ASIC tightens up on CFDs
The Australian Securities and Investments Commission (ASIC) is worried that retail investors do not appropriately understand contracts for difference (CFDs) and has moved to tighten up the guidelines regarding over-the-counter sale of the products.
ASIC today released a consultation paper aimed at having CFD issuers improve disclosure concerning the nature of CFD products, with ASIC commissioner Greg Medcraft (pictured) saying research had shown investors did not necessarily understand the risks of trading CFDs.
“This is due to the complexity of CFDs as a retail product,” he said. “However, another factor is the lack of clarity in current disclosure documents, which can be hard to understand and which do not necessarily highlight key information for investors.”
“Most investors in CFDs do not get independent financial advice,” Medcraft said. “They rely only on information by CFD issuers.”
He said this made it crucial for retail investors to have sufficient information to make an informed decision including “spelling out the very significant risks of CFD investment”.
AUTHOR
Mike Taylor
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