Trading platforms offer cash vouchers for 'high-risk' investments, watchdog says

Australia's corporate regulator, the Australian Securities and Investments Commission (ASIC), has identified concerning practices among online trading platforms, including the offering of cash vouchers and airline reward points to encourage retail investors to engage in high-risk investments. A review of nine platforms, such as Moomoo, Sharesies, and Webull, found that some providers offered incentives like fee-free or discounted trading to entice users into complex financial instruments.

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These are products where it can be hard to understand, but unfortunately easy to lose money, and easy to lose [it] quickly.

ASIC commissioner Simone Constant highlighted the danger of these products, noting they are often hard to understand but easy to lose money on quickly. She specifically mentioned short-dated exchange-traded options as an example, where small investments can lead to significant gains or losses within a short timeframe. Constant cautioned investors against being swayed by ease of access or inducements like airline points, urging them to invest only in products they understand and believe to be sound.

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What it seems like is happening here with these risky financial products is that there is a bit of a gap in the regulation and the protection of retail investors.

The review uncovered deficiencies in how platforms determined target markets, onboarded clients, and disclosed risks and costs associated with products like fractional trading. While ASIC did not attribute specific infractions to individual companies, the findings have prompted action. Since the review, two companies have halted new client onboarding for remediation, five have enhanced their compliance, and one has exited the Australian market entirely. ASIC is currently considering further regulatory and enforcement measures.

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Don't invest simply because it's easy to invest and access, or because there's an inducement to invest in airline points. Invest because it's a good investment that you understand, and you know it to be a good investment because you understand it.