Defining margin lending Financial institutions have in the recent past been engaging on numerous lending practices to investors hence the economical growth we are experiencing today globally. Without investments an economy can not thrive and investments are made possible by financial support (Makay 2005). The ability for individuals to borrow money from financial institutions so as to engage in further investments has enabled the global economy to rise. Borrowing money from financial institutions is of different types but this paper will be dealing with margin lending. Margin lending by definition is a loan taken by an individual with the aim of buying shares, securities and bonds. It can be used for other purposes but normally it is taken for the former reason. For one to access a margin loan, security in form of investment collateral is required. In this case, the collateral is in the investor’s shares and securities as well. Under normal circumstances, an investor is allowed to provide his or her other investments to stand as collateral for securing a loan. Margin loans have interests attached to them and are referred to as margin rates. This is the amount of interest charged above the call rate. The margin interest is influenced by a number of factors which include; the investor’s account balance and interest rates which impact and determine the level of inflation. Marginal loans are mostly used by investors who lack enough money to purchase securities. Causes of the storm financial company collapse Storm financial company was a financial planning group in Townsville, Queensland, Australia. Going by the records of Thompson (2009), the company had an estimated 4000 investors. The company exposed its investors to the worst experience ever in its history of existence. Immediately at the final stages of the global economical crisis, the company was placed under insolvency status. This caused big loses to the investors as they hoped to recover from the previous economic crisis. Investors flocked unaware of the dangers into the storm’s offices for financial advice and did exactly as they were told. One would ask him or herself the reason as to why storm’s clients never gave a second thought on the deals offered. But this was backed by the fact that the firm was fully licensed by the ASIC. In the financial planning, ASIC is the regulatory body that is responsible for formulating rules and regulations governing the industry. Storm financing having been licensed by the national governing body gave the clients more confidence in the firm hence the huge investor base. Before it collapsed the company was one of the major financial planning systems in Australia as Barry (2011) articulates. Many interviewed clients were submitting the same concerns that loans processing paper work was inauthentic. Storm financial was accused of lending money by going against the law. These saw its collapse, as the firm was lending money to clients who in most cases were not in a position to repay the loans (Barry, 2011). Barry (2011) noted that “It could be construed that income and ongoing commitments may have been manipulated to achieve approval.” The process of investigation was far much delayed as the firm was defended by the Ba