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The Australian financial regulator ASIC is suing the financial platform eToro due to the use of a high-risk leveraged derivative contract product, known as a CFD. 
ASIC started the <a href="https://asic.gov.au/about-asic/news-centre/find-a-media-release/2023-releases/23-204mr-asic-sues-etoro-in-its-first-design-and-distribution-action-to-protect-consumers-from-high-risk-cfd-products/" target="_blank" rel="noopener noreferrer nofollow">legal proceeding</a> against eToro. It alleges that the company breached design and distribution obligations and failed to act efficiently, honestly, and fairly.&nbsp; 
CFDs allow users to create speculation related to changes in the value of an underlying asset, such as stock market indices, stocks, forex, and cryptocurrencies. 
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The regulator said that <a href="https://crypto.news/etoro-to-cease-access-to-algo-mana-dash-and-matic-for-us-customers/" rel="noopener noreferrer nofollow">eToro</a> didn’t do enough testing on the product before releasing it to retail investors. 
The financial regulator said: 
<blockquote class="wp-block-quote"> 
 “eToro’s screening test was very difficult to fail and of no real use in excluding customers for whom the CFD product was not likely to be appropriate.” 
</blockquote> 
ASIC said that between October 5, 2021, and June 14, 2023, nearly 20,000 <a href="https://crypto.news/hedgeup-the-etoro-and-robinhood-alternative-providing-access-to-a-wide-range-of-investment-products/" rel="noopener noreferrer nofollow">eToro</a> users were victims of the company by losing money due to the use of CFDs. The financial regulator explained that 77% of retail investors in the company lost money while using the financial tool. 
The company added: 
<blockquote class="wp-block-quote"> 
 “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.” <cite>ASIC’s statement on eToro</cite> 
</blockquote> 
<h2 class="wp-block-heading" id="how-asic-treats-cfds">How ASIC treats CFDs</h2> 
According to ASIC, a CFD is a leveraged derivative contract that allows a client to speculate on the change in value of an underlying asset, such as foreign exchange rates, stock market indices, single equities, commodities, or crypto-assets. 
In the past, the financial regulator acted to protect consumers from high-risk financial tools like CFDs against Saxo Capital Markets and Mitrade Global Pty Ltd. 
 Read more: <a href="https://crypto.news/asic-sues-finder-wallet-for-providing-unlicensed-financial-services/" rel="noopener noreferrer nofollow"> ASIC sues Finder Wallet for providing “unlicensed” financial services </a>

Australian regulator sues eToro for trading CFDs

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