SEC toughens stance on margin loans

Rule change aims to limit systemic risk

- NUNTAWUN POLKUAMDEE

The Securities and Exchange Commission (SEC) has introduced new regulations to mitigate systemic risks in margin loan activities, prohibiting securities companies and derivatives business operators from providing loans secured by securities for noninvestment purposes.

The SEC's updated framework governing the provision of margin loans will ensure proper risk management, protect securities firms from potential losses, and reinforce investor confidence in the capital market, the regulator said in a statement.

Under the new rules, brokers and derivatives business operators are strictly prohibited from offering loans against securities (LAS) without specific investment purposes to prevent misuse of securities-backed credit.