International securities policy forum has set out a roadmap to protect investors
Two relatively recent developments that have helped bring younger participants into investing are also risks to investor protection, according to the International Organization of Securities Commissions (IOSCO).
The international policy forum has released a roadmap for better protection of retail investors and warns that, while providing some positives for the investment space, finfluencers and the gamification of investing also pose risks.
Finfluencers have grown in influence in recent years with younger investors particularly swayed by their recommendations. But while this has made finance more accessible to new generations, they potentially spread biased information or recommend high-risk products without conflict of interest disclosures.
Similarly, gamification of investing has attracted a technology-native cohort to engage with finance and investing and boost financial literacy. But IOSCO warns that digital engagement practices may also encourage excessive trading and point users to high-risk products.
Another risk is copy trading which has become very popular with those interested in short-term strategies in foreign exchange and crypto markets which can be complex and volatile.
IOSCO will be running five targeted campaigns over the next year to highlight the challenges posed by technology and the use of social media in financial and investment discovery. The organization is engaging with social media platforms and other internet operators such as search engines to try to stem the flow of harmful content.
“The online and cross-border nature of product offerings exacerbates potential risks to retail investors everywhere,” said Derville Rowland, chair of the Retail Investor Coordination Group. “Our New Roadmap outlines how IOSCO will engage with market participants on appropriate market conduct online and with social media and internet platforms globally to work with us to help combat retail fraud and eliminate 3 bad actors. It also illustrates how we will equip retail investors with the knowledge they need to make informed decisions and identify potential online threats.”
