The Australian Securities and Investments Commission (ASIC) has issued two interim stop orders preventing Trademax Australia Limited from opening trading accounts for retail investors or dealing in contracts for difference (CFDs) or margin foreign exchange (FX) contracts for these clients.

ASIC took this action due to concerns that Trademax failed to take reasonable steps to ensure its retail product distribution practices were aligned with two of its target market determinations (TMDs).

Regulatory concerns involve Trademax's reliance on unsuitable retail investor questionnaires to fulfill its obligations and the lack of other control measures during the client onboarding process to assess if customers might fall within its target market.

ASIC believes Trademax used poorly designed and inadequate questionnaires that:

- Failed to sufficiently inquire about potential clients' financial situations, risk tolerance, and investment objectives, making it impossible for Trademax to properly assess if potential clients fell within the target market for its complex, high-risk, leveraged CFDs and margin FX products described in the TMDs.
- Failed to adequately inquire about potential clients' risk tolerance and technical understanding of crypto asset CFDs, making it impossible for Trademax to properly assess if potential clients fell within the target market described in its crypto TMD.
- Had significant design flaws, including prompts reminding clients to review their answers and allowing potential clients to submit alternative answers to fit the target market.
- Allowed retail investors to attempt the questionnaire twice every 24 hours, indefinitely, and prompted potential clients to check boxes confirming they had certain attributes.

The design and distribution obligations require financial product issuers and distributors to take reasonable steps to achieve, or be reasonably likely to achieve, retail investor distribution consistent with the product's TMD.

The interim stop orders are effective for 21 days unless revoked earlier. ASIC issued these interim stop orders to protect retail investors from potentially unsuitable CFD or margin FX products that may not meet their financial goals, situations, or needs. The orders do not prevent Trademax's existing clients from altering or closing their CFD positions.

On September 6, 2023, ASIC released Report 770: Design and Distribution Obligations: Retail OTC Derivatives, outlining how retail OTC derivative issuers are meeting DDOs and highlighting areas for improvement, including their over-reliance on client questionnaires as the primary distribution filter and a greater utilization of available data to support distribution arrangements.

ASIC's product intervention orders for CFDs, reviewed in 2017, 2019, and 2020, enhanced consumer protections as most retail clients were found to lose money trading CFDs. In April 2022, ASIC extended this order for five years until May 23, 2027.

To date, ASIC has issued 86 interim stop orders and one final stop order under the DDOs, including the orders against Trademax.