Due to non-compliant target market determinations, Australia’s primary financial market regulator has issued temporary stop orders on three cryptocurrency-related products that are scheduled to be sold to retail investors.
A target market determination is a document that specifies who a product is suitable for, based on expected needs, objectives, and financial circumstances as well as how the product might be marketed.
The Australian Securities and Investments Commission (ASIC) announced on Oct 17 that it had issued temporary restraining orders against three cryptocurrency funds run by Australian asset manager Holon, each of which aims to invest in Bitcoin (BTC), Ether (ETH), and Filecoin (FIL).
According to ASIC’s statement, the funds are not appropriate for the broad target market covered by the TMDs, including those with “medium, high, or very high risk and return profiles.” It includes planning to use the fund as a “satellite component” of their portfolio (25% of portfolio), and those planning to use it for 75% to 100% of their investment portfolio.
The product disclosure statements (PDS) offered by Holon warn that investors in cryptocurrency funds may experience significant negative returns and even a “total loss of value.”
“ASIC made the interim orders to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs.”
The nature of the changes that ASIC has asked Holon to make is unknown, and the ASIC spokeswoman gave no additional information. The agency did, however, state that it anticipates Holon to take the issues into account and act right away to ensure compliance.
A final stop order will be issued if Holon fails to resolve the issues “within a timely manner,” although Holon will have the chance to submit arguments before such an order is issued.
The funds, which go by the names Holon Bitcoin Fund, Holon Ethereum Fund, and Holon FileCoin Fund, are all focused investment schemes that intend to provide exposure to the price of the respective cryptocurrency. The funds are funded by investors pooling money, and in exchange, they receive a relative stake in the scheme.