ASIC has commenced legal proceedings against eToro, alleging breaches of design and distribution obligations concerning its contract for difference (CFD) product.

These proceedings relate to CFD offered by eToro to retail clients from 5 October 2021 to 29 July 2023. eToro AUS is now operating with a revised target market determination in place for CFDs.

ASIC alleges that the target market for the CFD product offered by eToro was too broad for such a “high risk and volatile” product where most investors lose money.

ASIC deputy chair Sarah Court said: “ASIC is concerned eToro’s screening test inappropriately exposed clients to the CFD product. Providers need to ensure clients are receiving products that are consistent with their needs and the design and distribution obligations are being met.”

This course of action should not come as a surprise to product issuers as ASIC has previously taken administrative action to protect consumers from high-risk CFD trading, not suited to their financial circumstances.

These proceedings echo that ASIC is committed to ensuring that product issuers adequately assess their products to satisfy that the target market for the product is appropriate, which will ensure informed decision-making for investors.

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