The Australian financial market regulator has successfully retrieved approximately AU$40 million (about US$27 million) in refunds for over 38,000 retail contracts for difference (CFD) investors. This announcement was made today by the Australian Securities and Investments Commission (ASIC) following a comprehensive review of the CFD market.
ASIC”s investigation revealed that a significant number of CFD brokers in Australia were providing “margin discounts” to retail clients, leading to serious regulatory violations. The findings highlighted “widespread weaknesses” in the brokers” adherence to design and distribution obligations (DDO), as well as lapses in regulatory reporting and compliance with the CFD product intervention order (PIO).
The review indicated that 68 percent of retail CFD investors in Australia sustained losses in 2024, amounting to more than AU$458 million (US$308.3 million), with AU$73 million (US$49.1 million) attributed to fees. This alarming trend prompted ASIC to take action against 52 licensed CFD issuers, although specific brokers that breached regulations were not identified.
In December, ASIC issued a temporary stop order against the Australian operator FXCM after the company failed to address concerns regarding its target market determination. The order was later lifted after FXCM took corrective measures. Other brokers, such as Saxo and Mitrade, also faced similar scrutiny but managed to rectify their compliance issues and continue operations. Only one broker was taken to court over these violations, and that case remains pending.
ASIC Commissioner Simone Constant remarked, “Each year, thousands of Australians lose money trading CFDs, and through our review, we have helped put $40 million back in the pockets of more than 38,000 investors.” She emphasized the complexity and high-risk nature of CFDs, noting that even profitable trades could be diminished by trading costs.
Despite improvements in the CFD industry due to regulatory intervention, Constant acknowledged that further efforts are necessary. She noted that 39 CFD issuers modified their target market assessments, while 46 enhanced their website content and 44 improved client onboarding questionnaires. Additionally, 42 Australian CFD issuers implemented new client trading monitoring processes, and 48 adjusted practices to comply with OTC derivative transaction reporting requirements.
ASIC”s interventions have led to a remarkable 127 percent increase in reported compliance issues. “While the CFD industry has made significant strides, there remains a need for ongoing monitoring, adaptation, and strengthening of compliance practices,” Constant stated, urging Australians to remain vigilant regarding the offerings they encounter.
