The Australian Securities and Investments Commission (ASIC) has taken legal action against trading platform eToro for leveraged derivatives contract products, including those related to cryptocurrencies.
Australian Regulatory Authority Launches Investigation into eToro
ASIC alleges that eToro Aus Capital Ltd violated the design and distribution obligations of its contract for difference (CFD) product, which allows customers to speculate about changes in the value of underlying assets, including cryptocurrencies.
According to ASIC's statement, around 20,000 users of eToro lost money trading CFDs between October 5, 2021 and June 14, 2023.
The regulator highlighted that eToro's website shows that 77% of retail investor accounts lose money when trading CFDs with the platform.
ASIC expressed concerns about the broad target market of eToro's CFD product, stating that it was “too broad” and that the screening test to assess suitability for customers did little.
This resulted in customers being allowed to trade the product even if it was not suitable for their risk tolerance or experience level.
The regulator seeks court filings and financial penalties as part of its legal action against eToro.
However, a spokesperson for the trading platform stated that eToro has reviewed the claims made by ASIC and is confident that there are no impacts or service disruptions for its customers in Australia.
In response to ASIC's claims, eToro announced that they have a revised target market identification for CFDs in Australia, signaling a possible change in approach to complying with regulatory requirements.
Legal proceedings focus on the period from October 5, 2021 to July 29, 2023.
*Not investment advice.
