Due to “non-compliant” target market decisions, three crypto funds have received temporary stop orders from Australia’s market regulator.
Due to non-compliant target market determinations, Australia’s primary financial market regulator has issued temporary stop orders on three crypto funds that were going to be made available to retail investors (TMDs).
The Australian Securities and Investments Commission (ASIC) announced in a media statement dated Oct. 17 local time that it has issued temporary stop orders on three of Australian asset management Holon’s cryptocurrency funds, each of which aims to invest in Bitcoin, Ether, and Filecoin.
According to Invest Smart, 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.
ASIC’s representative claimed in a statement that the TMDs were “too broad […] given the volatility and speculative nature of crypto markets.”
Added to this was the regulator’s worry that Holon had “not appropriately considered the features and risks of the funds in determining their target markets.”
According to ASIC’s statement, the crypto 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,” those planning to use the fund as a “satellite component” of their portfolio, up to 25%, 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 “complete 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,” it said, adding that the order would be valid for 21 days unless revoked earlier.
The nature of the changes that ASIC has asked Holon to make is unknown, and the ASIC spokeswoman gave no additional information. However, the regulator stated that it anticipates Holon to take the issues into account and take prompt action to ensure compliance.
The temporary halt will ban Holon from distributing PDSs, offering general fund advice, or issuing shares of the funds to individual investors.
A final stop order will be issued if Holon fails to resolve the issues “within a timely way,” albeit 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 managed investment schemes that aim to provide exposure to the price of the corresponding cryptocurrency. They are operated by investors pooling money and receiving a relative stake in the scheme in exchange.
According to a company blog from July, in this instance, the pooled funds are utilized to buy the digital asset mentioned in the fund, with custody being managed by the Gemini cryptocurrency exchange.
