Australian regulator orders Holon to stop offering funds on Bitcoin, Ethereum, and Filecoin to retail investors
The financial watchdog called Holon to take immediate steps to ensure compliance otherswise it will place final stop orders on the funds.
The Australian Securities and Investments Commission has ordered Holon Investments Australia Limited (Holon) to stop issuing interests in, giving a product disclosure statement for or providing general advice to retail clients recommending investments in the three crypto funds directed at retail investors.
According to ASIC, Holon was dealt an interim stop order to suspend its offer and distribution of these funds to retail investors because of non-compliant target market determinations (TMDs).
The order is valid for 21 days unless revoked earlier and the funds included in the interim stop order are:
- Holon Bitcoin Fund ARSN 659 090 294
- Holon Ethereum Fund ARSN 659 090 516, and
- Holon Filecoin Fund ARSN 659 090 614 (together, the Funds).
Holon disclosed investors risk losing everything, but ASIC finds issue with target markets
The Australian regulator said it acted to protect retail investors from potentially investing in funds that may not be suitable for their financial objectives, situation or needs.
The abovementioned funds are invested in an individual crypto-asset – bitcoin, ether and Filecoin, which are are highly volatile and complex, making concentrated investments in individual crypto-assets very risky and speculative.
In its product disclosure statements, Holon has disclosed the risk that assets in the Funds could face a total loss of value. Still, ASIC is concerned that Holon has not appropriately considered the features and risks of the Funds in determining their target markets.
ASIC considers that the Funds are not suited to the wide target market defined in the TMDs, which includes investors:
- with a potentially medium, high or very high risk and return profile; and
- intending to use the fund as a satellite component (up to 25%) of their investment portfolio; and
- intending to use the fund as a solution/standalone component (75-100%) of their investment portfolio.
The financial watchdog called Holon to take immediate steps to ensure compliance otherswise it will place final stop orders on the funds.
The design and distribution obligations (DDO) requires firms to design financial products that meet the needs of consumers, and to distribute those products in a targeted manner.
An important requirement under DDO, a TMD is a mandatory public document that sets out the class of consumers a financial product is likely to be appropriate for (target market) and matters relevant to the product’s distribution and review.
To date ASIC has issued ten DDO interim stop orders, including the Holon funds, and six remain in place. Four interim stop orders have been lifted following actions taken by the entities to address ASIC’s concerns.