By Bitcoin.com - 9 months ago - Reading Time: 2 minutes
Australian Regulator Sues Etoro to ‘Protect Consumers From High-Risk CFD Products’
The Australian Securities and Investments Commission (ASIC) has filed a lawsuit against the crypto platform Etoro. The lawsuit relates to Etoro’s contract for difference (CFD) product which ASIC alleges to be in breach “of design and distribution obligations and of Etoro’s license obligations to act efficiently, honestly and fairly.” The regulator said it wants the Federal Court to issue declarations and pecuniary penalties against Etoro.
Etoro’s Broad Target Market
The Australian Securities and Investments Commission (ASIC) announced on Aug. 3 that it had filed a lawsuit against the crypto trading platform Etoro. The regulator alleges that the firm’s contract for difference (CFD) product is in breach “of design and distribution obligations and of Etoro’s license obligations to act efficiently, honestly and fairly.”
In a statement, the ASIC revealed that the lawsuit is focused on the appropriateness of the crypto platform’s target market as well as the methods used to assess if retail clients fall inside the target market for CFDs.
“ASIC alleges Etoro’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,” the regulator said.
To support its assertion about Etoro’s CFD, the Australian regulator alleges that in the period between 5 October 2021 and 14 June 2023, nearly 20,000 of the crypto platform’s clients lost money trading CFDs. The ASIC also points Etoro’s own warning about retailer traders’ seemingly dim prospects when trading CFDs.
Warning to CFD Issuers
Meanwhile, in her remarks accompanying the regulator’s press release, Sarah Court, ASIC’s deputy chairperson, said the Etoro lawsuit should remind industry participants of their obligations towards retailer traders. She added:
CFD issuers must comply with the design and distribution regime and cannot simply reverse engineer their target markets to fit existing client bases.
According to the press release, ASIC wants the Federal Court to issue declarations and pecuniary penalties against Etoro.
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Original source: Bitcoin.com