Australian Financial Services Licensing (AFSL) Forum

Home Forums Australian Financial Services Licensing (AFSL) Forum Asset Based Fees and Mortgage re-draw Reply To: Asset Based Fees and Mortgage re-draw


Andrew Ham



Thank you for your question.  As you have noted, s 964D of the Corporations Act 2001 (Cth) (‘The Act’) states that ‘a financial services licensee must not charge an asset based fee on a borrowed amount used or to be used to acquire financial products by or on behalf of the client.’  Section 964G of the Act defines ‘borrowed’ to mean ‘borrowed in any form, whether secured or unsecured, including through: (a) a credit facility… and (b) a margin lending facility.’


The explanatory memorandum relating to s 964D stipulates that the ban is designed to avoid conflicts of interest that arise from remuneration based on the amount of funds under management.


We recommend that you check your client’s loan product agreement and carefully consider the terms of the mortgage redraw facility.  Because the redrawn amount is accessed ‘through a credit facility,’ we would generally expect redrawn funds to qualify as ‘borrowed’ under the above definition.  However, the precise answer to your question may depend on the terms of the loan product.


Please feel free to contact our Financial Services Team if you require further information or more detailed advice.


Authors: Tamara Cherny (Law Clerk) and Andrew Ham (Senior Lawyer)

Our new Sydney office on Martin Place was recently launched on 1st July 2016!!  We are very excited about this opportunity to service our Sydney clients.

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