The International Organization of Securities Commissions (IOSCO) has set some reform agenda for capital markets regulators globally to protect investors and by implication, ensure sustainable growth of their bourses.
The umbrella body for capital market regulatory institutions globally in its just published report titled ‘Investor Behaviour and Investor Education’ noted that the COVID-19 pandemic did not hinder investor education efforts as many regulators continued, expanded, and or adapted their investor education activities to support investor protection throughout the pandemic.
The organisation disclosed that the report reflected that before COVID-19, regulators were already working to protect investors who had limited investment knowledge and faced an array of complex investment choices as well as addressing behavioural biases that could hurt investors.
According to the umbrella body for capital market regulators, the report indicates that the COVID-19 period featured high levels of market volatility, an upward trend in self-directed investing, an increase in gamification of investing and growing investor reliance on social media for advice as well as a surge in frauds and scams in the context of increased retail investor participation
The report further clarified: “Nevertheless, looking forward, high-quality measures aimed at protecting investors and enhancing investor education continue to be critical.
“Indeed, some of the changes observed during the pandemic are expected to endure, e.g., it is easier to participate in the financial market today than ever before and retail investors continue trading riskier investments, while regulators report a higher volume of investor claims and complaints,” it added.
To address retail investor risks and vulnerabilities during periods of crisis, the report proposes seven practices that regulators should consider when designing financial and investor education initiatives
Also, the IOSCO’s report also provides practical examples of the financial education and investor protection initiatives implemented by different jurisdictions from both developed and emerging markets.
Speaking on the report’s findings and the way forward, the Chairman of the IOSCO Committee on Retail Investors, Pasquale Munafò, said: “The COVID-19 pandemic has reminded us that investor education pays off. Investor education initiatives need to continue adapting to market developments, changing investors’ needs and characteristics, and evolving risks that challenge investor protection.
“In a context in which retail participation in the capital markets is easier than before, investor education should explore and find new and proper ways to reach out to current and new investors and help them develop knowledge and sound behaviours under normal and crises”, Munafò added
