• S Pettigrove and M Bacina

Crypto Target Market Determinations Targeted by ASIC


On Monday, ASIC announced that it had made interim stop orders preventing Holon Investments Australia Limited (Holon) from offering or distributing three funds to retail investors because of allegedly non-compliant target market determinations (TMDs). Each fund – the Holon Bitcoin, Ethereum and Filecoin funds – offers retail investors exposure to a single crypto-asset, being BTC, ETH or FIL, respectively.


Target Market Determinations are required to be published by the providers of financial products to retail customers under the Design and Distribution Obligations set out in Pt 7.8A of the Corporations Act 2001 (Cth). ASIC states that the Design and Distribution Obligations are intended to require providers to "design financial products to meet the needs of consumers and to distribute their products in a more targeted manner". Once an issuer has prepared and issued a TMD, they are required to notify ASIC if they have significant dealings inconsistent with the TMD and there may be consequences for that dealing.


ASIC argues that the Holon funds are "not suited to the wide target market defined" in the TMDs, which it says includes investors:

  • with a potentially medium, high or very high risk and return profile; and

  • intending to use the fund as a satellite component (up to 25%) of their investment portfolio; and

  • intending to use the fund as a solution/standalone component (75-100%) of their investment portfolio.

The final point is unclear, as Holon's published TMDs relating to these funds already excluded investors who intend to use the fund as a solution/standalone component (75-100%) from the target market.


The wording of ASIC's press release infers that ASIC believes exposure to a concentrated single asset crypto fund will only be appropriate for retail investors who have a relatively high risk appetite and that the products would be suitable for retail investors in small concentrations (potentially well below 25% of total portfolio) only.


ASIC's press release states:

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....Crypto-assets are highly volatile and complex, making concentrated investments in individual crypto-assets very risky and speculative. Investors are likely to experience significant price volatility and deep negative returns in periods of asset price decline.

ASIC also acknowledges that Holon warns investors of the potential of a total loss of value in its product disclosure statement. Its TMD also emphasizes the high risk of short term losses occurring.


ASIC's interim orders are valid for 21 days unless revoked earlier. Holon will have the opportunity to make submissions to ASIC. Final orders will be made if ASIC's concerns are not addressed in a timely manner. With continued rising numbers of Australians holding crypto-assets directly, and regulated funds arguably providing a safer way for some Australians to access crypto-assets, this move could lead to a dispute which may touch on the fundamental freedoms Australian retail investors should have to invest in their choice of assets.


In the meantime, any licensed providers which offer retail products involving crypto-assets would be wise to urgently review their TMDs and other disclosure documents for compliance and seek competent legal advice from lawyers with deep crypto experience.