IOSCO consults on recent retail investor trends and related conduct implications


The Board of the International Organization of Securities Commissions (IOSCO) is seeking feedback from stakeholders on issues related to the development of a regulatory toolkit for jurisdictions to consider when addressing emerging retail market conduct issues in today´s rapidly changing retail investment landscape.

Ashley Alder, Hong Kong SFC CEO and Chair of the IOSCO Board, said: “Innovative technologies and social media are transforming important aspects of retail investing, giving rise to retail investor trends such as gamification and self-directed trading. IOSCO´s Report on retail market conduct serves as a guide to help regulators around the world develop their approach to address these evolving trends and related conduct challenges.”

Increased retail participation in securities markets could mean retail investors increasingly influence market trends and pricing, with corresponding regulatory implications for retail market conduct. Increased retail participation carries with it the threat of misconduct. Misconduct in capital markets has far reaching consequences for financial consumers, investors, national economies and the overall global financial system.

The Consultation Report provides a clear picture of the evolving global retail investor trends and their implications for market conduct. Among other issues, it examines the reasons for and regulatory and market implications of increasing gamification, self-directed trading and the influence of social media on retail investor behavior.

Since the onset of the COVID-19 pandemic, IOSCO has observed rising cases of misconduct and reported investor losses, some of them cross-border in nature. The report also explains how IOSCO members address these evolving misconduct trends, including through the use of advanced technological tools.

The findings of the report are largely based on a comprehensive survey that IOSCO conducted in 2021 and public information issued by IOSCO members.

The consultation report also builds on a report the IOSCO Retail Market Conduct Task Force (RMCTF) issued in December 2020, which describes how the COVID-19 crisis impacted firm and retail investor behaviour.  Its findings indicated that extreme price volatility during March-April 2020 and the growing pressure of COVID-19 on firms’ profitability may have increased the offer of riskier products and the flow of retail investment into such products. It noted that retail investor vulnerability can take many forms and vulnerable investors may be more susceptible to financial exploitation during periods of market stress.

In its consultation report, IOSCO seeks feedback from a broad range of stakeholders, including investors, regulators, market participants, regulated entities, financial consumers, academics and other international bodies. To inform IOSCO´s work, the report includes fourteen consultation questions.

To supplement the analysis in the consultation paper, IOSCO plans to conduct further direct engagement with consumer groups and other stakeholders at a roundtable in first quarter 2022.

Derville Rowland, co-Chair of the IOSCO RMCTF and Director General Financial Conduct at the Central Bank of Ireland, said: “Investor Protection is at the forefront of our work and the valuable insights and experiences contained in this report will strengthen our work to protect retail investors. This report should prompt discussion about the way our markets are evolving and how investors behavior is being transformed. I look forward to hearing the views of regulators, industry and investors in the coming months.”

Sean Hughes, co-Chair of the RMCTF and Regulatory Commissioner, Governance, Legal and Risk Professional at ASIC Australia, said: “The Task Force has identified a number of emerging concerns, and common types of harmful behavior including mis-selling, mis-labelling, and misleading disclosure. Combatting misconduct in retail markets – especially that which is digitally-enabled – is an ongoing challenge worldwide and risks undermining confidence and stability. The retail trading landscape continues to rapidly evolve, and I encourage the broadest range of stakeholders – including financial consumers and market participants – to engage with the IOSCO consultation.”

Comments may be submitted on or before 23 May 2022.