The Board of the International Organisation of Securities Commissions on Tuesday published its final report on ‘Sound practices for investment risk education’ as part of its efforts at fostering investor engagement in financial planning.
The organisation urged its members to consider one or more of the “sound practices” outlined in the report, as forming part of a regulatory toolkit when designing and implementing their investment risk education strategies and programmes.
It also recommended that mechanisms, such as an online IOSCO portal, are developed and maintained to provide ongoing opportunities for IOSCO members to share learnings in relation to the evolution of various investment risk education initiatives across member jurisdictions.
The Vice-Chair, IOSCO Board, and Chair of the Committee on Retain Investors, Howard Wetson, was quoted in a statement by the organisation as saying, “This report includes a wide range of case studies, innovative approaches and practices, to highlight how securities regulators educate and inform retail investors about risk as a key part of their investor protection objective.”
Wetson, who is also the Chair, Ontario Securities Commission, said he expected the report to be a helpful source for regulators in developing their own strategies for investment risk education.
According to IOSCO, the report identifies a number of sound practices for investment risk education initiatives, based on an analysis of the approaches and practices adopted by the members of the IOSCO Committee 8 on retail investors in designing and delivering their investment risk initiatives, as well as a review of literature on the topic.
IOSCO, which is the leading international policy forum for securities regulators and is recognised as the global standard setter for securities regulation, said in the statement that it had long recognised investor education as a key strategy for enhancing investor protection, promoting investor confidence and fostering investor engagement in financial planning and decision-making.
“Investor education is complementary to other tools such as regulation, supervision and enforcement, and is recognised in IOSCO´s guiding principles for securities regulation,” it said.
According to it, for the purpose of the report, investment risk is generally defined as the risk that an investment will not deliver the expected yield and/or lose value and comprises a range of underlying factors.
It, however, stressed that risk related to investment fraud, an assessment of mandatory disclosure requirements, financial product advertising and the use of financial advisors were beyond the scope of the report.
It added that the report “examines the role of securities regulators in investment risk education and the challenges they face”, while also considering some of the different approaches and practices that securities regulators adopt.
The sound practices identified in the report, it said, included focus on influencing retail investor attitudes and behaviour, as well as knowledge; development of initiatives that take an evidence-based approach in response to the needs of retail investors; and test initiatives with the target audience.
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Source : Punch