ASIC has put Australian online brokers on notice over the distribution of complex and high-risk investment products to retail clients.
In its 2026 surveillance, ASIC examined nine entities offering retail investors access to products including short-dated exchange traded options, futures and fractional shares.
The regulator found weaknesses in target market determinations, onboarding controls and fractional-share disclosures. Five entities subsequently improved their compliance practices, including two that stopped onboarding options clients while remediation work was carried out. One entity exited the Australian market, and ASIC says it is considering further regulatory or enforcement action in relation to issues identified by the review.
For online brokers, investment platforms and AFS licensees, the message is straightforward: access to a product cannot be separated from the way the customer is assessed, onboarded and monitored.
What did ASIC review?
ASIC conducted targeted surveillance between March and June 2026 covering nine entities providing retail clients with access to short-dated exchange traded options, futures and fractional-share products.
These products can make investing more accessible, but some carry substantial complexity or risk.
Short-dated options can lose value quickly and can expose investors to amplified losses. Futures involve leverage and daily settlement. Fractional-share structures can create questions about legal ownership, investor rights, protections and transferability.
ASIC's review therefore focused not simply on whether these products could be offered, but on how firms were determining who should receive them.
What did ASIC find with target market determinations?
ASIC found deficiencies in some target market determinations.
In particular, some TMDs did not contain sufficient detail explaining how the relevant product met the likely objectives, financial situations and needs of clients.
This goes to the heart of Australia's design and distribution obligations.
A TMD should not operate as a generic product document created once and then left largely untouched. It needs to define the class of consumers for whom the product is likely to be appropriate and support distribution arrangements capable of keeping the product within that market.
For complex and high-risk products, ASIC expects target markets to be appropriately and narrowly defined.
What are ASIC's design and distribution obligations?
Australia's design and distribution obligations require firms within scope to take a consumer-centred approach to the design and distribution of financial products.
A product issuer generally needs to prepare a target market determination identifying the class of consumers for whom the product is likely to be consistent with their objectives, financial situation and needs.
The issuer and distributors must then take reasonable steps so that distribution is consistent with the TMD, subject to the applicable statutory framework.
For online platforms, this means DDO compliance cannot be confined to the legal or compliance department. It needs to influence product design and distribution governance, digital journeys, onboarding rules, marketing, customer monitoring and decisions about continued access.
What onboarding problems did ASIC identify?
ASIC identified onboarding processes that were insufficiently tailored to the customer's circumstances.
It also found examples in which clients were given repeated or unlimited attempts to pass onboarding questionnaires.
That matters because a knowledge or suitability-style questionnaire loses much of its value if a customer can simply repeat it until the required answers are achieved.
ASIC's findings reinforce the need to examine the outcome produced by the onboarding system, not merely whether a questionnaire exists.
For higher-risk products, firms should consider whether questions genuinely test relevant understanding, whether answers are assessed appropriately and what happens when a customer does not initially meet the required standard.
Why does ongoing client monitoring matter?
ASIC emphasised that firms must consider distribution throughout the client relationship, not only when the account is opened.
A customer who falls within a target market at onboarding does not automatically remain appropriate for every product indefinitely.
Changes in trading behaviour, repeated losses, use of leverage or other indicators may be relevant to a firm's product-governance framework depending on the product and distribution model.
Online brokers should therefore consider how information gathered after onboarding feeds back into their DDO controls.
The broader regulatory expectation is that product governance should operate as a continuing system rather than a one-time gateway.
What did ASIC say about fractional shares?
Fractional-share trading allows an investor to obtain economic exposure to part of a share or other asset rather than purchasing a whole unit.
The model can lower the financial barrier to investing, but the legal and operational structure can be more complicated than a customer expects.
ASIC found unclear disclosures concerning risks and costs associated with fractional trading.
Depending on the structure, questions can arise around ownership of the underlying asset, investor rights, custody arrangements, transferability and the role of an intermediary.
A disclosure stating that customers can "buy part of a share" may therefore be inadequate if it does not accurately explain what the customer legally owns and what rights accompany that interest.
Are trading incentives a compliance risk?
ASIC also drew attention to online brokers offering incentives such as cash vouchers, reward points, discounted trading or fee-free trading.
An incentive is not automatically unlawful, but it can influence customer behaviour and may encourage impulsive trading.
For firms offering complex or leveraged products, incentives should therefore be considered as part of the overall distribution and consumer-outcomes framework.
The relevant question is not simply whether a promotion attracts customers. Firms should consider whether the design of the promotion could undermine controls intended to ensure that the product reaches the appropriate target market.
What happened after ASIC's review?
ASIC says its surveillance has already resulted in changes across the sector.
Five entities improved their compliance practices. Two stopped onboarding options clients while remediation work was underway, and one of the reviewed entities subsequently exited the Australian market.
ASIC also confirmed that it continues to address concerns with some entities and is considering further regulatory or enforcement action in relation to matters identified during the surveillance.
That makes the findings more than general regulatory guidance. They provide a current indication of the areas ASIC is prepared to examine in real operating platforms.
What should Australian online brokers review now?
Online brokers and investment platforms should review the complete customer journey for complex and high-risk products.
The starting point should be the TMD. Firms should assess whether it defines the target market with enough precision for the risk and complexity of the product and whether the actual customer base remains consistent with it.
The onboarding journey should then be tested in practice. This includes question design, repeat attempts, customer categorisation, automated decision rules and the circumstances in which a customer is prevented from accessing a product.
Firms should also examine ongoing monitoring, fractional-share disclosures, marketing incentives, client asset arrangements and the governance process for identifying when distribution practices need to change.
Most importantly, the review should test what customers can actually do on the platform rather than merely what the written compliance framework says should happen.
ASIC is focusing on distribution outcomes
ASIC's findings reflect a broader shift in financial-services supervision from having policies to demonstrating that controls produce the intended outcome.
A technically detailed TMD is of limited value if the onboarding system allows customers outside the intended market to obtain the product.
Likewise, an onboarding questionnaire provides limited protection if unsuccessful customers can repeatedly attempt it until they pass.
For Australian online brokers, DDO compliance therefore needs to connect product design, customer acquisition, onboarding, monitoring and governance into a single operating framework.
Regulatory Counsel advises financial-services businesses on Australian regulatory compliance, AFS licence requirements, product governance, design and distribution obligations and compliance reviews.
Frequently Asked Questions
ASIC identified weaknesses including deficient target market determinations, onboarding controls that were insufficiently tailored to customer circumstances, repeated or unlimited attempts to pass onboarding questionnaires and unclear disclosures concerning fractional-share risks and costs.
The design and distribution obligations require firms within scope to design financial products with an appropriate target market in mind and take reasonable steps so that distribution is consistent with that target market, subject to the applicable statutory requirements.
A target market determination, or TMD, is a document that identifies the class of consumers for whom a financial product is likely to be consistent with their objectives, financial situation and needs and addresses matters required under the DDO regime.
ASIC's 2026 surveillance specifically identified repeated or unlimited attempts to pass onboarding questionnaires as an area of concern. Firms offering complex products should ensure their onboarding controls genuinely support appropriate distribution rather than becoming a box-ticking exercise.
Fractional-share arrangements can involve complex ownership structures affecting investor rights, protections and transferability. ASIC found weaknesses in disclosures explaining the risks and costs associated with fractional trading.