According to a press release issued on Thursday, the Australian subsidiary of social investment platform eToro, eToro Aus Capital Limited, has been sued by the nation’s markets regulator for claimed violations of design and distribution standards and of eToro’s license requirements to behave effectively, honestly, and fairly.
Social Investment Platform eToro Sued by Australian Market Regulator ASIC
eToro’s contract for difference (CFD) product, a leveraged derivative contract that enables a client to speculate on the change in the value of an underlying asset like cryptocurrency, is the subject of complaints made by Australia’s Securities and Investments Commission (ASIC). Australia has pushed down on cryptocurrency companies in recent months, notably Binance Australia, whose offices were examined by ASIC. Due to fraud and consumer money losses, major Australian banks have partially restricted the use of cryptocurrency.
For example, if a retail client had a medium-risk tolerance but was not an experienced investor and had no understanding of the risks of trading CFDs, that client still fell within the target market,
…clients could amend their answers without limitation and clients were prompted if they selected answers which could result in them failing.
ASIC
ASIC Claims Many Users Lost Money Due to eToro
ASIC claims that between October 2021 and June 2023, nearly 20,000 of eToro’s clients lost money trading CFDs because the company’s target market was far too broad, and its screening test was extremely difficult to pass.
eToro AUS is considering the allegations filed by ASIC in these proceedings and will respond accordingly. There is no impact or disruption of service for clients of eToro AUS and no material impact on eToro’s global business,
EToro
The company also stated that its CFD target market determination has been updated and that it is presently in operation.
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