The Australian Securities and Investments Commission has warned that a growing number of online brokers are exposing retail investors to complex and high-risk products without adequately explaining the risks or ensuring those products are suitable for their customers, as the regulator intensifies its scrutiny of Australia’s rapidly expanding retail trading market.
Following a surveillance of nine online brokers conducted between March and June 2026, ASIC identified weaknesses in product governance, onboarding processes and client disclosures for products including short-dated exchange traded options, futures and fractional shares. The regulator said some firms were also using sign-up incentives such as commission-free trading, cash vouchers and airline reward points to encourage customers to begin trading, raising concerns that marketing campaigns could encourage impulsive investment decisions before investors fully understand the risks.
The findings form part of a much broader regulatory campaign targeting how complex financial products are distributed to retail clients. Over the past two years, ASIC has moved well beyond enforcing disclosure rules, increasingly examining whether firms are designing products appropriately, identifying suitable target markets and maintaining adequate controls throughout the client relationship. FinanceFeeds also reported on ASIC’s A$7.3 million greenwashing victory against Fiducian Investment Management Services, while the regulator’s recent 52-firm CFD review has already resulted in licence action against one broker. Together, the cases illustrate ASIC’s increasingly proactive approach to market supervision rather than relying solely on enforcement after investor harm has occurred.
Retail Access Is Expanding Faster Than Investor Understanding
ASIC’s latest review reflects a structural shift taking place across financial markets. Mobile investing apps, commission-free trading models and fractional investing have dramatically lowered the barriers to entering financial markets. Products that were once primarily used by professional traders, including leveraged derivatives and options, are now available to retail investors through smartphone applications in minutes.
The regulator is not questioning whether retail investors should have access to these products. Instead, it is questioning whether firms are adequately assessing whether investors understand what they are buying.
ASIC found deficiencies in some firms’ target market determinations, with insufficient analysis explaining how products met the objectives, financial circumstances and needs of their intended customers. The surveillance also identified onboarding processes that allowed clients to make repeated or unlimited attempts to pass product knowledge questionnaires, reducing the effectiveness of suitability assessments.
For fractional share trading, ASIC found disclosure documents that did not clearly explain ownership structures, associated costs or the implications for investors’ rights.
Commissioner Simone Constant said the regulator wants Australians to participate confidently in financial markets, but warned that easier access should not be confused with lower investment risk.
“At ASIC we want to see Australians participating safely in thriving markets. But it is important Australians know that there is no such thing as easy money. While sign-up incentives can make trading more exciting, they can distract from investment risks and could encourage impulsive trading decisions.”
Complex Products Are Becoming Mainstream
The surveillance focused on three categories of products that have become increasingly accessible through online brokers but remain significantly more complex than traditional share investing.
Short-dated exchange traded options allow investors to speculate on market movements over extremely short time horizons, often just days before expiry. While leverage can magnify gains, it can equally accelerate losses, with the value of an option deteriorating rapidly through time decay if markets fail to move as expected.
Futures contracts present another layer of complexity. Although widely used by institutional investors for hedging and portfolio management, leveraged futures require only a relatively small initial margin while exposing investors to substantially larger market movements. Daily settlement can also force investors to realise losses before contracts expire.
Fractional shares present different challenges. While they make investing more accessible by allowing investors to purchase portions of expensive securities, ownership structures often differ between providers. Depending on the platform, investors may not hold legal ownership of the underlying shares directly, potentially affecting voting rights, transferability and other shareholder protections.
These products have become increasingly common as brokers compete to attract younger investors with lower account minimums, simplified trading experiences and broader product offerings. FinanceFeeds recently reported that Crypto.com launched tokenized U.S. stocks with investments starting from just US$1, highlighting the broader industry trend toward reducing barriers to market participation while introducing increasingly sophisticated financial products to retail audiences.
ASIC Is Looking Beyond Disclosure Documents
Perhaps the most significant aspect of ASIC’s latest review is what it says about the regulator’s evolving supervisory approach.
Rather than focusing solely on disclosure wording, ASIC examined the entire customer journey, from product design and marketing through onboarding and ongoing monitoring. That reflects the regulator’s growing emphasis on Australia’s Design and Distribution Obligations regime, which requires firms to identify appropriate target markets and take reasonable steps to ensure products are distributed accordingly.
Commissioner Constant said firms offering complex products have responsibilities extending well beyond the initial account opening process.
“Entities offering complex or high-risk products must ensure their products are distributed to the right target market, not only at onboarding but throughout the client relationship. The products are complex but the responsibilities are simple – they require effective product governance, including appropriate onboarding, ongoing client monitoring and clear disclosures that explain the real risks and costs involved.”
ASIC’s intervention has already produced tangible changes. Five firms have improved their compliance practices following the review, two have temporarily stopped onboarding new options clients while remediation work is undertaken and one provider has withdrawn from the Australian market altogether.
The regulator said it continues to investigate several matters arising from the surveillance and is considering additional regulatory or enforcement action where appropriate.
What Investors Should Consider
Alongside the surveillance findings, ASIC’s consumer education website Moneysmart has published new guidance covering exchange traded options, futures, fractional shares and micro-investing.
The regulator encourages retail investors to understand how complex products generate returns, where their money is held, whether they legally own the underlying asset and whether they can afford to lose their investment before opening positions.
Those questions have become increasingly important as financial technology continues making sophisticated investment products available to wider audiences. Lower trading costs, simplified mobile interfaces and promotional incentives have made investing more accessible than ever, but ASIC’s latest review suggests that accessibility alone does not reduce investment complexity.
For online brokers, the message is equally clear. Australia’s regulator is no longer assessing firms solely on whether required disclosures exist. It increasingly expects firms to demonstrate that complex products are designed for appropriate investors, explained clearly, distributed responsibly and monitored throughout the customer relationship. As retail participation in financial markets continues to grow, ASIC appears determined to ensure that easier access does not come at the expense of investor protection.