Australian financial regulator sues eToro over ‘volatile’ trading products
Aug 02. 2023
By Jesse Coghlan
The Australian Securities and Investments Commission alleged eToro users with no understanding of CFD product risks could still buy them on the platform.
Australia’s financial regulator has sued eToro over its contract for difference (CFD) product, alleging the trading platform used insufficient screening tests when offering the leveraged derivative contracts to retail investors.
The Australian Securities and Investments Commission (ASIC) said on Aug. 3 that it hadcommenced Federal Court proceedings over eToro’s CFD product for targeting too wide a market and breaching design and distribution rules.
CFDs are a type of leveraged derivatives contract that allows buyers to speculate on price movements of an underlying asset such as foreign exchange rates, stock market indices, single equities, commodities, or cryptocurrencies — all of which eToro offers.
ASIC alleged the CFDs offered by eToro were “high-risk and volatile” and the platform’s target market screening test didn’t properly exclude unsuitable customers from trading the product, stating:
“eToro’s screening test was very difficult to fail and of no real use in excluding customers for who the CFD product was not likely to be appropriate.”
“For example, clients could amend their answers without limitation and clients were prompted if they selected answers which could result in them failing,” it said.
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