Australia's financial regulator sues eToro for exposing unqualified clients to volatile crypto products AustralianSecuritiesandInvestmentCommission ASIC Australia
- Cryptocurrency exchanges continue to face new enforcement actions from regulators as the Australian Securities and Investment Commission has filed a lawsuit against eToro, a social trading and multi-asset investment company, accusing the platform of allegedly violating the design and distribution requirements related to its contract for difference offering.
“ASIC is alleging breaches of design and distribution obligations and of eToro’s license obligations to act efficiently, honestly, and fairly,” a press release from ASIC said. “The case focuses on the appropriateness of eToro’s target market, and the screening test used by eToro to assess whether a retail client fell within the target market for the CFD product.”
This is likely to have led to a significant number of retail clients being exposed to a product “that was unlikely to be consistent with their investment objectives, financial situation, and needs, resulting in a significant risk of consumer harm,” ASIC said. According to the lawsuit, eToro’s screening did not exclude a high proportion of retail clients, with only 8% of those screened from Oct. 5, 2021 - Jan. 25, 2022 being excluded from the product. From Jan. 26, 2022, onwards, only 6% were excluded.
The regulator said 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.
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