Due to non-compliant target market determinations, three funds that track Bitcoin, Ethereum and FileCoin were issued interim stop orders from Australia’s market regulator. Australia’s chief financial market regulator has placed interim stop orders on three cryptocurrency-related funds set to be offered to retail investors, due to non-compliant target market determinations (TMDs).
The Australian Securities and Investments Commission (ASIC), in a media release dated October 17, local time, stated that it had placed interim stop orders against three Australian asset manager Holon crypto funds. These funds, which each aim to invest separately in Bitcoin, ethereum, and filecoin, were listed as having been placed by the ASIC.
Target market determinations are documents that describe who a product is suitable for based on probable needs, objectives and financial situation. They also explain how the product can be distributed by Invest Smart.
A spokesperson for ASIC stated that the TMDs were too broad due to the volatility and speculative nature of crypto markets.
The regulator expressed concern that Holon had not properly considered the risks and features of the funds when determining target markets.
ASIC stated in its statement that it does not consider the funds to be suited for the broad target market as defined by the TMDs. This includes those who intend to use the fund as a “satellite component”, up to 25%, and those who plan to use the fund for 75%-100% of their portfolio.
ASIC stated that investors in cryptocurrency funds could be exposed to significant adverse returns, but the product disclosure statements (PDSs) provided by Holon state they could suffer a “total loss”
“ASIC issued interim orders to protect retail investors against potentially investing in funds not suitable for their financial goals, situation, or needs,” it stated, adding that the order would remain valid for 21 days unless revoked sooner.
It is unclear what Holon has been asked to change. A spokesperson for ASIC did not give further details. However, Holon was told by the regulator that it will be considering the concerns and taking immediate steps to ensure compliance.
Holon will not be able to share a PDS or offer general advice about the funds. Holon will also be unable to issue shares of the funds for retail investors.
Holon must also address concerns “within a reasonable time” or a final stop order may be issued. However, Holon will still be able to submit comments before the order is issued.
Holon spokeswoman told Cointelegraph that the company was not commenting on the matter at this time.
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These funds, Holon Bitcoin Fund and Holon Ethereum Fund, are managed investment schemes that provide exposure to the price of the respective crypto. Investors pool their money and receive a share of the scheme in return.
According to the July blog of the company, this pooled money will be used to buy the digital asset listed in the fund. Custody is handled by Gemini crypto exchange.