Margin Lending Agreement Template for Hong Kong

The Margin Lending Agreement is a crucial document used in Hong Kong's financial markets when a financial institution provides credit facilities secured against securities or other financial instruments. This agreement is essential for both retail and institutional clients seeking leverage for investment purposes, while ensuring compliance with Hong Kong's regulatory framework, particularly the Securities and Futures Ordinance and SFC requirements. The document typically includes detailed provisions on facility limits, margin ratios, collateral requirements, risk disclosures, and enforcement mechanisms. It is designed to protect both lender and borrower by clearly defining their rights and obligations, margin maintenance requirements, and procedures for margin calls and default scenarios. The agreement must incorporate specific Hong Kong regulatory requirements regarding client money rules, risk disclosures, and professional investor classifications.

1. Parties: Identification of the lender (financial institution) and the borrower (client)

2. Background: Context of the agreement, including the lender's regulatory status and the borrower's request for margin lending facilities

3. Definitions and Interpretation: Definitions of key terms including Margin Ratio, Collateral, Margin Call, and other technical terms used throughout the agreement

4. Facility and Purpose: Details of the margin lending facility, including the credit limit and permitted purposes for the facility

5. Drawdown and Operation: Procedures for requesting and providing margin loans, including operational requirements

6. Interest and Fees: Interest calculation method, rates, payment terms, and associated fees

7. Margin Requirements: Specification of margin ratios, maintenance requirements, and margin call procedures

8. Collateral Arrangements: Terms regarding the provision, maintenance, and top-up of collateral

9. Representations and Warranties: Standard and specific representations by the borrower regarding their capacity and understanding of risks

10. Covenants: Ongoing obligations of the borrower including financial covenants and information requirements

11. Events of Default: Circumstances constituting default and consequences thereof

12. Enforcement Rights: Lender's rights upon default, including liquidation of collateral

13. Risk Disclosure: Mandatory risk disclosures required by Hong Kong regulations

14. General Provisions: Standard clauses including notices, amendments, governing law, and jurisdiction