MIU - Issue 178 - August 2026

Issue 178 of the Market Integrity Update covers regulatory developments and issues affecting markets.

Complex product surveillance highlights weaknesses in design and distribution

ASIC is reinforcing that Australian financial services (AFS) licensees offering high-risk or complex products to retail clients have strict design and distribution (DDO) obligations and must maintain effective product governance arrangements, including ensuring that products are only distributed to consumers in appropriately defined target markets.

ASIC recently completed a targeted surveillance of nine licensees offering retail clients access to short-dated exchange traded options (ETOs), futures and fractional share trading products.

The review identified weaknesses across product governance arrangements, including target market determinations (TMDs), onboarding controls, client monitoring, authorisations, disclosure and client asset arrangements.

Well-defined target markets and effective distribution arrangements play an important role in supporting better consumer outcomes. This is particularly important for exchange traded options and futures, which are complex, high-risk derivative products that are unlikely to be suitable for many retail investors. TMDs for these products should be narrowly defined and clearly identify the class of consumers for whom the product is likely to be appropriate.

What ASIC found

For ETO and futures offerings, ASIC observed:

TMDs that lacked sufficient detail about the class of consumers for whom the products were likely to be appropriate, including their likely objectives, financial situation and needs
onboarding processes that permitted repeated or unlimited attempts to pass questionnaires, with limited tailoring to relevant trading strategies, and
heavy reliance on onboarding controls with limited monitoring of client outcomes and trading behaviour to assess whether TMDs remained appropriate.

For fractional asset offerings, ASIC identified concerns relating to client asset arrangements and disclosure. This included an instance where investors and corporate assets were co-mingled in a single account despite disclosures indicating investors’ assets were pooled separately. ASIC also observed disclosures that do not clearly explain how trading fractional share trading differs from whole share trading.

The surveillance prompted compliance improvements from five licensees. Two paused onboarding for certain products while remediation was underway and one exited the Australian market since the review. ASIC is considering further action as appropriate.

Key messages for licensees

Licensees offering high-risk or complex products to retail clients, including ETOs and futures, should ensure distribution arrangements are appropriately tailored to product risk and supported by effective onboarding, distribution controls and ongoing monitoring throughout the client lifecycle.

Onboarding questionnaires should not be tick-a-box exercises and questionnaires allowing unlimited attempts raise real questions about whether the process is testing understanding or simply creating a pathway to trade. Reliance on onboarding questionnaires and disclosure documents are unlikely to be sufficient to determine product suitability. Licensees must implement ongoing monitoring to assess whether their target market and distribution controls remain appropriate over time.

Where specific product features, such as time to expiry, may influence investor outcomes, licensees should consider analysing client outcome data against those features when reviewing target markets, distribution arrangements and monitoring frameworks.

Licensees offering fractional asset products should ensure disclosures are clear, accurate and transparent, particularly where product features, shareholder rights or the shareholder experience differ from direct ownership of whole shares.

Firms should use these findings to assess whether their own product governance arrangements, target markets and monitoring controls remain fit for purpose.

ASIC's findings are consistent with observations from previous work, including:

Report 770 Design and distribution obligations: Retail OTC derivatives (REP 770)
Report 795 Compliance with the reasonable steps obligation (REP 795), and
Report 828 Risky business: Driving change in CFD issuers' distribution practices (REP 828).

While these reports include findings specific to CFDs and over-the-counter (OTC) derivatives, they also identify broader better and poorer practices that may be relevant to the distribution of high risk or complex products more generally.

Together, these publications provide a practical reference point for firms when assessing their target markets, distribution arrangements and monitoring controls.

This work supports ASIC’s strategic priorities of protecting consumers, reducing the risk of poor retail investor outcomes and driving better compliance with the design and distribution obligations.

ASIC calls on industry to strengthen preparedness for geopolitically motivated disruption

ASIC is urging market participants to strengthen their operational resilience and ensure they are prepared for disruption following recent advisories from the Australian Signals Directorate (ASD) warning of cyber activity linked to Russian state-sponsored actors.

