Australian market regulator sues eToro over high-risk investment products

August 03, 2023 09:06 PM AEST | By Invezz

Australian market regulator sues eToro over high-risk investment products — Image source: Invezz

ASIC files lawsuit against eToro

NEWS – Australia ASIC sues eToro arguing screening tests were ineffective and allowed unsuitable investors to trade CFDs exposing them to significant losses (FCA) pic.twitter.com/HU9GsV60m0
— Simply Bitcoin (@SimplyBitcoinTV) August 3, 2023

The regulator went after eToro’s Australian arm for inefficient, unfair, and dishonest execution of the highly-risk contract for difference (CFD) product. CFDs are leveraged products that users can utilize to forecast potential asset value fluctuations.

eToro users lose big on CFDs

ASIC’s lawsuit comes after several eToro users (around 20,000) lost money on CFDs between October 2022 and June 2023. Further, data shows 77% of retailer accounts lose cash when using eToro to trade CFDs.

The regulator added that eToro targeted inexperienced market players with its Contract for Different products. For instance, the trading platform had an easy-to-pass screening test. That welcomed players without an understanding of the associated risks.

The regulator stated that the screening test allowed customers to amend responses without limitation, with clients alerted whenever they chose answers that could lead to negative results.

The market regulator wants eToro to face the law for falsely exposing retail traders to high risks in the form of CFDs that never matched their financial budget and investment goals.

In other updates, invezz.com reported that eToro delisted Decentraland, Dash, Polygon, and Algorand. That came after the Securities and Exchange Commission sued Coinbase and Binance for selling unregistered securities.

eToro continues to mislead customers about its offerings

eToro has lately faced regulatory scrutiny for misleading consumers. Italian Competition Authority fined the broker 1.3 million euros (around $1.46 million) on 17 July. AGCM alleged that eToro failed to disclose its financial terms and practical facts about its services and products.

The competition authority stated that the brokerage advertised its offerings as zero-fee services without informing users about costs associated with exchange rates. Moreover, the trading platform didn’t mention clauses that limit users from transferring their investments to different brokers.

Nevertheless, eToro confirmed its trust in client protection, promising exhaustive information about its investment offerings.

The post Australian market regulator sues eToro over high-risk investment products appeared first on Invezz.

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