The Australian Securities and Investments Commission (ASIC) issued warnings on Monday that thousands of ordinary investors could be burned by the high-risk investments contracts for difference (CFDs) as it reported that industry players are deliberately downplaying the risks entailed in betting to the investment products.

ASIC commissioner Greg Medcraft told ABC that the corporate watchdog sent undercover staff to CFDs marketing seminar and their investigations showed that the industry were clearly not explaining the risks that are attendant to the investment contracts.

Mr Medcraft warned CFDs industry players to alter their practices or face the spectre of stiffer sanctions as ASIC tightened its hold on CFDs trading in light of the Sonray Capital collapse in June.

At present, ASIC said that up to 35,000 retail investors have invested a total of $350 million on CFDs, which could be attributed to the industry's current marketing ploy of luring ordinary people on television, with offerings of big returns for their investments.

Mr Medcraft said that such TV commercials are focused on prime time viewing to mass market audiences, which he said ASIC doesn't consider as appropriate products for the targeted segment of the society.

He said that CFDs trading is a risky proposition best left to the sophisticated investors with deep pockets as he stressed that unlike in a race course, bettors would not lose more than what they have put down.

In CFDs however, "since investors have got a leveraged bet, they can actually lose a multiple of what they've put down which means that within a very short period potentially, they could lose everything they own."

ASIC said that its investigations showed that many investors were clueless on how companies with CFDs offerings are operating, which in turn made them vulnerable to the attractions and consequent risks of the investments.

CFDs come with leverage, which is a bet on price movements of shares and commodities, and with minimal place on the position, bettors could potentially collect multiples of the money that they had put in.

However, once the price moved against the investors' bets, they can shed their money in multiple times too and then face margin calls that necessitate more upfront bleedings of funds, which would be deposited with a CFD broker and pooled for general use in covering losses and shortfalls in other accounts.

Mr Medcraft added that the possibility of breaking the bookie is almost always present, that is when numerous clients won their bets and brokers ended up not having sufficient cash to meet the payment obligations.