The advisories are a timely reminder that geopolitical tensions, coupled with advancements in AI and cyber exploitation capabilities, can quickly become operational resilience risks for financial markets, critical infrastructure, technology services and supply chains.

Market participants play a critical role in supporting fair, orderly and resilient markets and should expect, and prepare for, a more complex, less predictable operating environment.

ASIC calls on market participants to strengthen their risk management frameworks, governance and accountability, and prepare for potential geopolitical shocks and malicious activities. This includes following the advice of intelligence agencies such as ASD. Global events can have practical consequences for market resilience, affecting critical systems, services and third-party dependencies.

Earlier this year, ASIC issued an open letter to industry, calling on all licensees and market participants to urgently strengthen their cyber resilience measures.

ASIC is closely monitoring market conditions and events offshore and is working with our Council of Financial Regulators counterparts and intelligence agencies to share information and assess risks as conditions evolve. Market participants should act now by testing critical systems, protecting key dependencies and engaging with on shared threats where they are identified.

ASIC’s regulatory resources include information about cyber security and good practices for cyber resilience.

Chair to outline ASIC priorities at CEDA event

Tickets are now available for ASIC Chair Sarah Court’s first major address at a Committee for Economic Development of Australia (CEDA) event in Sydney on 26 August.

Chair Court will set out her priorities for ASIC and her perspective on the challenges and opportunities facing Australia's financial system.

Drawing on her experience across financial system regulation, she will also outline how ASIC will support productivity, foster commercial confidence and help Australians build and protect their wealth.

ASIC proposes improved pre-IPO advertising flexibility and global alignment

Companies listing on Australia’s public market will have greater flexibility to publicise upcoming IPOs under proposals released by ASIC.

The proposed changes extend ASIC’s existing relief from Corporations Act restrictions, allowing companies greater advertising and publicity opportunities before lodging a prospectus. They respond to industry feedback received as part of ASIC’s discussion paper on Australia’s evolving capital markets, Report 823 Advancing Australia’s evolving capital markets: Discussion paper response report (REP 823), which commented that current IPO advertising and publicity rules do not reflect modern information-sharing practices.

ASIC’s changes aim to modernise and simplify the pre-lodgement advertising framework for IPOs by:

bringing the rules in line with comparable international jurisdictions and other domestic fundraising regimes, such as crowd-sourced equity funding and offers made under a product disclosure statement
allowing offerors to communicate in a controlled and accountable way
helping companies gauge market interest, improve information quality and enabling timely clarification or corrections
providing earlier regulatory visibility of potential offers and related market activity, and
maintaining core investor safeguards by reinforcing the prospectus as the primary disclosure document for investment decisions.

Under the proposed rules, companies could advertise unquoted securities as long as they:

identify the issuer and the seller of the security
ensure a prospectus is made available by the time a security is listed
make it clear where and when a prospectus will be made available, and
direct investors to the disclosure document as the key source of information before making an investment decision.

ASIC is seeking feedback on its proposal by 11 September 2026.

You can read Consultation Paper 390 Proposed reform to the pre-lodgement advertising and publicity regime (CP 390) on the ASIC website.

Key themes and areas of focus from ASIC’s Financial Markets and Innovation roundtable

On 30 June 2026, ASIC convened a Financial Markets and Innovation Roundtable with 32 industry, academic and public sector participants coming together to discuss how to keep Australia’s capital markets resilient, efficient and globally competitive while supporting innovation with appropriate investor protections.

The Roundtable formed part of ASIC’s broader work to advance Australia’s evolving capital markets and coincided with the publication of Report 825 Innovation in Financial Markets and Financial Market Infrastructure – A Landscape Review (REP 835).

Some participants highlighted Australia's strengths, including trusted institutions, sophisticated investors and deep pools of capital, but warned that Australia risks global marginalisation unless it keeps pace with market developments.

Many urged prioritising innovation that solves practical problems, boosts productivity and strengthens foundations for capital formation, liquidity, collateral mobility and global connectivity in an era of major global capital raising and AI-enablement.

