eToro Sued by Australian Regulator Over Trading Products
- ASIC has sued eToro over the sale of its contract for difference (CFD) product to users in Australia.
- The ASIC seeks to assess the screening process followed by eToro to provide users’ exposure to CFDs.
- ASIC claims, “The target market for the CFD product was far too broad for such a high-risk and volatile trading product.”
- ASIC claims that between October 5, 2021, and June 14, 2023, 20,000 users lost money trading CFDs.
The regulator of the financial sector in Australia has sued eToro, a social trading and multi-asset investment company, that has registered offices in the United Kingdom, the United States, and Australia as well. The lawsuit has been filed over the sale of “volatile” trading products that were offered by the trading platform to its users in the region.
On August 3, the Australian Securities and Investments Commission (ASIC) announced that it had sued online investment platform eToro regarding its contract for difference (CFD) product. The regulator is alleging “breaches of design and distribution obligations and of eToro’s license obligations to act efficiently, honestly, and fairly,” in the lawsuit.
The lawsuit is focused on the screening process followed by eToro to determine whether a candidate falls under the target market for the CFD product. The regulator claimed that the trading platform’s “target market for the CFD product was far too broad for such a high-risk and volatile trading product where most clients lose money, and that the screening test was wholly inadequate to assess whether a retail client was likely to be within the target market.”
“Our message to the industry is that CFD target markets should be narrowly defined given the significant risk that retail clients may lose all of their deposited funds. CFD issuers must comply with the design and distribution regime and cannot simply reverse engineer their target markets to fit existing client bases,” said ASIC Deputy Chair Sarah Court.
ASIC claims that between October 5, 2021, and June 14, 2023, almost 20,000 of the clients using eToro lost money trading CFDs, and the platform’s website states that 77% of retail investor accounts lose money when trading CFDs with the company.
The regulator also alleges that eToro “failed to do all things necessary to ensure that the financial services covered by its license were provided efficiently, honestly, and fairly by applying the screening test to determine whether to issue the CFD product to retail clients.”
As reported earlier by BitcoinWisdom, the ASIC recently stated that it will review the derivatives operations of the world’s largest crypto exchange, Binance. Additionally, local banks ended their support for the crypto exchange, and the debanking of the crypto trading platform affected around 1 million crypto investors in Australia.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
