Australia's corporate regulator, the Australian Securities and Investments Commission, has found that some online trading platforms reviewed offered retail investors cash vouchers, airline reward points, and fee discounts as inducements to trade in complex, high-risk financial products, according to findings published following a review of nine platforms including Moomoo, Sharesies, and Webull.
Australian regulator finds online trading platforms offering vouchers and reward points to attract retail investors into high-risk products
Australia's corporate regulator, the Australian Securities and Investments Commission, has found that some online trading platforms reviewed offered retail investors cash vouchers, airline reward points, and fee discounts as inducements to trade in complex, high-risk financial products, according to findings published following a review of nine platforms including Moomoo, Sharesies, and Webull.
ASIC did not attribute individual findings to specific companies and noted that not every company had committed every infraction identified across the review.
Among the problems the review found in some entities were deficiencies in target market determinations, including insufficient detail on how products met the likely objectives, situations, and needs of clients; onboarding shortcomings including limited tailoring of questions and unlimited or repeated attempts to pass onboarding questionnaires; and unclear client disclosure that failed to explain the risks and costs associated with fractional trading.
ASIC commissioner Simone Constant said platforms were increasingly offering complex financial instruments to users who did not fully understand them, citing short-dated exchange-traded options as an example of products that are difficult to understand but where money can be lost quickly.
Since the review, two of the companies have stopped onboarding new clients while remediation is underway, five more have improved their compliance practices, and one has exited the Australian market entirely.
ASIC said it was considering further regulatory and enforcement action in relation to matters identified in the review.
Tamara Wilkinson, a corporate law and regulation specialist at Monash University, said there appeared to be a gap in regulation and retail investor protection in this area, and that tightening rules or requiring retail investors to demonstrate competency before investing — an approach used in the United Kingdom — were among the options available to regulators. She said increased regulatory protections would bring the area more in line with the rest of Australia's regulatory regime.
- The specific number or proportion of the nine platforms found to have committed each type of infraction is not stated.
- The identity of the company that exited the Australian market entirely is not disclosed.
- The identities of the two companies that stopped onboarding new clients are not disclosed.
- The nature or timeline of the potential further regulatory or enforcement action ASIC is considering is not specified.
- The platforms reviewed — including Moomoo, Sharesies, and Webull — are named but none is quoted or given an opportunity to respond to the findings.
Read the original at ABC News Australia