Roundtable participants brought diverse perspectives, but four interconnected themes emerged:

preparing Australia for a more global market
getting the foundations right for growth
prioritising innovation to fix problems and boost productivity, and
maintaining trust and investor protection.

The Roundtable was part of a continuing conversation. Australia's global competitiveness depends on strong and reliable infrastructure, effective coordination across public and private sectors, and a market ecosystem that supports innovation and growth, with appropriate guardrails in place.

For more information on the themes discussed and next steps, read the supporting news item, ASIC releases key themes and areas of focus from its Financial Markets and Innovation roundtable.

ASIC moves to simplify sell-side research guidance to support capital raising activity

Regulatory guidance for Australia’s sell-side research will be reduced from 42 pages to just eight, under a new principles-based proposal by ASIC to facilitate greater investment in the local market.

The proposed revamp of Regulatory Guide 264 Sell-Side Research (RG 264) responds to industry feedback received through ASIC’s discussion paper on public and private markets, Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets, seeking clearer and less prescriptive guidance to encourage more research to support capital raising activity.

Sell-side research is prepared by AFS licensees such as investment banks and stockbrokers to help clients make investment decisions including about upcoming initial public offerings (IPOs).

ASIC is seeking feedback on the changes that are designed to simplify the existing guidance by removing prescription and replacing RG 264 with a shorter, principles-based guide.

The updates will enable greater research analyst input into the IPO process - to facilitate capital raising activity - whilst requiring licensees to have effective arrangements to manage conflicts of interest, inside information and to preserve the independence of research.

The work forms part of ASIC’s response to feedback on the discussion paper, ASIC moves to simplify sell-side research guidance to support capital raising activity, and also reinforces ASIC’s ongoing focus on regulatory simplification.

A copy of the draft updated regulatory guide and a summary of the proposed changes are available on the consultation webpage at Simple Consultation 59 Proposed updates to RG 264 (CS 59).

Submissions should be sent to markets.consultation@asic.gov.au by 5pm (AEST) on 21 August 2026.

Paving the way for greater transparency of listed entity ownership and control

ASIC has simplified compliance with new enhanced beneficial ownership reforms that will improve transparency about who ultimately owns, controls or has significant economic exposure to listed entities in Australia.

ASIC consulted on draft technical settings earlier this year in Consultation Paper 387 Enhanced beneficial ownership disclosure: Proposed legislative instrument, form and guidance (CP 387) after the reforms, passed in December 2025, imposed enhanced substantial holding disclosure and beneficial ownership disclosure obligations on listed entities.

Among other changes, ASIC has:

made the new Substantial Holding Notice (SHN) form, consolidating three forms into one
simplified the calculation used to determine deemed economic interests and offsetting short positions in listed securities, and
implemented an index-based format for registers of relevant interests.

Before 4 June 2027, interest holders can meet their substantial holding obligations either by using the new SHN or one of three replacement forms that will take the place of Form 603, Form 604 and Form 605. These forms are available at our Substantial holding notice page.

ASIC has also published updated Regulatory Guide 5 Relevant interests and deemed economic interests (RG 5), Regulatory Guide 9 Takeover Bids (RG 9) and Regulatory Guide 222 Substantial holding disclosure and tracing requirements (RG 222).

For more information about feedback received to CP 387 and ASIC’s responses, see the Feedback on CP 387.

Enforcement outcomes

Over the last two months, the following enforcement outcomes were recorded:

Stavro D’Amore jailed for misusing nearly $700,000 in Berndale funds (26-182MR)
Brendan Gunn sentenced in connection with suspected international cryptocurrency scam (26-167MR)
Deutsche Bank pays $2 million penalty for systemic trade reporting failures (26-149MR)
NAB’s WealthHub fined over $1 million for reporting failures (26-154MR)
ASIC cancels AFS licence of CFD issuer Trive (26-147MR)
ASIC suspends AFS licence of CFD issuer GFA Capital Markets (26-183MR)