasonably be expected to consult.
12.10 A finance broker
shall obtain and provide to each lender, in writing as an attachment to the
notice required under clause 11.2, the following information concerning
all borrowers and guarantors —
(a) in
addition to the names and addresses of each borrower and
guarantor —
(i)
a statement of the assets and liabilities of each
borrower and guarantor; and
(ii)
a statement of available income to service interest
payments of each borrower and guarantor,
statutorily declared
by those persons to be true and accurate at the time of signing;
(b) the
details of parties to any existing loan, if any part of the funds to be
provided by lenders is to be used to repay that existing loan;
(c)
details of any insolvency, administration or bankruptcy proceedings to which
any of the following persons has been a party to in the last
10 years —
(i)
any borrower or guarantor of a loan;
(ii)
any company of which any borrower or guarantor is or has
been a director or officer.
12.11 If a lender is
not represented at settlement by a solicitor or settlement agent who is
independent of the finance broker, the finance broker must ensure that the
appropriate documents are lodged, on behalf of the lender, at the Department
of Land Information immediately following settlement to ensure that the
lender’s interest is registered on the Certificate of Title of the
security property.
12.12 If a finance
broker arranges a settlement on behalf of lenders to be secured, that finance
broker must —
(a)
inform all lenders in writing that settlement and lodgment have been effected;
and
(b)
provide a copy of a Department of Land Information lodgment receipt to all
lenders; and
(c)
inform all lenders in writing that the finance broker will be sending lenders
a true copy of the duplicate Certificate of Title bearing lenders’ names
registered as mortgagees within 7 days of receipt of the duplicate
Certificate of Title from the Department of Land Information.
12.13 If a finance
broker receives a ‘Stopped Documents’ notice from the Department
of Land Information, the finance broker must —
(a)
immediately inform all affected lenders in writing that a ‘Stopped
Documents’ notice has been received; and
(b)
provide a copy of the ‘Stopped Documents’ notice to all affected
lenders; and
(c) take
all reasonable steps to resolve the issue giving rise to the ‘Stopped
Documents’ notice; and
(d) keep
all affected lenders fully informed about progress in dealing with and
successful resolution of the ‘Stopped Documents’ notice.
12.14 If a finance
broker retains a duplicate Certificate of Title for any lender, then the
finance broker must —
(a)
acknowledge that fact in writing to the lender; and
(b) send
the lender a true copy of the duplicate Certificate of Title bearing all
lenders’ names registered as mortgagees, within 7 days of receipt
of the duplicate Certificate of Title from the Department of Land Information;
and
(c) hold
that duplicate Certificate of Title in safe custody.
13.1 When a finance
broker arranges execution of any documents by any party, the finance broker
must ensure that those documents —
(a) in
the case of an individual, are properly witnessed by a person able to verify
the authenticity of the signature or execution; and
(b) in
the case of a company, are properly signed or executed in accordance with the
Commonwealth Corporations Act 2001 .
14 . Limited ability to waive compliance
14.1 Compliance with
one or more provisions of clause 12 may be waived if —
(a)
there is a written waiver of compliance that relates solely to any provision
in clause 12; and
(b) the
lender is a sophisticated investor who fully understands the importance of the
clause of the Code in respect of which the compliance requirement has been
waived.
14.2 To be a
sophisticated investor a person must —
(a) have
net assets of at least $2.5 million; or
(b) has
a net income for each of the last 2 financial years of at least $250 000
a year.
14.3 The onus of
establishing the requirements of clauses 14.1 and 14.2 rests with the
finance broker.