ASIC broker review found onboarding, disclosure and product governance gaps at nine online brokers in Australia, covering short-dated exchange-traded options, futures and fractional shares sold to retail clients.
The Australian Securities and Investments Commission said the surveillance ran from March to June. It named Interactive Brokers Australia, Moomoo Securities Australia, Sharesies Australia, Stakeshop AFSL, tastytrade Australia, Tiger Brokers (AU), Totality Wealth, Trading 212 AU and Webull Securities (Australia). However, ASIC said the findings were thematic and did not apply to all nine firms.
Five firms improved their compliance practices during the review. Meanwhile, two stopped taking new options clients while they fixed issues, and one provider later exited Australia. ASIC also said it may take further regulatory or enforcement action.
ASIC Commissioner Simone Constant said the products are complex, but the duties are simple.
ASIC Broker Review Finds Onboarding Gaps
ASIC said some target market determinations did not clearly show how products matched clients’ likely goals, financial position and needs. In addition, the regulator found questionnaires that were not tailored enough to each customer’s circumstances. Some onboarding systems also let users make repeated or unlimited attempts to pass.
ASIC said firms must set narrow target markets for complex products. They must also check whether clients still fit those markets after account opening. Therefore, the duty goes beyond the first questionnaire and continues through the client relationship.
The regulator also said some providers used fee-free or discounted trading, cash vouchers or airline reward points. According to ASIC, those offers can push impulsive decisions and distract clients from the risk of fast losses.
Disclosure Issues in Fractional Shares
ASIC said short-dated exchange-traded options and futures use leverage. Options can lose value fast near expiry. Futures, meanwhile, are settled each day and can force investors to close at a loss.
For fractional shares, ASIC found that some disclosures did not clearly explain costs, ownership terms, investor rights or whether holdings could move to another platform. It said investors may hold an interest through an intermediary rather than own the underlying security directly. As a result, voting, transfer and protection rights can differ.
ASIC did not say which five firms changed their practices, which two paused options onboarding, or which provider left Australia. The regulator has also added four Moneysmart pages on exchange-traded options, futures, fractional shares and micro-investing, and it revised its futures glossary.
You can access our other news on brokers and global market developments here.
Source: Finance Magnates
