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 Due to an alleged failure to behave honestly and fairly in the promotion of its contract for differences (CFD) product, which left 77% of retail clients out-of-pocket, the Australian Securities and Investments Commission is suing online investment platform eToro. 
 Asic contends that the leveraged trading product’s target market for eToro 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 determine if a retail client was likely to be within the target market. 
 Asic believes that eToro’s actions caused a sizable risk of consumer injury by exposing a sizable number of retail clients to the CFD product that was unlikely to be consistent with their investing objectives, financial status, and needs. 
 The regulator stated that eToro’s screening process was exceedingly tough to fail and was ineffective at identifying users for whom the CFD product would not likely be suitable. Clients, for instance, were prompted if they chose answers that would cause them to fail and allowed to change them at any time. 
 The watchdog claims that over 20,000 of eToro’s customers lost money trading CFDs between 5 October 2021 and 14 June 2023. 
 Sarah Court, the vice-chair of Asic, says: 
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 ‘‘Our message to 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. 
 Asic is disappointed by the alleged lack of compliance in this case, given eToro’s market penetration and the depth of its brand awareness, both in Australia and globally.” 
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 In response to the claim, eToro states that it is currently using an updated target market determination for CDFs and continues, 
 <blockquote class="wp-block-quote"> 
 “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.” 
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Australian Regulator Sues eToro Over CFD Overreach

TheBitTimes

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