The Australian Securities and Investments Commission (ASIC) has issued an interim stop order preventing Mitrade Global Pty Ltd from opening trading accounts or dealing in contracts for difference (CFDs) or margin foreign exchange contracts (margin FX) to retail investors.
The stop order was issued on Friday, June 2, in response to concerns that Mitrade failed to take reasonable steps likely to result in distribution conduct being consistent with its target market determination (TMD).
The order is valid for 21 days, although it does not prevent existing clients of Mitrade from varying or closing their CFD positions.
ASIC’s concerns were raised by a retail investor questionnaire that Mitrade used as a key step for compliance with its obligations. The questionnaire gave prompts to a prospective retail investor to review any “unacceptable answer” that would indicate that the investor was not likely to be in the target market for the products. They said the questionnaire has “significant flaws.”
For example, they noted that Mitrade permitted retail investors unlimited attempts to pass the questionnaire. ASIC also stated the questionnaire “did not adequately enquire into the objectives and needs of retail investors,” while it also “lacked the degree of specificity required.”
ASIC’s stop order is the first time it has used its powers under the design and distribution obligations (DDO).
The DDO was introduced in October 2021 and requires financial services licensees to take reasonable steps to ensure that their distribution conduct is consistent with their TMD.
