In 2003, Opes Prime Stockbroking was founded in a growing margin lending market, where investors borrow money to invest in forms of shares or managed funds, with the security of their existing cash, shares or managed funds. The amount that they are able to borrow depends on their securities on their portfolio, and the Loan to Value Ratio (LVR) and the credit limit depend on the investors’ financial position.
Opes Prime Stockbroking lent with a high LVR up to 95%, meaning that a client could borrow up to 95% of the value of the speculative shares he owned. As more speculative shares were invested by clients, and this also added the credit risk to the company. It did not follow the margin lending rule, instead, it managed agreements with external…