Australia’s chief financial market regulator has made an important decision due to non-compliant target market designations (TMDs). It has ordered a temporary hold on three cryptocurrency-related funds offered to individual investors. Here are the details…
ASIC halts cryptocurrency funds
The Australian Securities and Investments Commission (ASIC) featured cryptocurrencies in an October 17 press release. Australian asset manager Holon said that it has ordered a temporary halt to three crypto funds that aim to separately invest in Bitcoin (BTC), Ethereum (ETH) and Filecoin (FIL). A target market specification is a document that describes who a product is suitable for, based on possible needs, goals, and financial situation, as well as how the product can be distributed.
A spokesperson for ASIC said TMDs are “very broad given the volatility and speculative nature of the crypto markets.” They also cited the regulator’s concern that Holon did not “appropriately assess the characteristics and risks of the funds when identifying their target markets.” ASIC said in a statement on the subject that it is considering “considers to use funds as a “satellite component” that do not fit the broad target market defined in the TMDs, including those with a medium, high or very high risk and return profile. The satellite component is attributed to those considering up to 25 percent of their portfolio to use the fund for 75 percent to 100 percent of their investment portfolios.
What does ASIC want from the asset manager?
ASIC added that crypto funds can expose investors to significant negative returns. But he noted that the product disclosure statements (PDS) provided by Holon said they could face “total depreciation.” He added that the temporary order and will be valid for 21 days unless canceled beforehand.
The details of what ASIC wants Holon to change are unclear. But the regulator said it expects Holon to consider the concerns and take immediate steps to ensure compliance. The interim order will prevent Holon from sharing a PDS, providing general advice on funds, or issuing shares of funds to individual investors.
The regulator also expects Holon to address concerns “on time” or a final stop order will be issued. However, Holon will be given the opportunity to make a presentation before such an order is given. The funds, called Holon Bitcoin Fund, Holon Ethereum Fund, and Holon FileCoin Fund, are all managed investment schemes that aim for exposure to the price of the respective crypto and raise money by investors who in turn receive a relative stake in the system.
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